Wales politics

Budget 'lifts 42,000 more workers in Wales out of income tax'

An additional 42,000 people in Wales are expected to pay no income tax as a result of George Osborne's Budget.

The chancellor has lifted the threshold at which tax is paid, due to rise to £8,105 next month, to £9,205 in 2013.

But political opponents reacted strongly against moves towards the introduction of regional pay in the public sector.

The Welsh government called it "disappointing" and "not a Budget for jobs and growth".

Some government departments will have the option to introduce more local pay for civil servants whose wage freezes end this year, the chancellor announced.

Accompanying evidence from the Treasury said the "public sector pays more than is necessary to recruit, retain and motivate staff in some areas".

It cites research showing public sector workers in Wales can expect to earn 18% more than they would working for private businesses.

Mr Osborne last year asked independent pay review boards to look at how public sector pay can be made "more responsive" to local labour markets.

'Reward work'

Delivering his third Budget, he said he would "reward work, adding: "Britain is going to earn its way in the world."

Raising the income tax threshold is a key policy for the Liberal Democrats.

The UK government said the latest rise in the personal allowance means 95,000 people have been taken out of income tax in Wales since the coalition came to office. More than 1m people will benefit overall, the Wales Office said.

Welsh Lib Dem leader Kirsty Williams said she was pleased her party "have been able to persuade the chancellor to increase the personal income tax threshold".

"This will give hard-working people in Wales more of their money back in their pockets and it will also incentivise people to get off benefits and into work," she said.

Among other measures highlighted as beneficial to Wales were:

  • An extra £11.7m for the Welsh government - which has an annual budget of more than £14bn - over the next three years as a result of spending changes in Whitehall.
  • Mobile phone coverage will be improved along the A470 between Llandudno and Cardiff.
  • Cardiff will get funding of £12m to deliver ultra-fast broadband.
  • Child benefit will be withdrawn from people earning more than £50,000, instead of £43,000 as originally intended. It means 21,000 families will keep the benefit.

Businesses in an enterprise zone in Deeside will be able to write off the cost of plant and machinery against tax.

The Deeside enterprise zone - one of five being set up by the Welsh government - will focus on advanced manufacturing and includes the Airbus wing factory at Broughton.

Capital enhancement in enterprise zones have been the subject of negotiations between the Treasury and Welsh government Finance Minister Jane Hutt.

She welcomed the announcement, but criticised other aspects of the Budget and said the additional funds for the Welsh government were "peanuts".

'Value for money'

She also claimed there had been a lack of action on the railways.

The UK government said electrification of the Valley Lines in south Wales had been singled out as a "key infrastructure project".

The Treasury said it will continue to work with the Welsh government on the project "subject to value for money and an agreement on financing", with a final decision announced in the summer.

Plans to electrify the Great Western line from Paddington to Cardiff have already been announced, but the Welsh government wants it extended to Swansea and into the valleys.

First Minister Carwyn Jones said: "This is not a Budget for jobs, for growth in the economy, and that's very disappointing."

Mr Osborne also announced the 50p top rate of income tax, paid on earnings over £150,000, will be cut to 45p from April 2013, saying it damaged competitiveness and raised a third of the £3bn expected.

But Labour attacked a decision to freeze age-related tax allowances that will leave pensioners worse off.

Plaid Cymru Treasury spokesman Jonathan Edwards said: "Regional pay proposals will mean real term cuts for public sector workers in Wales and institutionalise low pay and low ambition.

"What has happened today is that George Osborne has passed the buck on regional pay to the Cabinet Office, but will be allowing it to go through.

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