Public services squeeze will pay for budget initiatives

The increase in National Insurance revenue made possible by the abolition of the rebates associated with ‘contracting out’ from the second state pension, which the Chancellor has decided to bring forward by a year to 2016, provides the funds for many of Budget 2013’s most eye-catching announcements. The government will say this is simply moving money around the public sector, but in practice it will produce a further squeeze on public services.

Many will of course support the decision to introduce the Dilnot reforms to social care finance, at a cost of £1 billion per year from 2016/17. The same applies to the new Employment Allowance which offers a £2,000 discount on employer National Insurance costs (a measure targeted at helping smaller employers) at a cost of £1.3 billion in 2014/15, £1.4 billion on 2015/16, and £1.6 billion in 2016/17.

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