Tory/LibDem Emergency Budget

The Chancellor today unveiled an Emergency Budget that was “exceptionally rich in measures, policies, changes in tone, figures and analysis,” according to the Telegraph’s Economics Editor, Edmund Conway. We extract the key news from today’s Budget for you below:

VAT to go up to 20pc from 17.5pc

Capital gains tax for higher-rate taxpayers rises to 28pc

Child benefit to be frozen for next three years

Two-year pay freeze for public sector workers

Basic state pension linked to earnings once again, from April next year

No new tax increases on alcohol, tobacco or fuel

Read Edmund Conway’s five-minute guide here


Mr Osborne has made the following changes to tax:

-VAT rises to 20pc from 17.5pc from January 4 2011. For more on the VAT change, read here

-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, read more here

-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

Watch here for a tax expert’s view of what these changes mean for you.

“It may have been nominally an Emergency Budget but it is exceptionally rich in measures, policies, changes in tone, figures and analysis,” writes the Telegraph’s Economics Editor, Edmund Conway. Read his full comment here

“Many owners of second homes and buy-to-let landlords who pay basic rate income tax will be caught by the new higher rate of capital gains tax,”
writes Ian Cowie, the Telegraph’s personal finance editor. Read his full comment here

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:

The Chancellor announced welfare cuts worth £11bn by 2014/15 plus a range of other measures:

-Child benefit to be frozen for next three years, read more here

-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, read more here

-Medical assessment for Disability Living Allowance from 2013 for new and existing claimants

-Two year pay freeze for public sector workers, read more here

-Public sector workers earning less than £21,000 to be paid £250 extra each year for two years

-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

“Many of the benefits that George Osborne is removing were things that should never have existed in the first place,” writes Telegraph commentator Janet Daly. See her full posting here

Deficit and debt:

Mr Osborne announced plans to cut the deficit, or the level of public

-Deficit to fall to 1.1pc of gross domestic product (GDP) by 2015/16 vs 10.1pc in 2011, read more here

-Budget deficit to be £149bn in 2010/11, lower than forecast at the last Budget

-Budget deficit to fall to £116bn in 2011/12

“The main challenge today was the deficit, and on that the Chancellor gets close to full marks,” Telegraph business columnist Jeremy Warner writes.
See his full comment here.


Mr Osborne announced the following measures which will affect companies.
Read market reaction to the Budget here and reaction from companies here

-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, read more here

-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


-Government spending will be £637bn in 2010/11

-Government spending will be £711bn in 2015/16


-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 to peak at 8.1pc in 2010/11

-Unemployment to fall each year to 6.1pc in 2015

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.