It’s the start of the financial year, so what do the government’s changes actually mean in real terms and will they affect graduates in a positive way? What does full employment mean and are the tax changes useful for us?
Will the new tax changes result in full employment in Britain?
George Osborne has recently debated over the consequences of the tax cuts and changes to the benefits structure. His aim? To make Britain, “the best place in the world for you to find a job.” He went on to say “I’m making a new commitment…to fight for Full Employment in Britain. Making jobs a central goal of our economic plan.” On the 1 April business tax was reduced from 23% to 21%. At the end of this week, from the 6 April your income tax allowance will increase so that the first £10,000 you earn won’t be taxed. This means most people will be around £700 better off. This will benefit all graduates several ways. Firstly you take home more of the money that you earn and secondly, an aim to get full employment will mean a greater number of jobs generated so a greater likelihood of employment.
Commenting on this Mr. Osborne said that they were, “the biggest cuts to personal and business taxes for two decades.” He said that this was “part of our long term plan to build a more resilient economy and create jobs.” This plan is meant to result in businesses, with more money, creating more jobs. George Osborne addressed the BCC (British Chamber of Commerce) Annual Conference, saying that the tax alterations have sent “a huge message to the rest of the world that Britain is open for Business”. This hopefully means that the recession that we have all experienced won’t happen again. So in theory graduates can once again graduate with the confidence of finding a job.
What does full employment mean?
It doesn’t mean 100% employment. This would in fact be bad for the economy causing large rates of inflation and risking economic collapse once again. There are many differing definitions of full employment. Unfortunately Mr. Osborne declined to provide his own definition, he did however say, “There is no reason why Britain shouldn’t aim to have the highest employment rate of any of the world’s leading economies. To have more people working than any of the other countries in the G7 group that’s my ambition.” This would mean that it was more lucrative for graduates to stay and work in Britain rather than go abroad in pursuit of a career.
Whether it’s an employed rate of 80% of the working populace (Labour’s definition) or unemployment being below 5% (an academic definition) the rate at the moment stands at 7.2%. As a guide, the telegraph reported that “The lowest recorded level of unemployment was 215,800, or 1 per cent, in July 1955.”
What is next?
The Coalition government want to decrease business tax from 21% to 20% in the following year. In contrast Labour would keep the rate at 21%. Labour wants to freeze business rates for the next few years. They argue that small businesses have suffered and need prioritising.
The Prime Minister said , “We’ve got to make sure our young people make that transition from school and college to the world of work” The Coalition government plan to do this via a reduction in red tape as well as taxes, hoping that this will allow businesses to create more jobs. The overall expectation is that this will make Britain’s economy sturdier.
So the new tax changes mean that you take home more money each month. Businesses will also have more of their income freed up, which in theory means they can generate more jobs. Jobs that graduates can apply for and begin their careers. Making sure the world knows Britain is a contender in the job market means more graduates retained in Britain, and a stronger more resilient economy.