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George Osbourne First Budget


22 Jun 2010
Posted by Mike Rawlins

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.

Welfare reforms:
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.

Rt Hon George Osborne MP
Post Gallery: 
Rt Hon George Osborne MP - crown copyright republished with permission of HM Tre

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tonyjohnt's picture

Haven't really had time to

Haven't really had time to digest it yet, but there is one screaming headline : VAT INCREASE!

During the election this whore looked Andrew Marr in the face and said raising VAT was not in their thoughts. It is the most regressive tax, it hurts the poor far more than the wealthy. This is the tone of our country now.

When this rise comes in it will make virtually everything more expensive. It will fuel inflation, stifle business and raise unemployment. Still, the millionaire Cameron can always blame our ills on the scroungers. Caroline Lucas has also raised a good point - what has happened to "Green Dave"?

What I find hardest to stomach is the fact that this bunch of crooks don't even have a mandate.

Mike Rawlins's picture

But Cider won't be as

But Cider won't be as expensive......


Remember: Britain invented time zones, so that means the French sit down to lunch when we tell them it is 1 O'clock and that is what makes us Great.
Ian Norris's picture

Mike Rawlins wrote:But Cider

Mike Rawlins:
But Cider won't be as expensive......

Try tell them that down trentham village £4.95 ur cyder n £10.95 ur perry :( gutted i was, they used to have a decent range of proper cyders in there too

¨°o.O O.o°¨°o.O O.o°¨°o.O O.o°¨°o.O O.o°¨°o.O O.o°¨°o.O
¨°o. http://iannorris.limewebs.com/
¨°o.

tonyjohnt's picture

Every cloud's got a silver

Every cloud's got a silver lining!

tonyjohnt's picture

May I also suggest Mike, that

May I also suggest Mike, that you would have much more credibility on the subject of alcohol abuse if your avatar was not a pic of you supping a pint!

An alcoholic is simply someone who drinks as much as you, who you don't like.

Mike Rawlins's picture

Who is talking about alcohol

Who is talking about alcohol abuse?

Not me..

and what of all the people whom I like more when they drink?


Remember: Britain invented time zones, so that means the French sit down to lunch when we tell them it is 1 O'clock and that is what makes us Great.
tonyjohnt's picture

I doubt they drink white

I doubt they drink white cider for its softness on the palate! Anyway, they've scrapped the tax to help the dirtbags who make and sell it, not the dirtbags who drink it.

tonyjohnt's picture

Who went out that Thursday to

Who went out that Thursday to vote for a ConDem government? Qui Bono?

This is NOT democracy - it is hypocrisy!

David Jack's picture

Nothing wrong with a drink or

Nothing wrong with a drink or two, just as long as you dont start blogging on the internet under the influence, or not as the case maybe!!

Didnt realise there were that many methodists in Stoke, seems everyones got something to say about those of us who enjoy a social pint or six.

Guest's picture

What about the workers?

What about the workers?

Warren Lloyd's picture

Normal Tory b****cks, any

Normal Tory b****cks, any Lib-dem worth there salt sould be disgusted this evening that there leaders have put there name to this Conserative sack of s**t. High end bussness and fat ritch bas****s are the only ones to gain from this. Oh! and Chavs who drink to much Cider.
By the way at least 30 cans of beer, cider, lager, stout (yes, the black irsh stuff)or bitter, £20 from you know where, I'm sick of seeing the bloody stuff. Bring you ID with you, cos I'll want to see the bloody thing and get some Tic-Tacs, cos I'll tell you cart off if I so much as smell it on you.

Caring for the city and all within it.

Johnnyf's picture

My biggest worry for our area

My biggest worry for our area is , will the private sector step in to create jobs?

I dont feel that we have this culture sufficiently given that we have rrealy struggled to replace our traditional industries.

We need our local politicians to get their act together and work with business and bring jobs to the city, that should have been the crux of the regeneration money that the City had and may now well lose.

This means that the challenge is even greater than before.

I also worry about the enforcement of public sector cuts, I will shed few tears for many at the city council who have no passion for the city and choose not to live here if theor jobs go because they have not delivered but I doubt that they will suffer .I suspect that these people will cover their own backs and money that now goes to local services and voluntary sector and community geoups will be cut to save council managers salaries. This will be very bad for the City.

