ROOF Blog

Young people trying to get on the property ladder were handed a pre-election boost worth up to £2,500 after the chancellor scrapped stamp duty on homes costing £250,000 or less for first-time buyers. The move will be funded by an increase to 5% in the duty on homes costing £1m or more, which will see buyers of these properties having to hand over a minimum of £50,000 in tax. The move was quickly dubbed by some as a ‘Robin Hood’ tax on the rich. The new £250,000 threshold, which took effect at midnight last night and will last for two years, means nine out of 10 people buying their first home will not be liable for the tax.

Hundreds of out-of-work families who have been living in expensive homes at the taxpayers’ expense are facing eviction after changes to housing benefit announced yesterday. Alistair Darling said that from October next year the most expensive properties would be removed from the housing benefit calculation. Housing benefit, which can be as much as £1,800 a week, discouraged people from working and was unfair on those who accepted smaller, cheaper homes, he said. Housing benefit will be capped at £1,100 a week, meaning that 13,000 families, mostly in London, will have to move out of their current properties and into somewhere more modest.

Council taxes will rise in the next financial year by 1.8%, the lowest figure since the levy was introduced nearly two decades ago. John Denham, communities secretary, claimed that the slightly below-inflation rise had been made possible by a 4% increase in central funding for councils from next month. But he acknowledged that there would be growing pressures on town hall budgets in the coming months against the wider backdrop of the UK’s large deficit. ‘Local people will rightly be intolerant of any council if they are told that care, libraries or youth services will be cut because they have not followed our radical reforms to protect the frontline services, which matter most to people,’ he said. The increase, the most modest since the tax was introduced in 1993-94, brings the bill for an average band D property to £1,439, from £1,414 this year.

Councils are considering plans to reduce their spending including by cutting up to 170,000 public sector jobs in anticipation of a dramatic downturn in their budgets. Dame Margaret Eaton, chair of the Local Government Association, said that local authorities were being hit by a ‘perfect storm’ in the recession with increased pressure on their services and a squeeze on their budgets. Privately, councils are looking at how to slash their budgets by 15% over the next three years, using projections on the cuts necessary to reduce the £178m public deficit drawn-up by the respected Institute for Fiscal Studies.

The government will struggle to build even half of its target of a million affordable homes by 2020 if the housing budget is not exempted from public spending cuts, a housing campaign group says. If the cuts to the house-building budget suggested by November’s pre-budget report go ahead, the number of affordable homes built by 2020 will be 444,000, says the National Housing Federation. The NHF is calling on Gordon Brown to make the house building budget ‘untouchable’ and give it the same status as hospitals, schooling and policing, areas the government said in November it would ringfence while it cut back spending in other areas.

Windsor and Maidenhead council will announce today a four per cent cut in the charge from April. This will bring the average council tax for a band D property to £996 2010/11, down by £41 from 2009/10. The Local Government Association said that Windsor and Maidenhead’s tax cut was the biggest ever. Most councils are set to increase the charge by between 2.5 per cent and 3 per cent from April. The RPI measure of inflation is currently 2.4 per cent. The local authority has cut more than £1million off the local authority’s budget between 2009/10 and 2010/11 - and handed the saving directly onto council tax payers. Windsor and Maidenhead councillors said they were hoping that the radical overhaul of its finances could form a blueprint for other councils across the UK to cut council tax. David Burbage, the council’s leader, said: ‘We are showing that council tax can go down as well as up. For too long council tax bills have inexorably risen, and there is no correlation between high council tax and good services.’

Frontline services such as social work, meals on wheels and road maintenance may have to be cut to cover the cost of controversial plans for elderly care at home, local authority leaders have warned. The £670 million required to provide free care for those most in need in their own homes — a key government policy — will add pressure to councils already trying to find multimillion-pound savings. A rise in council tax of between 1 and 2 per cent will be needed to meet the cost, while cuts in adult and childrens’ social care services are an ‘unwanted but very real possibility’, council chiefs have said. The draft Bill, set out in the Queen’s Speech in November, was described by Labour peers as an ‘exocet’ on social-care reform and ‘a demolition job’ on budgets, while MPs and care providers have also criticised it for being ill-conceived and uncosted.

Crisis has warned that despite the budget deficit, 75% of the British public want the Government to address the growing gap between rich and poor. A YouGov poll commissioned by Crisis also shows that the majority of people in UK (60% of those with an opinion) say that the recession has made them more worried about the gap between rich and poor and the same proportion want to see the poorest protected from budget cuts as they can least afford to pay. Leslie Morphy, Crisis chief executive said: ‘With the election looming, politicians vying for votes must recognise people’s desire for a fairer society. They must not forget those who are poorest, amongst whom homeless people are some of the most vulnerable. They must pledge to protect them.’

Figures in last week’s pre-Budget report reveal 60,000 low-income families now face paying 90 per cent of any earnings directly to the taxman.

The number of affected families is up from 30,000 last year and is forecast to rise again to 70,000 next year.

The very high tax rates arise from complex rules that mean low income families have their benefits slashed if they take up work.

These so-called marginal tax rates – far higher than those faced by top earners – are blamed for discouraging thousands from seeking work.

The true extent of the financial pain that will be felt by households and public services over the next few years has been laid bare by the Institute for Fiscal Studies (IFS).

Even those on half typical earnings will see their living standards suffer as a result of the Chancellor’s policies, the think-tank warns. 

To protect the ‘ringfenced’ areas of hospitals, schools and the police, there will have to be savage cuts to defence, housing, transport and higher education budgets.

Cuts of almost seven per cent a year, 20 per cent over three years, mark the severest squeeze since the Second World War, tougher than anything in the austerity years of the 1970s or early 1980s.

The IFS analysis of the Chancellor’s pre-Budget report also shows a £76bn ‘black hole’ in the public finances; that fixing it will cost every family £2,400 a year; and that only those on less than £14,000 will be better off as a result of the changes.