UK Emergency Budget

DrumSteve

http://news.bbc.co.uk/2/hi/politics/10371590.stm

Budget: Osborne's 'tough' package puts VAT up to 20%
Page last updated at 14:02 GMT, Tuesday, 22 June 2010 15:02 UK
E-mail this to a friend Printable version Osborne: "The years of debt and spending made this unavoidable"
VAT is to rise from 17.5% to 20% in January after George Osborne unveiled the biggest package of tax increases and spending cuts in a generation.

He said his "tough but fair" Budget was "unavoidable" although he told MPs in the Commons there would be no extra tax on alcohol, tobacco and fuel.

Child benefit will be frozen for three years and there would be cuts to family tax credits and housing benefits.

Labour said the Budget was "wreckless" and would "throw people out of work".

Acting Labour leader Harriet Harman said it would stifle growth and hit hardest "those who can least afford it".

But Mr Osborne laid the blame for the state of the nation's finances squarely at the door of the previous Labour government, saying: "The years of debt and spending make this unavoidable."

'Progressive budget'

He promised to balance Britain's books within five years - faster than Labour was planning, with the bulk of the savings to come from cuts to benefits and public services rather than tax increases.

He said action was needed to prevent a "catastrophic collapse" in economic confidence but stressed it would be done in a "fair" way with the better-off shouldering most of the burden.

BUDGET MEASURES
Continue reading the main story VAT increase
Public sector pay freeze
Child benefit frozen
Housing benefit cuts
Disability Living Allowance cuts
Tax cut for lowest paid
Two year council tax freeze
Capital Gains Tax increased
Bank levy
NI tax holiday for job creation outside South-East of England
Key points: At-a-glance

Harman attacks 'reckless' Budget

How the VAT rise will work
UK to 'balance books' by 2016
"Everyone will pay something but the people at the bottom of the income scale will pay proportionately less than those at the top. This is a progressive Budget," he said to jeers from Labour MPs.

Tax credits will be cut for families earning more than £40,000 a year - and there will be a two year pay freeze for public servants paid more than £21,000, with those earning less all getting a £250 rise.

In addition to the VAT increase, which Mr Osborne said would raise £13bn a year, capital gains tax will be increased to 28% for top rate taxpayers - less than the 50% some Conservative backbenchers had feared.

And he ended his speech with a pledge to link pensions to earnings - or prices or 2.5% if they are higher.

He also signalled that public spending cuts would be much deeper than previously expected.

All government departments are facing real terms cuts of 25% over four years, except health and foreign aid, which have been ringfenced.

The full detail will not be revealed until Wednesday 20 October, when Mr Osborne publishes his spending review.

In other moves, housing benefit will be reformed with a maximum limit of £400 a week, in a package saving £1.8bn a year by the end of the Parliament.

Other benefits to be cut include the health in pregnancy grant while the Sure Start maternity grant will be restricted to the first child only and lone parents will be expected to look for work when their youngest child goes to school.

Bank levy

But there will be an extra £150 a year for the poorest families, through changes to family tax credits to ensure, Mr Osborne said, child poverty reduction targets would be met.

The government is also to introduce a medical assessment for Disability Living Allowance from 2013 for new and existing claimants.

FULL BUDGET DOCUMENTS
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Documents hosted by Direct.gov.uk
Mr Osborne also announced plans to help the low paid by raising personal tax allowances, taking an estimated 880,000 people out of the tax system and give millions of basic rate taxpayers a tax cut of £200 per year.

From January 2011, the Government will introduce a bank levy, which will apply to the balance sheets of UK banks and building societies and the UK operations of foreign banks. Mr Osborne said the move would raise £2bn a year once it was fully in place.

Mr Osborne said public sector workers paid more than £21,000 a year would have a two year pay freeze with those paid less getting a flat pay increase of £250 for the next two years.

The plan is the first step towards a key Liberal Democrat coalition demand of taking all those earning less than £10,000 out of tax.

'Enterprise-led recovery'

The chancellor must find £3.5bn to pay for the giveaway - which will be clawed back from top rate taxpayers - and Labour are likely to argue it is irresponsible in the current climate.

Mr Osborne also froze the Civil List payments to the Royal Family at £7.9m a year and said in future years they would be subject to scrutiny by the National Audit Office.

