| Synopsis: |
For the first time, the Government's fiscal policy decisions have been based on independent forecasts for the economy and public finances. Urgent action is taken to eliminate the bulk of the structural deficit through plans for additional consolidation of GBP 40 billion per year. "Budget 2010 (HC 61)" will save GBP 32 billion per year from spending reductions, including: GBP 11 billion in welfare reform savings; a two year freeze in public sector pay, except for those earning less than GBP 21,000 a year; and, GBP 8 billion per year from net tax increases, including an increase in VAT to 20 per cent and higher rate of insurance premium tax from 4 January 2011.Plans to support business and restore competitiveness include: a reduction in the main rate of corporation tax to 24 per cent over four financial years from April 2011; a decline in the small profits rate to 20 per cent from April 2011 and capital allowances in April 2012; an increase in the Enterprise Finance Guarantee and the creation of a new Growth Capital Fund; a Regional Growth Fund in 2011-12 and 2012-13; and, an increase in the threshold for National Insurance Contributions by GBP 21 a week above indexation in April 2011. The Government also wants to ensure that every part of society makes a contribution to deficit reduction while supporting the most vulnerable. To this end, plans include: an increase in personal allowance for under 65s; capital gains increase to 28 per cent; the introduction of a levy based on banks balance sheets; and, a freeze on council tax in 2011-12. There will also be reforms to the housing and disability benefit and tax credit systems, and child benefit will be frozen for three years. Pensions will also be increased by a triple guarantee of earnings. There will be no increases in the rate of duty on beer, wine or spirits in this budget.The interim Office for Budget Responsibility forecast whether Government policy is consistent with a better than 50 per cent chance of achieving the fiscal mandate set by the Government. These set of judgements and assumptions proceed the main Budget Report in this document. |