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Emergency Budget: what to expect

In what will be the toughest budget for a generation, here is a roundup of what chancellor George Osborne is likely to announce on Tuesday.

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by Victoria Bischoff on Jun 21, 2010 at 12:18

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George Osborne’s emergency budget on Tuesday will be the toughest in decades, the chancellor has warned repeatedly.

In order to tackle the country’s colossal deficit, the budget is expected to include a wide range of tax hikes and cuts to public sector spending.

Speaking on the BBC’s Andrew Marr Show, Osborne said: ‘No incoming chancellor has ever faced a set of public finances like this. And unless we take the determined and concerted action to deal with that then I am afraid we will find our country on the road to ruin’.

Here is a roundup of what Osborne is likely to announce tomorrow.

Tax hikes

VAT is likely to increase from 17.5%, as it currently stands, to as much as 20%.
Capital gains tax is almost certain to increase tomorrow, bringing it into line with income tax. However, it still unclear if small firms and savers will be spared from the rise as Osborne has previously hinted.
National insurance contributions are expected to rise by 1% for employers and employees earning more than £20,000 from next April, and by 2% for top earners.
A bank tax is likely, and although it is not yet definite how the levy on banks will work, it is thought it will be based on banks' balance sheets rather than on their profits.
Airline tax could increase if the government goes ahead with plans to tax airlines per plane rather than per passenger, with extra costs being passed onto the customers.
Insurance premium tax, which is charged on car insurance and home insurance, could double, increasing the price of policies for consumers.
Alcohol and tobacco taxes are likely to rise again.

Spending cuts

Child tax credit is likely to be taken away from middle class families, and given only to those on low incomes. There is also likely to be a freeze on other welfare payments such as disability benefits, housing benefits and unemployment benefit for one year.
Public sector pay is expected to be frozen for one year.
Public sector pensions are to undergo an inquiry, headed up by John Hutton, former Labour pensions minister.

Tax breaks

Income tax personal allowances are likely to increase, as the government outlines how it will increase the point at which people start to pay income tax from £6, 475 to £10,000 over the next five years.
The National insurance contribution threshold is expected to rise from £110 per week to £135 per week to help those on low incomes. Meanwhile, the starting threshold for employers will increase to £6,812.
Council tax is likely to be frozen for one year.
Corporation tax is likely to be cut from 28%, and relief on national insurance contributions is expected to be introduced to help businesses outside London and the South East. It is thought new businesses will not have to pay national insurance contributions for the first 10 people they employ for one year, with the tax break capped at £5,000 per employee.

Growth forecasts

The government has admitted that the tax hikes and spending cuts announced in tomorrow’s budget will mean the Office for Budget Responsibility will have to revise growth projections and job forecasts downward.

However the OBR will assume the falls will be short term and ‘the effect will be to increase spare capacity in he economy’, allowing the economy to grow faster before the next election.

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17 comments so far. Why not have your say?

And yet with all this pain for us the taxpayer to tolerate we will continue to pay overseas aid of around £7.2Billion! Have we forgotten that charity begins at home! We still have British families living in abject poverty and with rising unemployment we will see more falling below the poverty line.

Cut overseas aid...eliminate the bureaucrats that administer it and use the money to improve public finances!

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How To Increase The Tax Take In One Easy Move.....

Flat Rate 20% for personal and companies with a 20K threshold.

Simples!

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Roger

You are absolutely correct but it's too difficult for simple politicians!

Michael

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Why not introduce a tax on all forms of gambling, especially big lottery wins

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Spot on Rodger - a flat rate tax for all/everything.

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People paying PAYE pay most of the tax because they can't escape it .For others the payment of tax is purely voluntary. Some method has to be devised that everybody pays their fare share of tax. Is this what A Donald means?

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It would be nice for a reality check.

I propose more tax and salary cuts for football players who earn millions of pounds a year for kicking a football about instead of penalising those who work loyal citizens who work hard in order to live.

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What about the lottery money Why it is not invested for the goods of our society.

After all it's people who count beforhand

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Everyone should be banding together, to call on the government to stop overseas aid immediately.

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Withdraw from Afghanistan

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Increase the price on a pack of 20 cigarettes by £1.00 has these kill more people than drugs and alcohol.

Increase spirit duty by 75p. Alcopops by £1.25. Pint up by 5p. A 60% tax rate for all earning over £250,000 p/a.

No tax credits or child benefit payments to those earning over £27, 000 p/a.

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can i be reassured that we will see a reversal of the tax burdens when things get better?

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This would only force an increase in black market activity, and thus see an overall fall in the revenue generated from the tax on these products......Bad Idea Munir.

I am still going with option A; Rogers idea.

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Do away completely with MPs' and House of Lords expenses. They knew the salary before they applied for the job, and there's no end of people who could do the job as well or better for the same salary!

Freeze tax on petrol,

Apply a minimum cost for alcohol sold at supermarkets (NOT pubs).

Encourage companies to move out of London and the South East to spread wealth around the country.

Move civil servants out of London

Withdraw troops from Afghanistan and Iraq. Then freeze/reduce the defence budget..

Freeze the Civil list. If necessary sell off (or rent out) the Palaces owned by the nation.

Increase VAT paid on high end goods by more then 2.5% already proposed.

Eg new cars, jewellery, designer clothes,

Either cancel or reduce VAT paid on energy bills.

Do away with child benefit for any other than the first child.

Top rate income tax at 49%

Do away with unelected Quangos completely.

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I think we should increase overseas aid. I'd like to see the government take all bankers' bonuses for this year and next and pay off half the national debt at a stroke.

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I agree with Anonymous 3

Lets get out of Afganistan. In a nutshell.....

(1) We went in with America, who's solitary aim was to steal a scarce resource Oil.

(2) We tried to change the very culture of a Country and failed.

(3) The cost os the Lives and resources deployed was and is too high a price to pay.

We should Tax banks on their very profitable ventures, trading with each other, put the levy into a fund that would avoid the Tax payer stepping in if we had another Crisis, and then, and only then allow Banks to pay out huge bonuses and Dividends.

Anyone with a grounding in Company Finance will understand the term, Advance Corporation Tax.... this theory should be more widely used

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Mike H

Jun 22, 2010 at 11:56

Forget the comments above, the only reason for this budget is to continue bailing out the banking sector. Osbourne needs to get the rest o f the World behind him to take charge of the banks and use their profits for the good of society. The previous government were correct on that score but Osbourne is to proud or stupid to follow that course of action.

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