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    B960 - Finance and Welfare Bill 2016 (Second Reading), TSR Government


    FINANCE AND WELFARE BILL 2016
    An Act to reform the tax system of the UK and amend the welfare system

    BE IT ENACTED by The Queen's most Excellent Majesty, in accordance with the provisions of the Parliament Acts 1911 and 1949, and by the authority of the same, as follows:

    1: INCOME TAX
    (1) There shall be a personal allowance of £12 500.
    (2) The first £37 500 earned above the personal allowance shall be taxed at a rate of twenty pence in the pound.
    (3) The next £100 000 earned above the twenty per cent tax rate shall be taxed at a rate of forty pence in the pound.
    (4) All income earned above the forty per cent tax rate shall be taxed at fifty pence in the pound.

    2: VALUE ADDED TAX
    (1) The highest rate of value added tax is reduced from 20 pence in the pound to 15 pence in the pound.

    3: INHERITANCE TAX
    (1) Unquoted business assets and agricultural land shall no longer be exempt from the Inheritance Tax Act 1984.
    (2) Inheritance Tax shall be raised from 40 pence in the pound to 50 pence in the pound.

    4: WELFARE CAP
    (1) The welfare cap shall be set at £500 per week for those residing in Greater London.
    (2) For those residing outside of Greater London the welfare cap shall be set at £445 per week.

    5: JOBSEEKER'S ALLOWANCE
    (1) Jobseeker's Allowance shall be increased to £80 per week for all age groups.
    (2) A claimant will receive a weekly payment from one week of being found eligible as per the conditions regarding their jobseeker's contract.

    6: HOUSING BENEFIT
    (1) The age that one can claim Housing Benefit shall be reduced to 18 years

    7: CHILD BENEFIT
    (1) Child benefit claims from the 1st of January 2017 will be limited to the first 2 children.
    (1) a. In cases of multiple births, where a child benefit claimant previously had fewer than 2 children, they will be entitled to child benefit for all children born.
    (2) Existing claims or entitlements will not be affected.

    8: STAMP DUTIES
    (1) The first time stamp duty is levied upon a home built on a brownfield site after the date of commencement of this Act, it will be collected at 50% of the usual rate.

    9: SUGAR TAXATION
    (1) Foods containing more than 5 grams of added sugar per 100 grams will be taxed at an additional 10 pence in the pound.
    (2) Foods containing more than 10 grams of added sugar per 100 grams will be taxed at an additional 20 pence in the pound.
    (3) Drinks containing more than 5 grams of added sugar per 100 millilitres will be taxed at an additional 20 pence in the pound.

    10: COMMENCEMENT, SHORT TITLE AND EXTENT
    (1) This Act may be cited as the Finance and Welfare Act 2016.
    (2) This Act shall extend to the United Kingdom; and
    (3) Shall come into force immediately.


    Notes
    The lower benefit cap had priced people out of their homes and left them in even a dire position than they were in before. Increasing Jobseeker's Allowance means that these people are in a more stable position to go out and find the jobs that they’re looking for, it makes sure that people can afford to eat, to travel, to actually live.

    Changes for second reading:
    Correction of VAT change
    Inclusion of sugar tax


    Costings
    > Income tax changes (Cost: £4bn)
    > Lowering VAT to 15% (Cost: £27.75bn)
    > Increase to inheritance tax and removal of exemptions (Saving: £5bn)
    > Increase the benefit cap to £26,000 per year for those in London (Cost: £60.75m)
    > Increase Jobseeker's Allowance to £80 per week no matter the age of the applicant (Cost: £1bn)
    > Lower the age that one can claim Housing Benefit back to 18 (Cost: £120m)
    > Limiting Child Benefit to the first 2 children (Saving: £300m)
    > Halve stamp duty on houses built on brownfield land (Cost: £3.65bn)
    > Sugar tax (Saving: £800m)

    Total Cost: £30.48bn
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    What a surprise, it's gone to a second reading with the wrong costing maintained. Also, how about no to a sugar tax, I quite like avoiding unnecessary inflation.

