Chancellor George Osborne unveils his Emergency Budget in the House of Commons
Welcome to Building’s coverage of the second budget of the year.
Osborne rises. The Budget will be “tough and fair”, says Osborne. One pound in every four spent in the UK is borrowed. Labour had no credible plan to reduce it.
Higher interest rates, business failures, unemployment rising and a catostrophic lack of confidence will result if we don’t cut the deficit.
“I’m not burying the truth in the small print of the budget,” says Osborne.
Dig at Gordon Brown: “We are set to miss the Golden Rule by £485m.”
The structural buget deficit should be balanced by 2015/16, says Osborne.
Office for Budget Responsibility’s growth prediction: 1.2% in 2010, 2.3% in 2011, 2.8% 2012 in 2.9% in 2013, and 2.7% in 2014 and 2015.
Consumer price inflation: 2.7% in next year and then returning to 2% - the Bank of England’s inflation target.
Unemployment will peak at 8.1% in 2010 and will fall in next four years to reach 4.1% by 2016.
BBC says that 1.2% growth forecast is lower than predicted. “Our approach is lower spending, not higher tax,” says Osborne.
77% of deficit reduction will be achieved through spending reductions and 23% by tax increases.
Budget deficit will fall from today’s £149bn to £20bn in 2015. This equates to reduction from 10.1% of GDP in 2010 to 1.1% in 2015.
Osborne announces to cheers that the Euro properations unit has been abolished.
Capital spending will not be cut futher in this parliament. Good news for construction. Osborne says that capital investment was cut too deeply in the early 1990s.
Overall spending will fall by £30bn more than previous projections.
Osborne says he is commited to increase NHS spending.
Other departments will face average really cut of 25% over four years.
Final details will be set in October’s spending review.
Osborne says he has identified £17bn extra cuts in addition to the £40bn already identified.
“We need to restrain public sector pay.” Two year pay freeze for public sector pay. Those earning less than £21,000 will receive £250 extra per year for two years. This will cover 28% of the public sector workforce.
Osborne has asked Will Hutton to come up with fairer pay scales in public sector. Top boss will receive no more than 20 times the salary of the lowest paid.
Welfare reform is required. Benefit bills are being addressed across Europe. Total welfare spending from £132 to £192bn over last 10 years.
Tax credit payments to families earning over £40,000 will be reduced.
Child benefit will be frozen for three years.
Disability benefit - medical assessement will be introduced in 2011 for existing and new claimants.
More spent on housing benefit on police and universities combined says Osborne. Housing benefit is in “dire need of reform,” says Osborne. He will impose an upper limit housing benefit to £400/week for a four bed-house among a range of other measures. Housing benefit to be reduced by £1.8bn by end of parliament.
We will make it cheaper to employ people. The cost of hiring people on pay of less than £20,000 will be lower than it is today.
Corporation rates will be cut by 1% to 27p in the pound, and reduced to 24p within four years. The small companies tax rate will be reduced. Coaltion will reduce it to 20% to support 850,000 small businesses.
Manufacturing as a whole will pay less tax but capital and investment allowances will be reduced for plant and machinery from 20 to 18%.
Financial activities tax on bank profits is being ’explored’. From January 2011 a bank levy will be introduced. £2bn will be raised annually. Germany and France also introducing the same levy today.
Labour’s reen investment bank will remain.
Osborne announces capital investment in areas outside London and the South East:
- Tyne and Wear and Manchester Metros
- Birmingham New Street station redevlopment
- Rail improvements for Sheffield and line between Leeds and Liverpool.
- A regional fund will support projects that offer innovation and create jobs.
VAT is increased from 17.5% to 20%. It is unavoidable says Osborne, and will generate £13bn extra revenue per year.
Captial Gains Tax: Rises to 28% for higher tax earners.
New bank levy will create £2bn of tax revenue every year. Introduced at the same time as Germany and France, which announced similar plans today.
Pensions will increase in line with earnings from April 2011.
EC Harris’ head of public Graham Kean
“It was fantatic to see capital projects figures so early in the speech, and that this government recognises the broader benefits from properly targeted programmes of work it is up to us now to deliver…”