Chancellor taketh away, and giveth back

CHANCELLOR George Osborne’s first Budget sent a chill through the heart of government spending — and put the wind up the rest of us.

His plan is to rake back almost 80 per cent of his savings from cuts in public spending — leaving the rest of us to pay the other 20 per cent in higher taxation

Promising to deal decisively with the UK's record debts, he warned of his economic plan: "It is tough; but it is also fair."

He pulled no punches about the state in which the previous government had left the public finances.

He said everyone would be asked to contribute to the recovery: "But in return we make this commitment. Everyone will share in the rewards when we succeed.

"When we say that we are all in this together, we mean it."

Mr Osborne announced extra expenditure reductions of £30 billion a year by 2014/15.

The total welfare shake–up will save the country £11 billion by 2014/15.



How will you fare after his attempt to set us on the course to financial balance and recover from the crash over the next five years?


AMONG the major announcements:

:: On January 4, the main rate of VAT will rise from 17.5% to 20%.. Zero-rate items will remain exempt. The measure will generate £13 billion a year.

::There will be no new increases in duties on alcohol, tobacco or fuel. A plan to increase duty on cider will be scrapped.

::The Government will help low–spending councils in England to freeze council tax for one year from April.

::Personal income tax allowance to be increased by £1,000 in April to £7,475. Around 23 million basic rate taxpayers will gain up to £170 a year. Higher rate threshold will remain frozen until 2013-14. There is a long–term plan to increase the personal allowance to £10,000.

::BASIC state pension will be linked to earnings from April 2011, with the pension guaranteed to rise in line with earnings, prices or 2.5 per cent, whichever is greater.

::PUBLIC sector workers are being asked to take a two–year pay freeze, with protection for the 1.7 million earning under £21,000. Those low–paid workers will receive a flat pay–rise worth £250 in both years.

::THE Government will accelerate the increase in state pension age to 66.

::Welfare spending rises will be in line with consumer prices, not retail prices — an effective cut that will save £6billion a year by 2015.

::Tax credits will be reduced to families earning over £40,000 next year. The baby element will be removed for new children from April 2011, as will the one–off payment to new workers over 50 from April 2012. The Government will abolish the health in pregnancy grant from April 2011, restrict the Sure Start maternity grant to the first child only, and expect lone parents to look for work when their youngest child goes to school. Child benefit will be frozen for the next three years.

::The child element of the Child Tax Credit will rise by £150 above indexation next year in a £2 billion–a–year "commitment to low–income families".

::There will be new medical assessments for Disability Living Allowance from 2013 for new and existing claimants.

::Housing Benefit will be reformed, with a maximum £400 a week – saving £1.8 billion a year by 2015.

::EMPLOYERS will pay a little less National Insurance for workers — the threshold at which they start to pay will rise. Corporation Tax will be cut next year to 27 per cent, falling by one per cent a year for the next three years, to rest at 24 per cent. Small companies will pay only 20 per cent. Capital allowances for plant and machinery will fall slightly next April.

The measures are intended to protect business growth and reduce the possibility of double-dip recession.

::Capital Gains Tax stays the same for most people, though it will rise for higher-rate taxpayers to 28 per cent. A 10 per cent rate for entrepreneurs will be extended from the first £2million to the first £5million. Changes will generate around £1billion a year.


::FROM January 2011 the Government will introduce a bank levy on UK banks and building societies and the UK operations of foreign banks. Smaller banks will not pay.

::The Government will publish a White Paper on tackling regional economic differences in Britain later in the summer. He committed the Government to the Manchester Metrolink extension, and improvement of the Liverpool-Leeds link, which passes through Saddleworth.

::The Government will create a Regional Growth Fund to provide finance for regional capital projects over the next two years — three years for anyone setting up a new business outside the South East. These areas will also be exempt from £5,000 of NI payments for the first 10 workers.