Last week, the government unveiled its first proper budget. I say proper, to differentiate from the earlier 'emergency' budget. This time around, the cuts weren't so severe. In fact, overall it seemed to be fairly low key. Unless you have a family.
If you're a parent, with one or more children, you are going to in fact be worse off. The newspapers keep referring to the 'squeezed middle'. It seems as though everyone's forgotten about the crushed bottom, which is where many of us feel we've already been shoved.
So what did the budget mean for families exactly? I'm not an economist, nor a political writer. I don't understand a fraction of it all. So this is what I could glean from reports by those that do, and can translate for the rest of us.
If you want to find out exactly what impact the budget will have on you personally, try the Which? tax calculator.
The bottom line
In fact, things were going downhill last year. In 2010, according to the Consumer Credit Counselling Service (CCCS) households with dependent children needed an additional £650 a month to cover everyday living costs. That's compared to those households without children. Yes, that's right, A MONTH.
This isn't because we're all expecting to live a champagne lifestyle on beer money. Well, you knew that already. But it is always nice to know that we're not living on high and unrealistic expectations.
According to research undertaken by online bank, First Direct, young people today (ie 25 years old) would have to increase their income by 55% to enjoy the lifestyle their parents had at the same age. And their parents didn't have about £12,000 in university fees to take into account.
Cost of living to increase
That's where we stand now. What does the future look like for family finances? This comes from a report in the Observer, published yesterday. "Typical families with , who are already struggling on low to middle earnings, will see their real incomes fall by between 4% and 7% in real terms over the next year, according to new analysis obtained by the Observer".
The analysis comes from the Resolution Foundation (RF), a politically independent think tank. It defines low and middle earners as those with incomes between £12,000 and £30,000 for a couple with no children and up to £48,000 for a couple with three children.
I don't know about you, but this is a big worry for me. We're already living to the limits of our income, making every penny work. It is scary to think that I've another 4% or 7% to find. But it is a good motivator to get those longer term money saving projects underway.
Personal tax allowance
Now for a glimmer of good news. Our personal tax allowance will go up by £1,000 to £1,000 to £7,475, effective from April. Personal tax allowance is the amount we earn before we have to start paying tax. This will rise again, by £630 to £8,105 in April 2012 (BBC Business, 'The Budget And You').
According to the Mail Online, this will "take about 900,000 people out of the tax net and represents a £200 a year tax cut for a basic-rate taxpayer".
It all seems a bit pitiful really when viewed through the rising cost of living mentioned above.
The price of petrol
Is going down. Great news for families, who rely on using their car in a way that those with no dependents don't. Fuel duty has been cut by 1p per litre. There's also something that's not a reduction, but is a saving. Sort of. MyFinances.co.uk explains that "the rise of 4p per litre on fuel, due to be introduced in April, has been postponed until 2012".
Will you still be getting these? That depends. The system has been changed, with some tax credits cut altogether, while for others there's an increase. According to a report in the Mail Online households with an income of £40,000 can no longer claim tax credits. For those on incomes between about £21,000 and £40,000 tax credits will be reduced as a family's income rises. The Government is also scrapping the 'baby element' of the credit.
"Another restriction on tax credits will be imposed on April 6, 2013. Families will now have to report immediately any increase in annual income of more than £5,000 and have tax credit payments adjusted accordingly. Before this, increases of up to £20,000 could be ignored. "
Tax-free childcare vouchers are also being restricted. But, if you're already claiming childcare vouchers from your employer, you're fine. You won't be affected by the changes. I am not sure how it works if you change employers, or if you take a break for some reason (maybe maternity leave with another child) and start again. Hopefully one of our more knowledgeable readers will be able to explain that.
So if you're signing up to employer voucher schemes from today, the amount of tax-free pay will stay at £55 a week for basic-rate taxpayers. However, for 40 percent taxpayers it will be capped at £28 per week, and £22 for top rate earners.
There's all the little bits and pieces that will add up. Cuts at a local authority level will impact on families the most. Parks are losing staff. It has already happened in one of our local parks, and today my husband removed a used condom from the bottom of the slide in the kids playground. Yay. Looking forward to more of that. Not.
The government is extending the Support for Mortgage Interest scheme for another year, so it will last till 2013. This is a benefit that pays the interest on your mortgage if you're unemployed. Which is great. Sort of. The thing is it takes 13 weeks to kick in. And you only get it on income based support. You don't get it if you're on contributions based support, which is where you get about £60 a week for six months provided your national insurance contributions are up to date ie you've been in full employment before losing your job.
By that time, most companies will have started repossession proceedings anyway!