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    Aye, but I don't see the need to include a sugar tax because of canon.
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    (Original post by TheDefiniteArticle)
    Aye, but I don't see the need to include a sugar tax because of canon.
    It's a very different and more comprehensive sugar tax.
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    (Original post by Saracen's Fez)
    It's a very different and more comprehensive sugar tax.
    oh, excellent, aye then
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    Aye
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    Nay the costings aren't sorted
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    Provisional aye, on the condition the costing is improved.

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    Nay
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    Nope.

    Housing benefit needs to be available to people from the age of 16, at least under certain conditions. I shouldn't have to explain why.

    I do not support such a child benefit cap and am yet to be convinced of a sugar tax being a positive thing.

    Some good things contained in this, but it could be better.
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    Nay
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    I would have preferred the inclusion of the traffic light labelling thingy I did back in office, but oh well
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    I guess the corrected costing needs bringing over, with a small correction to make:
    Spoiler:
    Show
    I guess it's time to be the unofficial civil service with Nigel Farage MEP again, let's go from the bottom up:

    Okay then, you reckon halving stamp duty on Brownfield sites will decrease revenues by £3.65bn p/a, which requires stamp duty revenues to decrease by more than 50%. We see here that a 12.1% decrease in revenues over 10 months is £620m, from this it is reasonable to assume that the old annual revenues were ~£6.2bn, or ~£5.6bn now, this halving of stamp duty on not even all properties seems to be leading to a decrease in revenues of about 65%, which is somewhat ludicrous, especially given that this should in theory stimulate, not retard, home sales, in fact it would likely lead to an increase in the first year as people hold off selling their house to make the most of this cut.

    Next up comes the child benefit changes, as already discussed the savings on this are actually £0 as this is a change that comes into force for the 2017-18 tax year IRL and as such this saving is being made regardless, I'm not going to bother checking the figure because it simply should not be included in this given the same (bar the wrong date being used) enactment date.

    Housing benefit change merely quotes the government figure so I guess that one is as fine as they're going to get here.

    For JSA, I have it having cost £2,696m in 2014-15, we also have the following rates now, £57.90 a week for 16-24 year olds, and £73.10 for over 25s, meaning we have a nominal increase of £22.10 and £6.90 respectively. If we express these as percentages of the current rates we get increases of 9.4% and 38.2%, multiplying that £2,696m by 38.2% we get a figure of £1,029m, so the only way that policy will cost £1b will be if near enough every JSA recipient is under 25. We could go on to look at the distribution of JSA recipients by age, but I don't feel that is necessary, unless the government wants me to do the full costing for them.

    On the benefit cap increase, according to this HoC briefing paper 69,000 households nationwide were hit by the original reduction to £26,000, but it also gives a link to a spreadsheet that estimates how many households will be hit by the new reduction to £20,000/£23,000 in each Local Authority, totting it up we have between 21,600 and 35,170 in London, given that 45% of the 69,000 were in London logic would dictate it's nearer the top end of this boundary, although one would also expect it to be much higher, given this the cost tops out in the region of £100m. In this instance I would be interested to see the government source on the £60.75m figure.

    On Inheritance tax, as Nigel has already pointed out, it is being suggested here that slight increases in the rate will more than double receipts, clearly absurd.

    The lowering of VAT cost is severely understated. Section 1.8 of the 2016 budget report (well worth a read, even has a section on financing and all the GILTS and stuff Lime-man, you might learn something) gives the 2016-17 VAT estimate as £138bn, a reduction to 15% would cost £34.5bn, £6.75bn more than given here, and a figure that will be even greater in 2017-18 when this bill would come into force.

