Caterer's Guide Emergency Budget As It Happened - Direct from the House of Commoms.
SPENDING:
Current spending will rise to £711bn in 2015/16, thanks largely to a rapidly rising bill for debt interest, which Mr Osborne calls "the price of economic failure".
There will be no further reductions in capital spending in this Budget, Mr Osborne says, explaining that he has learned lessons from government actions of the early 1990s.
George Osborne will please business by not making steeper cuts in capital spending - this will be seen as helpful for job creation in the construction industry - but this means probably deeper cuts elsewhere, Iain Watson says.
ROYAL LIST:
Expenditure on Royal activities through the civil list will remain static at £7.9m a year, says Mr Osborne. It will be scrutinised by the National Audit Office in future, he adds.
freezing cash for the Royal Family - via the civil list - is designed to underline the government message that "we are all in this together"
PUBLIC SECTOR PAY:
There will be a two-year pay freeze for public sector workers, says Mr Osborne, although the 1.7 million lowest paid will get a flat £250 pay rise.
A two-year pay freeze public sector pay freeze is twice as long as was envisaged before the election, though only for those on incomes over £21,000. This is, however, less than the four-year freeze that had been discussed privately,
WELFARE:
"It is simply not possible to deal with a budget deficit of this size without undertaking lasting reform of welfare," says Mr Osborne.
TAX CREDITS:
From next year, with the exception of pension and pension credit, benefits, tax credits and public service pensions will rise in line with consumer prices rather than retail prices - saving over £6bn a year by the end of the parliament, the chancellor says
LONE PARENTS:
"We will expect lone parents to look for work when their first child goes to school," says Mr Osborne.
Child benefit will be frozen for the next three years, says the chancellor.
DISABILITY LIVING ALLOWANCE:
A medical assessment will be applied to new disabilities living allowance claimants from 2013, says Mr Osborne.
CHILD BENEFIT:
Freezing child benefit for three years will be portrayed by the opposition as hitting the poorest hardest, but George Osborne has resisted pressure to tax or means test the benefit, says Iain Watson. This might cut across the work of Labour's former welfare minister Frank Field's work on child poverty, commissioned by the coalition government
HOUSING BENEFIT:
Housing benefit will be limited to a maximum of £400 per week for a four-bedroom house under radical reforms, Mr Osborne says.
CORPORATION TAX:
Corporation tax will be cut by 1% per year for four years from next year, bringing it down to 24%, while the employers' National Insurance threshold is to rise
SMALL COMPANIES TAX:
Small companies' corporation tax will be cut to 20% next year, says the chancellor.
Corporation tax cuts are quite modest - the right of the Conservative Party would have liked to see the tax cut overall to 18 or 20%, not just 24% over four years, says the BBC's Iain Watson. Meanwhile, Labour will say that specific allowances for investment are more important than a headline tax cut.
Mr Osborne is planning to "over-achieve" his target of balancing the structural current deficit by 2015/16. The forecast is for a surplus on the structural current deficit of 0.8% in that year, which is roughly the margin for error that Mr Darling used to employ. That is probably why the OBR can say they have a more than 50% chance of hitting their goal.
PHONE DUTY SCRAPPED:
A duty on landline phones, proposed by Labour with the aim of funding universal broadband internet access, is to be scrapped, the chancellor confirms.
BANK LEVIES
A bank levy is likely to be one tax which is popular - though perhaps only outside the City of London, . The chancellor can say Labour would have fought shy of this measure without prior international backing. It will also help him argue that bankers - and not just benefit recipients - will shoulder some of the burden of deficit reduction
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.
NEW BUSINESSES:
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
VAT RISE:
Uproar on the opposition benches over the VAT increase. It's a big rise but delayed to help stimulate spending during the rest of this year, says Iain Watson. It's also challenging for the Lib Dems, who campaigned against a Conservative "VAT bombshell" during the election campaign but now have agreed jointly to detonate it in government.
VAT is to rise from 17.5% to 20% from 4 January next year, the chancellor announces.
There will be no new increases in duties on alcohol, tobacco or fuel, Mr Osborne says. He adds that he will report back in the autumn on possible health-related measures on alcohol and on the possible per-plane, rather than per-passenger, levies on flights.
INCOME TAX:
From midnight, higher-rate taxpayers will pay 28% on their capital gains.
The tax-free personal allowance on income tax will be increased by £1,000 in April, giving 23 million people up to an extra £170 per year and taking 880,000 out of the tax system altogether, the chancellor says.
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 - that was one of the Liberal Democrats' key election pledges.
The increase in the income tax threshold is crucial for the Lib Dems in return for support for a VAT increase - this was a key plank of their manifesto, says Iain Watson. The fact that any benefit will be clawed back from higher rate taxpayers means the government can argue that the poorest - or at least the poorly paid, rather than those on welfare - will be protected from the worst of the cuts.
CIDER DUTY REDUCED:
Good news for cider drinkers but many other goods will cost more due to the VAT increase, Lib Dem deputy leader Simon Hughes previously criticised any VAT increase as "regressive". But the Lib Dems' policy on aviation taxation has been adopted and the chancellor is going atl east some way to satisfying Lib Dem demands for an increase in capital gains tax.
Budget Commended to the house. |