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The Chancellor called the measures in this historic Budget "unavoidable," and announced the following changes to tax and spending:
Taxes:
Mr Osborne has made the following changes to tax:
-VAT rises to 20pc from 17.5pc from January 4 2011
-Food, children's clothing and other VAT-free items remain exempt from VAT for current Parliament
-Capital gains tax (CGT) to rise for higher-rate taxpayers to 28pc from midnight
-Capital gains tax to remain at 18pc for basic-rate taxpayers
-CGT exempt amount remains at £10,100 this year
-Personal income tax allowance increased by £1,000 in April to £7,475
-Higher rate income tax rate remains frozen to 2013/14
-National Insurance threshold rises by £21 next year
Sin taxes:
-No new increase on alcohol, tobacco or fuel
-Planned increase in cider duty to 10pc above inflation scrapped from end of June
Public sector cuts and benefit reform:
-Child benefit to be frozen for next three years
-Child benefit removed from families on an income of more than £40,000
-Benefits to rise in line with consumer prices
-Tax credits reduced for families earning more than £40,000
-Child element of child tax credit increased by £150 above inflation
-Housing benefit restricted to maximum £400 a week
-Medical assessment for Disability Living Allowance from 2013 for new and existing claimants
-Two year pay freeze for public sector workers
-Public sector workers earning less than £21,000 to be paid
-Basic state pension linked to earnings from April next year
-Pensions guaranteed to rise in line with with earnings, prices or 2.5pc, whichever is greatest
-The Government will accelerate the increase in state pension age to 66
Deficit and debt:
Mr Osborne announced plans to cut the deficit, or the level of public borrowing:
-Deficit to fall to 1.1pc of gross domestic product (GDP) by 2015/16 vs. 10.1pc in 2011
-Budget deficit to be £149bn in 2010/11, lower than forecast at the last Budget
-Budget deficit to fall to £116bn in 2011/12
Spending:
Government spending will be £637bn in 2010/11
Government spending will be £711bn in 2015/16
Growth:
UK economy to grow by 1.2pc in 2010
UK economy to grow by 2.3pc in 2011
UK economy to grow by 2.8pc in 2012
Unemployment:
Unemployment to peak at 8.1pc in 2010/11
Unemployment to fall each year to 6.1pc in 2015
Business:
-Corporation tax cut to 27pc next year
-Corporation tax cut by 1pc point a year for next three years to 24pc
-Small companies tax rate cut to 20pc
-Tax relief for video games industry scrapped
-UK bank and building society levy from 2011
-Levy also on UK operations of foreign banks
-Smaller banks not liable for a levy
-Banks levy expected to raise more than £2bn a year
-10pc CGT rate for entrepreneurs extended to first £5m of qualifying gains
-Government looks to sell shareholding in air traffic control agency Nats, the student loan book will be sold and the future of the Tote bookmaker will be resolved
The background to the Budget:
The new Chancellor has to balance the need to cut the country's Budget deficit without threatening the fragile economic recovery. Mr Osborne knows that financial markets are expecting the emergency Budget to lay out a credible plan for bringing the deficit down to sustainable levels. Failure is not an option. The 38-year old Chancellor knows that investors will punish sterling and drive interest rates up across the economy if the plan isn't credible.
What was expected:
The coalition Government has already said its plan will include a painful combination of spending cuts and tax rises. An increase and extension of Capital Gains Tax has been signalled, while experts are convinced that VAT will also be increased. With growth still fragile, the Government is also preparing to take the axe to parts of the benefit system it judges the country's coffers can no longer afford. Child tax credits, for example, are expected to be restricted to those on lower incomes. And outside health, whose spending Mr Cameron has ring-fenced, Government departments won't be spared. All are likely to see hefty cuts in their budgets
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