FROM BBC NEWS BLOGS
Continue reading the main story It is rare for a Budget to contain both an overhaul of the taxation system and a significant shift in the boundary between public sector and private sector
Robert Peston

BBC Business Editor

Robert Peston's blog

Nick Robinson's blog

Stephanie Flanders's blog

Analysis from around the web
He stressed that the pain of his austerity measures would be shared by "everyone" - but said all would share in the proceeds of the "enterprise-led recovery" that he promised would follow.

"Yes it is tough, but it also fair," said Mr Osborne of his first budget, adding: "Everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it."

He said that the Office for Budget Responsibility (OBR) now estimated growth this year of 1.2% and 2.3% next year - compared to its previous forecasts of 1.3% of 2.6%.

Giving her response to Mr Osborne's statement, acting Labour leader Harriet Harman poured scorn on the Liberal Democrats for providing a "fig leaf" for their Conservative coaltion partners, arguing "this reckless Tory budget would not be possible without the Lib Dems".

"How could they let the Tories so exploit them?," she said, adding: "The Lib Dems leaders have sacrificed everything they ever stood for to ride in ministerial cars and to ride on the coat tails of the Tory government."

In a message last night to Liberal Democrat supporters, Deputy Prime Minister Nick Clegg made clear that his party was fully signed up to the coalition's economic strategy.

He rejected accusations that he had "sold out" to the Conservatives, insisting that the Budget would bear "the stamp of our Liberal Democrat values".

So what do you think?

He seems to be making the right noises however I can see the cuts going down well. looks to be getting them back on the right track though to bring down their deficit.

The rise in VAT could see a potential opportunity for ourselves.

Anyways let see if he follows through on these cuts without backing down.

Cookie_Monster

everything expect this:

estimated 880,000 people out of the tax system

seems to make sense to me. no reason for anyone to be outside the tax net, even if they are contributing virtually nothing

It'll be interesting to see what gets chopped back to meet the 25% cuts across all depts.

Permabear

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Nody

Someone who actually go the balls to do what needs to be done; bravo is all I can say. Yes, they risk double dipping but since they can't keep on borrowing themselves out of it (hey, a lesson for certain people there..) it is needed. The cut of 25% of PS is also very much needed in Ireland I'd say...

DrumSteve

donegalfella wrote: »

This post has been deleted.

Aye, but without the w.

who the fug

Cookie_Monster wrote: »

everything expect this:



seems to make sense to me. no reason for anyone to be outside the tax net, even if they are contributing virtually nothing

What is the point in taxing them, and then wasting a % of the monies collected trying to give it back to them

who the fug

Fcuk this means the price of beer is going up again,:mad: must swap me tobacco brand to Golden Virgina seems to easier to get

dan_d

Child benefit frozen - it doesn't get paid out or it doesn't go up in the next 3 years??

Looks okay to me although that's a big jump in VAT. The bank levy......would that even be possible here anymore?

Cookie_Monster

who the fug wrote: »

Fcuk this means the price of beer is going up again,:mad: must swap me tobacco brand to Golden Virgina seems to easier to get

why?

although he told MPs in the Commons there would be no extra tax on alcohol, tobacco and fue

except VAT of course. 3% not that much though

who the fug

Cookie_Monster wrote: »

why?

VAT on Beer

Golden Virgina does nae smell when coming through customs, so I am told

Aard

Cookie_Monster wrote: »

except VAT of course. 3% not that much though

Which in reality is an increase of just over 2p for every pound.


I don't understand why there's such a hullabaloo over VAT increases

Fratton Fred

dan_d wrote: »

Child benefit frozen - it doesn't get paid out or it doesn't go up in the next 3 years??

Looks okay to me although that's a big jump in VAT. The bank levy......would that even be possible here anymore?

the UK's 17.5% was pretty low anyway I believe and to be fair, no one really noticed when it went down to 15% so i doubt too many people will notice this increase.

In all, I am quite happy with this budget. I exploit the IR35 loop holes and i was worried they were going to be shut off. More than happy to pay the extra VAT though.

This morning they were talking about "lifting the cloud" of the budget. These measures have been coming for a long time and to use the words of the BBC, the drum roll of austerity measures was getting unbearable.

ednwireland

Aard wrote: »

Which in reality is an increase of just over 2p for every pound.


I don't understand why there's such a hullabaloo over VAT increases

what do you spend every year on items with vat it will add up to quite a bit of money

rightwingdub

dan_d wrote: »

Child benefit frozen - it doesn't get paid out or it doesn't go up in the next 3 years??

Looks okay to me although that's a big jump in VAT. The bank levy......would that even be possible here anymore?

