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2010 Emergency Budget

Many of the papers had suggested that George Osborne’s revelations today would constitute the harshest budget in years; The Daily Telegraph says it will be "the most draconian in 30 years" and the Financial Times says it will be "the most brutal budget in a generation".

Earlier today the Chancellor had this to say about his emergency budget:

“My budget is tough but it will be fair. This is an unavoidable budget because of the mess we have to clear up. So the coalition government will take responsibility for balancing Britain's books within five years. We're going to do it fairly, protecting children and pensioners, and ensuring the richest contribute the most. And it means getting enterprise going, because it's businesses, not government, that will create the jobs of the future.”

So how did your pocket fare today? Well. Many of the detailed spending cuts are yet to be announced, which could see many regions and households who depend on the public sector employment fall into difficulty. For the moment however, Credit Action has put together a brief synopsis of today’s emergency Budget – visit our website again tomorrow as we digest all that has been announced.

Public Sector

There will be a two-year pay freeze for public sector workers, says Mr Osborne, but those earning less than £21,000 will be exempt. There are 1.7 million workers in that category. They will get a £250 pay rise this year and next year.

Across the scale, benefits, tax credits and public service pensions will be up-rated in line with consumer prices rather than retail prices. Osborne says his measures to cut benefits will save £11bn by 2014-15.

Welfare

One of the main ways of achieving these savings will come from the decision to freeze child benefit for the next three years, while the sure start maternity grant will go to the first child only. In addition, Mr Osborne announces, "We will expect lone parents to look for work when their first child goes to school".

However, there will also be extra money for families Mr Osborne argued. The child element in the tax credit system will rise by £150 above inflation. That will cost £2bn, and it will mean that there will be no increase in child poverty. There will also be tax credits cut for households with incomes over £40,000.

Lastly, the government said that they will introduce a medical assessment for Disability Living Allowance from 2013, which will be applied to new and existing claimants.

On housing benefit, Osborne says it costs £21bn. "Costs are completely out of control", costing more than the police and universities combined. The government will reduce the costs of Housing Benefit by £1.8 bn a year by the end of the Parliament, or 7 per cent of the total budget. Housing benefit will be limited from £280 a week for a one-bedroom property to a maximum of £400 per week for a four-bedroom house under radical reforms, Mr Osborne says.

From April next year the state pension will be linked to earnings, not inflation. (That means it will go up more every year.) It will rise by earnings, inflation or 2.5%, whichever is greater.

Taxes

On 4 January next year, the main rate of VAT will rise from 17.5 to 20%. “The years of debt and spending make this unavoidable”, said the Chancellor as he announced the measure. This is expected to generate over £13bn a year by the end of the parliament. Food and children's clothing, as well as other zero-rated items like books, will remain exempt. There will be no new increases in duties on alcohol, tobacco or fuel, said Mr Osborne.

The chancellor also announced an increase in the income tax personal allowance by £1,000 in April 2011, giving 23 million people up to an extra £170 per year and taking 880,000 out of the tax system altogether. The higher rate income tax threshold will remain frozen to 2013/14, with a long-term objective to increase the personal allowance to £10,000.

The government said that they will help local authorities in England to freeze council tax for one year from next April if they keep spending costs low, this will save the average family £35 next year.

From midnight, higher-rate taxpayers will pay 28% on their capital gains.

Banking

From January 2011, a levy will be imposed on UK banks and the UK operations of foreign banks which will generate more than £2bn in annual revenue. The French and Germans have also agreed to impose levies, George Osborne says.

Business

Anyone who sets up a new business outside London, the south-east and east of England will be exempt from £5,000 of National Insurance contributions for each of first 10 employees they hire, the chancellor announces.

 

 

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