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  1. ITV Report

North East economy under scutiny

From Grannies to pasties: tax decisions have been controversial Photo: PA

When the Chancellor George Osborne stood up to deliver his budget on March 21, he knew the decision to cut the top rate of tax from 50p to 45p (from April 2013) would be highly controversial.

What he certainly didn’t expect was the series of other controversies which have flowed since then.

First, there was the 'Granny Tax' (the decision to freeze enhanced personal allowances for pensioners). Then, there was the hot topic of Pastygate (with Greggs leading the call against the plan to charge VAT on hot savouries). Now, the government is under fire from charities over a proposal to limit tax relief on donations (as part of a wider clampdown on tax loopholes).

All of these issues will no doubt feature in a special 90-minute Westminster debate: ‘the impact of the budget on the North East economy’.

The debate is being led by the MP for Gateshead, Ian Mearns. Several of his northern colleagues are also expected to speak.

It’s actually the hangover from the Budget in 2011 that is troubling many MPs. Tax changes announced last year have only now begun to take effect (from the beginning of the tax year 2012/13). Labour claim that up to 48,000 North East families are set to lose all of their Child Tax Credit or Working Tax Credit.

The biggest hit could be faced by working couples earning less than £17,000. Unless they can increase their (joint) working hours to 24 hours per week, they might lose up to £3,870.

The debate on Tuesday morning is likely to be a lively affair, with much talk of millionaire’s tax cuts vs tax rises for the working poor. Coalition ministers will point to the thousands of the lowest-paid workers who have been lifted out of the PAYE net altogether, due to the big increase in the personal tax allowance.

Finally, the government’s plans to look at the possibility of local and/or regional pay deals for some public sector workers is certain to divide opinion across the floor.

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