As much as I'd love to see a bank levy in Ireland it is completely unaffordable at the present time.

Okay regarding the UK budget, apparently it was 77% spending cuts 23% tax increases, Osborne should have gone about 90% spending cuts 10% tax increases.

some good ideas:

1) someone on job seekers allowance will see their housing benefit cut by 10% if they are more than 12 months on the dole. (From April 2013)
2) Single parents will be expected to seek work from when the youngest child starts school, an excellent proposal but will it be implemented.
3) Corporation tax to be cut from 28% to 24% over the next 4 years felt he should have gone for 20% and for small businesses it is to be 20%.
4) A review of public sector pensions in the autumn to be chaired by a former Labour minister.

Din Taylor

Aard wrote: »

Which in reality is an increase of just over 2p for every pound.


I don't understand why there's such a hullabaloo over VAT increases

Still takes money out of the economy no matter how small the increase. Very simple example: I have £120 to spend. I see a nice, let's say, television for £100 + VAT. Before January this will cost me £117.50 in the UK where I may buy a cup of coffee with the extra £2.50. After January my whole £120 will be spent. Even if the retailer doesn't pass on the increase it still has to be paid and it goes out of the economy.

You have to decide whether or not you want the economy to grow on the back of consumer spending. Conversely the 2.50% temporary cut by Alistair Darling was a stroke of genius at the right time IMHO.

ardmacha

The big difference in the UK budget was that they taxed the banks and used the money to increase welfare and preserve salaries. Here they cut salaries and welfare in order to give money to banks.

rightwingdub

ardmacha wrote: »

The big difference in the UK budget was that they taxed the banks and used the money to increase welfare and preserve salaries. Here they cut salaries and welfare in order to give money to banks.

Welfare and public sector salaries had to be cut in Ireland otherwise the country would have gone bust, secondly ps salaries in the UK will be cut eventually todays announcement of a pay freeze for anyone earning over 21,000stg will be reversed in a year or two.

Permabear

This post has been deleted.

rightwingdub

donegalfella wrote: »

This post has been deleted.

The problem is that the do gooders hold sway when it comes to welfare in this country, hopefully an IMF intervention will bring an end to this do gooder rubbish in Ireland whereby single parents can claim the one parent family payment until the youngest country reaches 22.

thebman

rightwingdub wrote: »

The problem is that the do gooders hold sway when it comes to welfare in this country, hopefully an IMF intervention will bring an end to this do gooder rubbish in Ireland whereby single parents can claim the one parent family payment until the youngest country reaches 22.

Do gooders is being kind to the groups involved, they are nothing but lobby groups like big tobacco, unions, publicans, taxi drivers and even charities.

All out to try to preserve their slice of the pie and screw everyone else as long as their cause gets its money from the state and doesn't have to ask the people directly for fear of giving people a choice of where they spend/donate their money and how much of it they give away.

Better to let the government decide that it seems.

Aard

Aard wrote: »

Which in reality is an increase of just over 2p for every pound.


I don't understand why there's such a hullabaloo over VAT increases

ednwireland wrote: »

what do you spend every year on items with vat it will add up to quite a bit of money

If you spend 20,000 a year on taxable goods/services, then the proposed increase amounts to 425 a year: less than 1.20 a day.

Din Taylor wrote: »

Still takes money out of the economy no matter how small the increase. Very simple example: I have £120 to spend. I see a nice, let's say, television for £100 + VAT. Before January this will cost me £117.50 in the UK where I may buy a cup of coffee with the extra £2.50. After January my whole £120 will be spent. Even if the retailer doesn't pass on the increase it still has to be paid and it goes out of the economy.

This is a good argument. I had been thinking of the personal side, rather than the larger economic side.

ednwireland

Aard wrote: »

If you spend 20,000 a year on taxable goods/services, then the proposed increase amounts to 425 a year: less than 1.20 a day.

60million people in britain though if 1 million spend that, thats 425 million

agree its money out of the economy though, ts like the employers taxes there seems to be an opiniion out there that this extra money just magically appears, but no - working in a small company we have to up our prices or work longer or get paid less someone loss out somewhere

A Dub in Glasgo

Biggest affect for me is the Child Tax Credit changes which will mean we lose ours. I would have loved to see more tax avoidance loopholes being closed though [including the obvious IR35 one]

Biggest concern of mine is what the departmental cutbacks will mean for my work in the future. I work for Network Rail btw.