I do think that people should be encouraged to work idleness is no good for anybody but we need decent jobs to come to the area.

A day where the message " get your act together" was never more relevent to the City of Stoke-on-Trent I just hope our leaders in both business, public services and politics will work together to deliver a future for this City

OWD POTTER's picture

Saw an interview with a Lib

Saw an interview with a Lib Damned, MP, didn't catch the name as I was not that interested till near the end, when I heard him say that he had campaigned on a promise of no rise in VAT, and this budget now makes him a liar and he feels that he has betrayed those who voted for him,
HELLO, welcome to the real world, where have you been since the sell out...... sorry, election?
not read any newspapers, or emails? not looked on many blogs?
I think you will find that quite a sizable chunk of Lib Dem voters,...... and even a few Tories would not argue with you about the way you 'feel'

I have read quite a lot of post by 'former' Lib Dem supporters using exactly those words, THEY did NOT vote Lib Dem to allow the Tories in through the back door, and today we see the results, Same old tories,

and we are only getting started, there will be trouble ahead, there are some very uncomfortable looking Lib Damned MPs knocking about the halls of Westminster,the cracks are growing,
ONE "grain of comfort" to come from this stitch up is knowing that when it does all come crashing down (and it will) the Lib Dems, or as I have taken to calling them, the Lib Damned, will become the Lib Doomed, because millions of their former supporters will transfer their votes,
and I get the feeling they WON'T be going the Tories way,

Playing the long game,

---------------------------------------------------
The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent and repress them.

Karl Marx

----------------

Basil Fawlty's picture

It's a mad mad mad mad mad

It's a mad mad mad mad mad mad mad mad mad world. 25% cuts and a net increase in jobs? Don't make me laugh Osborne. There was a time when a budget like this would've caused widespread unrest. Unfortunately, apathy and servilitude is such that we'll take it like sheep on the way to the abattoir. Cameron and Clegg have the grubby hand of Thatcher up their sphinctii

Warren Lloyd's picture

The only reason its not been

The only reason its not been met with civel unrest is that he layed off the beer and fags...lol. Keep the great unwashed sweet.

Caring for the city and all within it.

Andi's picture

The report above, should have

The report above, should have read that those on over £21k will have a pay freeze and those on under £21k will have the £250 a year rise.

tonyjohnt's picture

£250 per year Andi? Well

£250 per year Andi? Well that's really going to cushion the poorest in our society from the double whammy of VAT rises and cuts in services.

I'm no economist and it may show, but I cannot understand how we improve the economy by throwing thousands more on the dole - not paying taxes and claiming benefits.

I must also say that to hear a Prime Minister referring to a section of society as scroungers has a most depressing sense of deja vu about it. It can be expected from your average contributor to the Sentinel site, but it is disgraceful from our senior politician.

There may be trouble ahead...

Andi's picture

Tony if you had read the

Tony if you had read the article you would have seen the section on public sector employees pay to which I refer.
I ask where you get the connection to "the poorest" or was it just an attempt to be sarcastic !

tonyjohnt's picture

I read the article Andi and

I read the article Andi and there are still two points I would put to you.

Firstly, does a rise in VAT and cuts in services hit the poorest hardest?

Secondly, does it make any sense to be aiming for £13billion in welfare cuts when you are also intending to put thousands of Public Sector workers on the dole? As ever, these ridiculous Tory policies will cause great division and social unrest. What's saved on welfare will no doubt have to be spent on policing and the courts.

Andi's picture

Tony , I didn't feel any

Tony , I didn't feel any benefit when labour supposedly cut VAT , and logically the first 12+ months of this VAT rise is paying back the supposed savings that we had under labour. As for "cut in services hit the poorest" and having a look through all 121 pages of the budget I can not see the detail to which you refer where the "poorest" are a target, please could you be more specific.

tonyjohnt's picture

£13billion of welfare cuts -

£13billion of welfare cuts - and you don't see where the poorest are targeted? They are either cuts or they are not.

When the rise in VAT comes in next January it may cost me £5 - £10 more a week to live. That will make a great difference to me... I doubt it will bother Messrs Cameron and Clegg (spit).

Andi's picture

Tony I hope you saved the £5

Tony I hope you saved the £5 - £10 a week Labour gave you on the VAT you "saved" before! {spending £400 a week (£20k+/year)to cost you £10 in VAT} In the Budget document it states "£11B of welfare reform savings to reward work and protect the most vulnerable" (page 7) ok yes your right target to protect !