    Last but not least comes the income tax changes, I thought this one would be difficult but the ONS is kind and publishes percentile data, both pre and post tax. The changes that are being made are the following: The personal allowance is £12,500 instead of £11,000, the higher rate threshold is to be at £50,000 rather than £43,300 and the additional rate shall be set at 50 pence in the pound rather than 45 pence. If we ignore that reduction from 50p to 45p had very little impact on reciepts, either actual or forecasted we now have to look at what those tax threshold changes will do. I shall inflate the 2013-14 income by 2.7% for 2014-15, 2.3% for 2015-16, and then the same again for 2016-17 and then 3% for 2017-18 for a net effect of 10.7%, let's call it 11% wage growth for the end of the first tax year of this bill being in effect and uniformly apply this across the board. Now, the difficulty comes in the fact that a number of the people will be above the tax free allowance due to non taxable income such as benefits, but looking at the data there the effects are minimal. Currently there are 31.42m people in employment, with about 500,000 jobs being created annually, so we will call it a 32.5m strong working population. Now, with these inflated figures we get 5% of the population lifted out of tax all together, or 1.625m people, if we say they each pay about £150 less tax each (20% of £750) there is a cost there of £243.75m, now we need to turn to the other 93% of the workforce, they are each paying £300 less, or £9bn between them all, already £5bn more than costed for. Next we get a little shy of 6% of people will be relegated from the 40p rate, we'll say it's 2 million, each paying on average £600 less each, for a total cost of £1200m, with 13% of the workforce paying the full £1340 less each, or £5.6bn. Now of course we get the loss of the tax free allowance from £100,000-£125,000, so just before the 97th percentile they start losing and just after the 98th percentile they have no more personal allowance, so for this let's call it 0.5% of workers lose on average half their personal allowance, so about 160,000 each lose £1250 giving back £200m, and then the remaining 2% lose the full £2500 reclaiming £1625m, so let's add this all up.

    Revenues lost due to higher personal allowance:£9.25bn
    Revenues lost due to higher 40p threshold: £6.8bn
    Revenues relciamed due to loss of personal allowance: £1.8bn
    Total cost: £14.25bn (£10bn more than budgeted for here)

    So all in all this bill costs about £20bn more than it claims

    QFA:
    Chancellor:United1892

    Acting Chancellors: PetrosAC
    Saracen's Fez

    Shadow Chancellor: The Financier



    Because I told them I would do it all:Quamquam123



    Leader of the Opposition (and might want to know the bit coming below): Life_peer



    Might be interested: Rakas21



    Deficit according to Budget: £36.54bn
    Adjustments:
    ATA Amendment failure and ATA repeal: +£40bn~
    Budget errors from this bill: +£23bn
    Correct accounting on Council House construction: +£18bn
    Changes to Defence Budget: +£20bn (or something like that as I recall)
    Increase in Foreign Aid Budget: +£1.5bn

    So assuming everything got signed off by the treasury that was legal
    True Deficit: ~£140bn

    Congrats guys, the deficit is back where it was 5 years ago.

    I slightly overstate (if we assume no change in avoidance, which there most certainly will be, I wouldn't be surprised if for more than what is saved) the cost of the income tax changes, although only by about £500m and none of this has any real impact on the deficit estimate given the margin of error. I failed to consider that the removal of personal allowance over £100,000 was not removed, consequently the 50p rate is being started at £137,500 and not £150,000. Estimating this threshold to be at about the 98.2% mark and the £150,000 to be at the approximately 98.4% mark, given how small the error due to the assumptions now being made are and given the overall margin of error being used we shall assume these all to be above the £150,000 mark, the average would be near that regardless. This means we have 1.8%, or about 600,000 people of the population paying 5p in the pound more than previously calculated on £12,500 of their earnings, or approximately £400m. Again, we will assume there is no effect on tax avoidance, despite the actual effect being very significant compared to this sum of money, possibly leading to increased costs compared to the threshold remaining at £150,000, which gives the income tax changes a cost of £8.85bn rather than the £9.25bn previously given.

    I would also be interested in how the £800m figure for the inflation boosting tax came from given very very limited data to go on.

    Regardless, in the grand scheme of the deficit forecast these changes are minor and the deficit forecast remains in the £140bn area, just as in the first reading, just as in 2010.
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    Division! Clear the Lobbies!
 
 
 
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