In an attempt to boost spending on the high street and halt the economic slowdown, the Chancellor Alistair Darling has announced a raft of measures designed to kick-start the UK economy.
To help individuals and businesses, the Chancellor has unveiled a £20 billion package of tax cuts, raised personal allowances and public expenditure that will be paid for by taxing the better off in 2011. The question for many students, will be what benefit this package brings for them.
Under the new tax regime students earning under £6005 from April 5 2009 will not pay a penny in income tax, the tax free sum rising to £6475 in April 2010. The 10p threshold, which is applied after the tax free sum, has also increased to £2320 this year and to £2440 in the next.
Students who enjoy a drink and a smoke, however, will be disappointed that the 2.5% cut in VAT will be wiped out by increases in alcohol and tobacco duty. Nevertheless, the new 15% rate will reduce student's expenses a little. For example, a laptop typically costing £400.00 in November would include £59.57 in VAT, while from December 1 that figure will fall to £52.17.
The Credit Crunch has also prompted the Chancellor to announce spending on educational projects worth £800 million which is being brought forward to help stimulate the UK's flagging economy. The government also announced a further £2.2bn of additional expenditure to be used to improve the country's roads, housing and infrastructure. The new spending, however, is not thought to include any additional money for Britain's universities. "I have not identified anything in the pre-budget report which directly relates to universities," said Dr Robin Kirby, Bursaries officer at University College Falmouth.
The extra spending and cuts in tax will be paid for in the short term by additional borrowing which has raised concerns that the country's national debt, projected to rise to a trillion pounds, is spiralling out of control. According to Darling, however, "In these extraordinary circumstances allowing borrowing to rise is the right choice for the country."
George Osborne, the Shadow Chancellor, who does not support the government's rescue plan, accused the government of creating "a huge unexploded tax bombshell timed to go off at the time of the next economic recovery".
The brunt of the planned future tax rises will fall on those earning over £150,000 a year by increasing the future top rate of income tax to 45% and raising existing National Insurance rates by 0.5%.
The government's decision to pump money into the economy should go some way to offset the effect of the credit crunch, however, with nothing aimed specifically at higher education, or any additional cash earmarked for universities the benefit to students will be limited to those working and spending their way through college.
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