Guest's picture

Would this be the same Nicky

Would this be the same Nicky Clegg that (as an MEP between 2001 and 2005) made no less than £331,000 on the sale of his 'second home' - bought with assistance from us poor taxpaying mugs ?

Guest's picture

Can I remind you of the

Can I remind you of the recent proposals to close 103 magistrates' courts and 54 county courts ?

tonyjohnt's picture

As the monkey said when he

As the monkey said when he shat behind the piano... it remains to be seen.

Like many posters on here, I lived through the last Tory Government. The notion that they have an atom of egalitarianism about them is laughable. Even in good times they won't throw much from the table.

Warren Lloyd's picture

I like the idea of the 20%

I like the idea of the 20% VAT rate in-fact. It meens all pay, not just workers via your pay packet.

Caring for the city and all within it.

Guest's picture

880,000 out of income tax

880,000 out of income tax altogether.. The poorest people too.

VAT sure as hell didn't help the poor when it was lowered, so it's not going to do the opposite when it's raised. And all the people going mad about the raise should consider how they would tackle a budget deficit the size of ours.

There was no way a Labour government would ever have come to terms with the problem they had created and those that think they would (despite their lack of an opposition to the budget) are biased for the sake of being biased.

tonyjohnt's picture

VAT is widely regarded as the

VAT is widely regarded as the most regressive tax Warren. With a few exceptions, most food and children's clothing for instance, the cost is borne by us all.

Whatever happened to the old fashioned notion of taxing the rich? They gain far more from society - is it asking too much that they help out when we are in trouble? If the Bankers had lent to industry and entrepreneurs instead of being fixated with property, maybe we wouldn't be in this mess.

Why is it falling on those with least to dig us out of the hole fat cats have made?

Guest's picture

Just to pick up on the point

Just to pick up on the point of the VAT increase costing somebody £5-10 per week.

This would require weekly expenditure of £200-400 per week on non-17.5% VAT expenditure; so that's £200-400 per week, excluding food, fuel, and fares (rail & bus).

That sounds pretty good amount to be able to spend to me - hardly what the poorer in society can be spending?

Oh, and the uprating of income tax allowances is worth about £4 per week! So add that in and to be £10 a week worse off would involve spending an awful lot of money each week.

Or have I missed something?

Andi's picture

That is totally true and was

That is totally true and was part of my reply to tonyjohnt earlier

tonyjohnt's picture

Guys, Iam trying to keep it

Guys, Iam trying to keep it fluffy... but you cannot argue that rises in tax on spending, added to cuts in services will do anything other than hurt the poorest most.

There is an old saying amongst the socialists : we talk class war, but the Tories wage it.

Warren Lloyd's picture

Tony, I would rather pay VAT

Tony, I would rather pay VAT at a higher rate, a rate that may be picked up and hidden by the shops if you shop around. Like you say most foodstuff is not covered by VAT. Fair tax, all pay. If you can aford to pay for a wide screen telly, you can aford it wether or not it goes up 2.5%. But it will not, the retaler will take the 2.5% hit to get you in the door.

Caring for the city and all within it.

tonyjohnt's picture

Well I'm in smug mode this

Well I'm in smug mode this morning!

Just been on the Gaurdian/Observer site. A Yougov poll suggests 48% of people who voted Lib Dem at the election are less inclined to back them again. 26% "somewhat" less likely, 22% much less likely. The reason? The VAT increase!

Further, a study by economists Howard Reed and Tim Horton claims that the budget will hit those earning under £14,200 SIX TIMES harder than those earning more than £49,700.

We're all in this together?

Warren Lloyd's picture

Tony, people will work out

Tony, people will work out that much of the higher VAT increase will be swallowed up by the stores. Tax is not the problem with this lot we have in.
The CUTS hidden as saveing and some of there other idears are. Only today we learn from not other the Eric Pickels, that council tennents are to be hepled to move to other parts of the country where jobs are. The Germans sort of tryed that in the 1930's, it was called displacement. So instead of encuraging job groth in all areas, the buggers will only make jobs where they seem fit, and make people move where they want them to be. Them that don't want to move to where they say will no doute suffer by removel of benifits and so on.

Caring for the city and all within it.

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