Taking Gladstone’s original Budget Box out for its final outing, before it becomes a public record of the National Archives, the Chancellor went to the Palace Of Westminster to deliver this first budget of the new government, in line with the Conservative pre election promise, to deliver a budget within 50 days of coming in to office.
During the budget speech Rt Hon George Osborne MP said that:
It was an unavoidable Budget and £1 in every £4 we spend is borrowed. He said the deficit would be dealt with by cuts in spending more than increases in taxation.
The deficit was brought about by over spending not under taxing.
The chancellor also confirmed that the UK would not be joining the Euro during the term of this government.
Public sector workers earning less than £21,000 will have a pay freeze for 2 years. Public sector employees earning less than £21,000 will get a flat £250 rise on each of the two years the freeze is in place.
There has been much speculation about what was going to be included in the budget, but here is the actual budget direct from HM Treasury:
Today the Chancellor of the Exchequer George Osborne has set out his Budget with a comprehensive five-year plan to rebuild the British economy. The plan sets out tough but fair action to tackle the unprecedented budget deficit, introduce a fairer tax system, encourage enterprise and support long-term growth across the economy. The Budget sets out action within these three areas, to help rebalance the economy and provide the conditions for sustainable growth. Each builds on the Coalition Government’s core values of responsibility, freedom and fairness.
1. Responsibility: Tackling the deficit & the fiscal mandate.
The Chancellor has been clear that we need to tackle the deficit urgently. Reducing the deficit is a necessary precondition for sustained economic growth; today’s plans will help to restore stability and balance to the economy, underpinning private sector confidence to support recovery.
The Government has therefore set:
“¢ A deficit target, to achieve cyclically-adjusted current balance by the end of the rolling, five- year forecast period. At this Budget, the end of the forecast period is 2015-16;
“¢ For this Parliament, the fiscal mandate will be supplemented by a target for debt as a share of GDP to be falling at a fixed date of 2015-16, ensuring that the public finances are restored to a sustainable path;
“¢ By 2014-15, 80 per cent of the additional consolidation measures set out in this Budget will be delivered through spending restraint, with additional spending reductions of £31.9bn a year by 2014-15 and additional net tax increases of £8.2 billion. Taking the total consolidation measures delivered through spending restraint to 77 per cent;
“¢ On spending, £29.8bn of the additional savings are from public sector current expenditure (PSCE) and £2.2bn from public sector gross investment (PSGI). There are no further reductions in public sector gross investment beyond the cuts already announced as part of the £6.2bn of savings in 2010-11;
“¢ The Government will increase the standard rate of Value Added Tax (VAT) to 20 per cent from 4 January 2011;
“¢ The Government will increase the standard rate of Insurance Premium Tax (IPT) to 6 per cent and the higher rate to 20 per cent from 4 January 2011; and
“¢ The Government will introduce a two year pay freeze for public sector workforces from 2011-12, except for those earning £21,000 or less, who will receive an increase of at least £250 in these years.
2. Freedom: Enterprise and growth agenda
This Budget will create the conditions for enterprise and sustainable growth. The Chancellor wants to support business and make the UK more competitive. This means giving businesses more freedom by reducing regulation and providing targeted tax breaks, while ensuring that the economic opportunities for businesses are shared more evenly throughout the UK’s regions.
Measures to support enterprise include:
“¢ A major package of reforms to reduce corporation tax rates including a reduction in the main rate of corporation tax from 28 per cent to 24 per cent over the course of four financial years from April 2011 and reductions to the main and special rates of capital allowances from April 2012;
“¢ A reduction in the small profits rate from 21 per cent to 20 per cent from April 2011;
“¢ A National Insurance Contributions (NICs) holiday for new businesses which start-up in certain areas of the UK over the next three years;
“¢ An increase in the Enterprise Finance Guarantee and the creation of a new Enterprise Capital Fund; and
“¢ A Regional Growth Fund in 2010-11 and 2012-13 to support increases in business employment and growth, and a scheme in which new businesses in areas of the UK outside of the East, London and the South East will get a substantial reduction in their employer National Insurance Contributions (NICs).
