Tuesday, 22 June 2010

Emergency budget 2010

George Osborne has just finished presenting his first budget to parliament; the "emergency" budget to usher in the Age of Austerity. On standing up practically the first thing he said was that there would be nothing hidden in the small print, unlike Gordon Brown who used to gabble over the bad news and the very bad news he just left out for people to dig out of the paperwork at their leisure.

Speaking of Gordon Brown, was he in the Commons to represent the people of Kirkcaldy and Cowdenbeath? No, he was nowhere to be seen. Alistair Darling was there but Brown has not been seen in parliament since he left number 10. He doesn't seem to be taking his job as a backbench MP very seriously.

Anyway, on to the budget. The highlights were: VAT increased to 20% from January 4th next year, CGT increased to 28% for higher rate taxpayers but kept at 18% for others, £1.8bn cut from the annual £21bn housing benefit bill, other benefits to be indexed by CPI rather than RPI (CPI is usually lower than RPI), tax credits to be reduced for higher earners, child benefit frozen for 3 years, all claimants of Disability Living Allowance to be reassessed to see if they are still disabled, and various minor benefits are being abolished: health in pregnancy, and Sure Start restricted to first child only.

Osborne drew gasps when he revealed that some families get up to £104,000 per year in housing benefit. (That's actually money into the pockets of private landlords, not cash to scroungers as you might think.)

The government plans to sell some assets, notably: NATS, High Speed One (the train link from London to the channel tunnel), the Student Loan Book, the Tote, and, partially, the Royal Mail.

There was some good news from Osborne. The 10% cider tax has been abolished before it even came in, so has the landline tax. No other duties were raised, not even petrol - the usual sacrificial victim. And Osborne has a plan whereby council tax will be frozen this year, although that depends on the councils playing ball.

Public sector workers will have a two-year pay freeze save that those earning under £21,000 pa (that 28% of them) will get a flat increment of £250 pa, this year and next.

There were a few sops to the business community. Corporation tax for large companies will be reduced by 1% per year from the current 28% to 24%. For small companies it will be cut to 20%. The CGT disregard for the sale of business assets will be increased from £2m to £5m. There will be a new employee allowance against employer's national insurance, £5,000 per employee up to 10 employees, but only outside the South-East and Eastern regions.

There will be a new tax on banks. It will be based on their balance sheets, with allowances for "good" money such as "Tier 1 capital", ie, not short term deposits, and small banks will be exempt. Osborne expects to garner £2bn pa from them.

The big numbers for the financial year are: spending will be £697bn, revenue £548bn, hence borrowing £149bn. Osborne claims to have knocked £6bn off the deficit.

Labour's interim leader, Harriet Harman, responded for the opposition. Most of her speech seemed to have been written beforehand and consisted of irrelevant comparisons with Greece and Canada. She mainly tried to drive a wedge between the two coalition partners, pointing out that the Lib Dems were now voting for things they campaigned against last month. She did land one telling blow: the Lib Dems looked decidedly uncomfortable when she noted that their 22 ministerial jobs would be at the cost of tens of thousands of lost jobs in the country as a whole.

Overall Osborne's budget can be characterised as no more than a step in the right direction. He has kept borrowing massively high - the £6bn cut is a drop in the ocean. He hasn't really got to grips with the run-away benefits bill and other countries have actually cut the pay of their civil servants, not just frozen some at the top end. He seems to have ring-fenced the NHS, despite there being massive waste in that organisation. And pointlessly he is maintaining the overseas aid spending.

He claims to have split the pain 23% tax rises and 77% spending cuts. Frankly it should have been all spending cuts, and there should have been a lot more of it.

Red book
Key points
Document list
BBC article
Where's Gordon Brown?

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