Citizens Advice Response to Budget 2011

Citizens Advice has reviewed the announcements made by the Chancellor George Osborne in his budget statement yesterday.  Citizens Advice is continuing to advise many people who are struggling with the effects of the recession whether that be reductions in working hours, job losses, coping with the effects of being in debt or with changes to their social security benefits. 

Citizens Advice welcomes the announcement to raise the personal tax allowance which will assist many low income families.  However many of the clients we see are beginning to deal with changes to the social security benefits system which are being gradually introduced since the Emergency Budget and the Comprehensive Spending Review last year.

Changes to Housing Benefit and Tax Credits may well leave others on low incomes out of pocket. As an example families with a new baby will lose up to £545 per year as a result of the tax credit changes.

We are disappointed that no change has been made to the standard interest rate for the Support for Mortgage Interest scheme which is currently below the rate most people pay for their mortgages. Many CAB clients have been experiencing mortgage arrears as a result of this change and we foresee that many clients will end up facing possession action as a result of the reduction in the interest rate introduced last October.

The proposal to introduce a £140 flat rate pension removes the need to be means tested for Pension Credit.  We will need clarification on how those of pension age who have state earnings related pensions and who paid additional contributions bringing their pension over this amount will be affected by this change.

The planned consultation on the merging of Income Tax and National Insurance will impact on some welfare benefits which depend on the claimant's National Insurance contribution record and it is unclear how the proposed changes would affect these entitlements.

The retention of the higher VAT rate introduced from the start of this year is also impacting on everyone’s household budgets.