3. Fairness: A fairer personal tax and benefit system.
The Government has been clear that the burden of deficit reduction will have to be shared. The changes announced today set out a vision for a refocusing of the tax and benefit framework, while protecting the most vulnerable in society. This Budget announces measures to encourage people to take personal responsibility for their actions by rewarding those who work hard and save responsibly for the future.
Personal tax measures:
“¢ Increasing the personal allowance for under 65s by £1,000 to £7,475 in 2011-12, taking 880,000 people out of income tax altogether;
“¢ Capital gains tax will rise from 18 to 28 per cent for those liable to income tax at the higher and additional rates. The 10 per cent rate for entrepreneurial business activities will be extended from the first £2 million to the first £5 million of qualifying gains made over a lifetime;
“¢ The Government will work in partnership with local authorities in England to implement a council tax freeze in 2011-12; and
“¢ Introduction of a bank levy on banks balance sheets from January 2011.
As part of the welfare reforms, the Budget announces:
“¢ Uprating the basic State Pension by a triple guarantee of earnings, prices or 2.5 per cent, whichever is highest, from April 2011;
“¢ Reduction in tax credit eligibility for families with household income above £40,000 (down from £50,000) from April 2011;
“¢ Intention to restrict the generosity of pensions tax relief by reducing the annual allowance from April 2011. The Government will ensure that this alternative approach raises no less revenue than has already been accounted for in the public finances; and
“¢ Indexing benefits by the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) from April 2011 – in order to provide a fairer reflection of benefit claimants’ experiences.
The measures set out by the Chancellor today will pay for the past and plan for the future. This Budget represents the first important step in transforming the economy, rebalancing growth across the UK and paving the way for sustainable, private sector led growth in the years ahead
How will this affect Stoke-on-Trent & The West Midlands?
“¢ To help areas and communities particularly affected by reductions in public spending make the transition to private sector-led growth and prosperity, the Government will create a Regional Growth Fund in 2011-12 and 2012-13. This fund will operate in England only and support proposals from private and public-private bodies that create sustainable increases in business employment and growth.
“¢ The Government will shortly announce details of a scheme to help new businesses in countries and regions outside London, the East and South East. The three-year scheme will exempt new businesses from up to £5,000 of employer NICs payments, for each of their first 10 employees hired. Subject to meeting the necessary legal requirements, the Government intends to have the scheme up and running by September. Any new business set up from 22 June which meets the criteria set out in the forthcoming announcement will benefit from the scheme. Up to 55,000 businesses could benefit in the West Midlands.
“¢ The impact of the employer NICs rate rise previously announced will be largely reversed by increasing the threshold for employer NICs by £21 a week above indexation. This will lead to a saving of around £280 million in the West Midlands.
“¢ The Budget 2009 proposal to repeal the special tax rules for furnished holiday lettings will not be implemented. Instead, the Government will consult over the summer on an alternative proposal to ensure the tax treatment of holiday lettings meets EU legal requirements in a fiscally responsible way, which does not penalise UK businesses, by changing the eligibility thresholds and restricting the use of loss relief. This will benefit an 22/06/2010 estimated 3,900 individuals in the West Midlands who receive an income from furnished holiday lettings.
“¢ The income tax personal allowance for those aged under 65 will be increased by £1,000 in cash terms, taking it from £6,475 in 2010-11 to £7,475 in 2011-12. As a result, the Government estimates that 23 million basic rate taxpayers will benefit by up to £170 each. In the West Midlands over 2 million basic rate taxpayers will gain from this measure.
“¢ Government will uprate the basic State Pension by a triple guarantee of the highest of earnings, prices or 2.5% from April 2011. The Consumer Price Index will be used as the measure of prices in the triple guarantee. However, to ensure the value of a basic State Pension is at least as generous as under the previous uprating rules, the Government will increase the basic State Pension in April 2011 by the equivalent of Retail Price Index. An estimated 1.1 million pensioners in the West Midlands will benefit.
“¢ Government will uprate the standard minimum income guarantee in Pension Credit in April 2011 by the cash rise in a full basic State Pension to ensure the lowest income pensioners benefit from the triple guarantee. 220,000 pensioners currently receive Guarantee Credit in the West Midlands.
“¢ The Government will introduce legislation to waive certain backdated business rates bills, including for some businesses in ports. An estimated 3,000 businesses across England will benefit
Picture: crown copyright republished with permission of HM Treasury.