WTF response to Budget 2010

The Governments budget announcements yesterday went further than expected with massive cuts in the capital and revenue budgets across government. First Minister Carwyn Jones yesterday relayed that early indications would suggest around 2billion of spending over the next four years for Wales with the suggested £300 million shortfall in the existing Barnett formula for Wales not being recognised.

The headline issue for people on low incomes has to be the VAT rise to 20% this will undoubtedly have an impact on costs of living for poorer families and those who are on low incomes paying proportionately more for the rise in VAT than the well off. While we await news of any possible exemptions, we anticipate that exemptions will not include, food and clothing and other essential items of costs that will be passed on to consumers such as transport etc.

There is real concern at the increase VAT will have on repairs and improvement budgets for repair and renewal of existing stock in the private sector and to aid regeneration. Arguably there is a strong case for reducing VAT on home improvements rather than increasing it. This would encourage investment and help to retain and recruit more jobs in the construction sector.

Capping local housing allowances will also have a significant effect for those who rely on housing benefit and rent privately, particularly in high cost areas or where there are high levels of unemployment. The measures could result in a rise in homelessness and propagate overcrowding as people may be forced to downsize to smaller accommodation that would be covered by the allowance. In very high costs areas this could result in ghettoising the poor and low income earners creating a further social divide.

Capping housing benefit payments under the local allowance schemes could also have a significant impact on plans to utilise the private sector more to meet the huge shortfall in social housing provision. We believe that these measures could damage their engagement as the income to meet private sector landlord costs will undoubtedly decline. Alternatively this could have the effect of them choosing not to rent too housing benefit applicants further putting pressure on local authority homelessness provisions. Squeezing both private sector renting as well as social house building could therefore provide a double squeeze on the provision of homes for those on low incomes; those unable to work; rural accommodation and single parents.

On the plus side the government has recognised that people who have carers who need an additional room will now be covered by the housing benefit allowance system. This is welcomed and will aid supporting people, projects and help people to continue to receive care at home.

The positive measures in the budget such as not freezing public workers pay below 21,000, which seems like a liberal influenced tax measure along with last ditch measures of increasing the rate by £1,000 at which you start to pay tax will provide some relief. However, freezing child benefit for the next few years will penalise part time workers who are unable to move to full time to recover their overall loss.

Changing the way rises in benefits are calculated from RPI (Retail Prices Index) to the CPI (Consumer Price Index) is expected to have a diverse effect in the long term particularly if the economy struggles. While reductions in the range of 25% for government departments could also have an effect of significant reductions in supporting people services that support vulnerable people.

While there is a great deal of detail within the budget the measures taken, they will undoubtedly mean that people in areas of high unemployment; where there is little social housing; combined with the struggle to bring up children will have to take a disproportionate hit to pay for the retention of quality of life for the well off.