Bite Sized Budget Briefing
On 22nd June 2010, the coalition government published an emergency budget, setting out the government's spending plans and forecasts for the next 5 years. Urban Forum's briefing on the emergency budget gives a breakdown of the main measures in the budget, a snap shot of reactions to it, and an outline of the next steps that the Government will be taking. For busy people, we have also produced a bite sized budget briefing.
The Coalition Takeaway
The June 22nd 2010 Budget sets out ways in which the coalition government want to bring down public borrowing and eliminate the structural budget deficit within 5 years.
Their aim is to cut public spending by £32 billion this year, and every year for the next five years (in addition to the cuts planned by the previous government). The total deficit reduction package is planned to be £113 billion in 2014-15, rising to £128 billion in 2015/16. Over a third of the savings (£11 billion) will come from cuts to benefits.
Still on the menu
• Winter fuel payments
• Free TV licenses for over 75s
• Free off-peak local bus travel, eye tests and prescriptions for men and women over female state pension age
No longer available
• The ‘baby element' will be removed from child tax credit (from April 2011), and, from April 2012, the ‘50 plus element' will be removed from working tax credit
• The Health in Pregnancy Grant (from April 2011)
• The Saving Gateway - Government supported cash savings scheme for workers on low incomes (due to launch in July 2010)
• A planned 10% increase in duty on cider!
• Child tax credit for families with a combined income of over £40,000 (from April 2011) ( I moved this as it's not being abolished just reduced at mo)
• The budgets of all government departments to be cut by an average of 25% over the next four years - except health and foreign aid.
• Reduction in working tax credit - by lowering the amount of your income not taken into account.
• Housing Benefit will decrease across the board as the way it is worked out will be changed, as well as a cap on the limit of Housing Benefit - ie for larger families, or in higher rent areas. (moved)
• Reduce Housing Benefit for working-age claimants in social housing who are living in a larger property than their household size warrants.
• Reduce Income Support Mortgage Interest payments (from October 2010) by changing how it is worked out.
• Discretionary Housing Payments (up by £40 million)
• Increase in rate of child tax credit for those on lowest income
• The Enterprise Finance Guarantee (EFG) to get an additional £200 million to support lending to small businesses until the end of March 2011.
• The Personal Allowance for people on low incomes aged under 65 to increase by £1,000 in April 2011
Changes in the menu
• All cost of living increases in benefits, tax credits and pensions to be worked out using the Consumer Price Index rather than the Retail Price Index, which is lower.
• Receipt of full housing benefit for claimants in rented housing to be time limited.
• Lone parents required to look for work when their youngest child goes to school (rather than from 10 years old)
• Disability Living Allowance claimants to be medically tested (from 2013)
• The Discretionary Housing Payments system to cover the cost of an extra room for disabled claimants who need a carer.
• Sure Start maternity grants limited to the first child only.
• The basic state pension link to earnings restored from April 2011, with the pension guaranteed to rise then in line with earnings, prices or 2.5%, whichever is the greater. However this is likely to be offset by downward pressure on wages, and use of Consumer Price Index to calculate cost of living increase opposed to the Retail Price Index.
• Special relief on Capital Gains Tax (CGT) for entrepreneurs has been increased. Entrepreneur‘s relief is a rate of 10% to be paid in CGT out of business sales.
• Reduction in National Insurance (NI) contributions - raising the threshold by £21 per week and reducing NI for the first 10 people hired for some new businesses in targeted areas (i.e. outside London and the Southeast).
New dishes being considered
• Raising the State Pension age to 66 years. Consultation to start on 28th June.
• Cutting public sector pensions. Early review findings will contribute to the autumn‘s Spending Review, with a full report for next year‘s Budget.
• Green investment bank planned and investment in digital infrastructure.
Ways to Pay
• Value Added Tax up from 17.5% to 20% (from April 2011).
• Capital Gains Tax up from 18% to 28% for higher and middle rate taxpayers
• Corporation Tax down from 28% to 24% over 4 years from April 2011.
• No increase in alcohol, cigarettes and fuel in addition to those in the March budget
• A banking levy (from January 2011), expected to raise c.£2bn per year (moved)
• Child Benefit frozen for 3 years
• Public sector pay frozen for 2 years for those earning over £21,000.
• Government to work with councils to freeze council tax for 2 years with protection for the public servants earning less than £21,000 (from April 2011).