ANDREW FISHER pores over the fine detail in the Budget, including more income tax, lower energy bills and frozen rail fares, and highlights some of the important areas that were not addressed by Chancellor Rachel Reeves
Just over a year ago, seven MPs had the Labour whip suspended after they voted to scrap the two-child benefit limit. This week, in Chancellor Rachel Reeves’ Budget, Labour scrapped the two-child benefit cap.
Well trailed: there wasn’t much in Chancellor Rachel Reeves’ despatch box that we didn’t already know about
Local MP Natasha Irons posted that “3,600 children in Croydon East will be lifted out of poverty”. Her colleague, Sarah Jones, in neighbouring Croydon West, posted that 4,680 children would benefit in her constituency.
According to the Labour Party this morning, the policy change will benefit a total of 12,500 children across the whole of Croydon.
In her much-trailed Budget speech, Reeves announced the end of the policy introduced by the last Conservative government, saying that it “punishes children for the circumstances of their birth”.
With the number of children across the country living in poverty at 4.5million – up from 3.6million in 2010 – there is an urgent need to address this. The two-child benefit cap was one of the primary drivers of increasing child poverty in the last 15 years.
Ending the two-child limit from April will lift 450,000 children out of poverty in one move. Other policies, including the roll-out of breakfast clubs and free school meals, will add another 100,000 to that figure.
Many households in Croydon will also benefit from a freeze on rail fares next year. Hard-pressed commuters paying the most expensive rail fares in Europe for the joys of travelling on Southern and Thameslink trains will at least not be paying any more from January. It is the first rail fare freeze in 30 years.
Ready support: Croydon East MP Natasha Irons did not vote to scrap the two-child cap last year. But she was quick to signal her support for the Budget measure this year
Likewise the decision to cut energy bills by £150 a year from April 2026 will be felt most keenly by those struggling to make ends meet. Energy bills have risen by 70% in the last five years, so any respite is good news.
But the Budget also had a few stings in the tail.
The Chancellor announced she would freeze Income Tax thresholds for another three years (beyond the four-year freeze already imposed under the last Conservative government).
This means even basic-rate taxpayers will be paying hundreds of pounds more by 2030. The independent thinktank The Resolution Foundation estimates that by 2029-2030, the average basic-rate taxpayer will be paying an extra £140 per year.
That said, I have a sneaking suspicion that the Chancellor’s tax rises are a backloaded insurance policy. If things are as forecast by 2029, they will go ahead. If not, and the economy has picked up, it is well-timed for a pre-election cancellation.
But buried in the small print, too, was a stealth tax on graduates: with the government imposing a freeze to the repayments and interest rate thresholds for student loan repayments for three years starting from 2027. This will be an additional hit in the pay packets of those still repaying student debt.
Another future tax rise is the proposal to introduce pay-per-mile charging for electric vehicles and hybrids from 2028.
The government receives a lot of revenue from petrol, although fuel duty has either been cut or frozen over for several years. The public’s switch to EVs and the use of hybrid vehicles reduces that tax income. The Treasury has been in discussions for some time about how it can maintain its revenues.
Plugged in: the taxing of EVs and hybrid vehicles does not appear to have been properly thought-through
One option would have been to increase road tax on EVs and hybrids. Pay per mile policies risk penalising those in live in rural areas and who have longer commutes (perhaps because they can’t afford housing closer to their work?).
And what if you drive your car abroad? That has raised the possibility of some people being taxed twice – once in the country they are visiting, as well as here.
There is also the complication of how the miles travelled are recorded. They are for MoT purposes, but new cars don’t have MoTs for their first three years. Now the government seems to be saying cars must have an MoT from Year 1 – which will not be popular with motorists, though mechanics will welcome the extra business.
There are lots of complications coming down the road on this in the next couple of years. Expect this policy to evolve, or be dropped.
Another bit of Westminster can-kicking, which has been cautiously welcomed by hard-pressed councils, is the decision for central government to absorb costs associated with children with special educational needs and disabled children.
The costs are putting a huge strain on already frayed council finances, so the fact this will transfer to central government books after 2027-2028 has been welcomed. But the detail so far is scant. Many councils already have huge deficits in their SEND budgets, and it’s not clear how central government will fund the current shortfall. Any cuts to provision would create a huge backlash.
Tourist jackpot: some estimate that the tourist tax could generate £330m per year for London
One tax rise that will benefit Londoners is the announcement in the Budget that city region mayors will be allowed to levy a tourist tax on overnight stays – whether in hotels or AirBnBs. This would bring London into line with many other world cities (from New York to Amsterdam to Tokyo), and has been lobbied for by London Mayor Sadiq Khan.
An evaluation by the Greater London Assembly in 2017 suggested such a tax could raise £240million a year. By now, that’s reckoned to be £330million a year. If hypothecated, that could fund thousands of much-needed council homes every year.
Sadly, there was precious little in the Budget to tackle the housing shortage and rising homelessness. This year, a record 170,000 children are homeless, consigned to spending this Christmas in temporary accommodation.
Reducing child poverty is an unmitigated good thing in this Budget.
The absence of any strategy to tackle child homelessness is a glaring omission.
- From 2015 to 2019, Andrew Fisher was the Labour Party’s Director of Policy under Jeremy Corbyn
- Fisher is also the author of The Failed Experiment – and how to build an economy that works, and now writes columns for InsideCroydon, the i newspaper and is a regular pundit on BBC and Sky News programmes
As well as his column, Andrew is also conducting podcast interviews, in-depth and informed, with specialists and national figures, sharing their expertise with Croydon. They include an exclusive with Paul Holden, the author of the explosive new investigative book, The Fraud. It’s well worth a listen.- It’s available now on Inside Croydon’s Spotify channel
Andrew Fisher’s recent columns:
- Streeting’s ‘manoeuvres’ do nothing to reduce NHS waiting lists
- Now even Mayor Perry agrees we need to Fund Croydon Fairly
- We have been betrayed by broken promises, deceit and scandal
PAID ADS: To advertise your services or products to our 10,000 weekday visitors to the site, as featured on Google News Showcase, email us inside.croydon@btinternet.com for our unbeatable ad rates
- If you have a news story about life in or around Croydon, or want to publicise your residents’ association or business, or if you have a local event to promote, please email us with full details at inside.croydon@btinternet.com
As featured on Google News Showcase
- Our comments section on every report provides all readers with an immediate “right of reply” on all our content. Our comments policy can be read by clicking here
Inside Croydon is a member of the Independent Community News Network
Huge assumption that the extra child benefit will be spent on the child. Let’s hope so !
The cap was not on child benefits, but on other benefits.
Removing the two-child benefit cap is a very good thing. So why didn’t Labour do it last year when lots of campaigners, and some of their own MPs, were calling for it?
Why have Labour not reversed the Conservative tax cuts for the wealthy and restored funding for public services and local Councils?
Instead of allowing more wealth to go to the wealthiest, they could have provided more help for most of us who are struggling to get by. Instead of benefits for big business, they could be supporting small businesses and local jobs. Instead of a few tweaks to grab the headlines, they could have delivered real change to make people’s lives better.
At the election Labour promised change but all we are seeing is a continuation of the Conservative policies that got us into this mess in the first place. If we want things to get better then we need real change in the politicians we elect.
Your comments seem at odds with Zack’s view that wealth taxes are primarily to reduce inequality, not raise money . Can you clarify pleade
Your comments are at odds with what Zack Polanski and the Greens are calling for, and you’re portraying the issue as an either / or, not a both. Wealth taxes can raise money and cut inequality.
What the Tories did and Labour are still doing is taxing the much less wealthy and those in poverty, while keeping inequality
Keep up Arfur, I was merely referencing Jacks interview yesterday with Context.
Jacks? pleade? In case you didn’t know, interviews can be edited.
And you’re telling me to keep up!
The extra £16bn in welfare benefits is essentially an income transfer mainly from those earning over £50,000 a year to the poorest in our society. In itself, this is a good thing, especially for the children of the poorest. This represents 0.55% of our nation’s annual income (GDP), a relatively modest redistribution of income. As for as impact on economy should be positive since all that income will be spent (not saved) on goods and services.
Furthermore, the increase in benefits is front end loaded (two child benefit cap takes effect next year), while tax rises don’t really happen for 2-4 years out, so the impact on spending is extremely positive for next year in particular.
In summary a modest, but welcome, first step to a fairer society.