_(St_Edwards_Crown).svg) | |
| Presented | 22 June 2010 (Tuesday) |
|---|---|
| Country | United Kingdom |
| Parliament | 55th |
| Party | Conservative/Liberal Democrat coalition |
| Chancellor | George Osborne |
| Total revenue | £548 billion (40% of 2009 GDP) |
| Total expenditures | £697 billion (51% of 2009 GDP) |
| Deficit | £149 billion (11% of 2009 GDP) |
| Website | [1] |
2011› | |
TheJune 2010 United Kingdom Budget, officially also known asResponsibility, freedom, fairness: a five-year plan to re-build the economy, was delivered byGeorge Osborne,Chancellor of the Exchequer, to theHouse of Commons in his budget speech that commenced at 12.33pm on Tuesday, 22 June 2010 (just 90 days after theprevious budget speech).[1] It was the firstbudget of theConservative-Liberal Democrat coalition formed after thegeneral election of May 2010. The government dubbed it an "emergency budget", and stated that its purpose was to reduce thenational debt accumulated under the Labour government.
In his budget speech Osborne quoted data and forecasts made by the independentOffice for Budget Responsibility that was formed by the coalition soon after they took up office.[2]
Thepreceding budget of theLabour Party in March was only partly enacted due to the calling of the election.
Osborne predicted that the economy would grow by 1.2% in 2010, rising to 2.9% in 2013.[1]
He said the country was set to miss the previous government's "golden rule" in the current cycle by£485bn.
The Chancellor said he expected consumer price inflation (as measured by theConsumer Price Index) to reach 2.7% in 2010, above the target of 2%.
He forecast that unemployment would peak at 8.1% in 2010, falling over each of the next four years.
Osborne said the state accounted for "almost half" of all national income, including the escalating cost of debt interest, which was "completely unsustainable".
Osborne aimed to balance the structuralcurrent account deficit by 2015–16. The balance of tax rises to spending cuts in his budget was 23% to 77%.
Income taxpersonal allowances for people under 65 years old will be raised by £1000 from April 2011, taking about 880,000 people out of the tax system and reducingincome tax on the low-paid by £200 p.a.[1][3]
The main rate ofVAT will increase from 17.5% to 20% on 4 January 2011. This had been widely predicted before the Budget.[4] No taxes will be imposed on items that are currently zero-rated (e.g. food, children's clothes).[5]
A newbank levy was announced, to raise £2 billion p.a.Corporation Tax will fall progressively in 1% increments for each of the next four years, from 28% to 24%. The small companies' tax rate will be cut from 21% to 20%.
Capital gains tax increases from 18% to 28% from the following day, for higher rate taxpayers only.[6]
There were no changes toduties on fuel (petrol anddiesel), alcohol, and tobacco. Osborne cancelled the increase thatLabour had planned on cider.[7]
| Receipts | 2010-11 revenues (£bn) |
|---|---|
| Income tax | 150 |
| Value added tax (VAT) | 81 |
| National insurance | 99 |
| Excise duties | 46 |
| Corporate tax | 43 |
| Council tax | 25 |
| Business rates | 25 |
| Other | 79 |
| Total government revenue | 548 |
Osborne announced further reductions in public expenditure to reach £17 billion by 2014/15.[8] The Budget did not make any further reductions in overallcapital expenditure, but projects will be prioritised and reassessed in the autumnSpending Review.[1]
Public sector workers face a two-year pay freeze, although 1.7 million of those earning less than £21,000 will get a flat pay-rise of £250 each year.
The government will accelerate the increase in state pension age to 66.
From 2011, state benefits other than the state pension and pension credit will be pegged toconsumer prices rather thanretail prices.[9] The same will apply to public service pensions. These measures were expected to reduce public spending by over £6 billion p.a. within the five-year term of the Parliament.
Child benefit was frozen for three years.Tax credits will provide an additional £150 a year for the poorest families,[3] but with withdrawal rates increased by 2% to 41%,[10] reducing tax credits at higher incomes.[1]
Housing Benefit reforms will introduce a maximum payment of £400 per week. This would save £1.8bn p.a.
A new medical assessment forDisability Living Allowance will be introduced from 2013.
Heavy Industrial Plant Grants will rise from 10% to 11% of the purchase price for small business.
The Queen'scivil list payment remained frozen at £7.9 million.[11]
| Department | 2010-11 expenditure (£bn) |
|---|---|
| Social protection | 194 |
| Health | 122 |
| Education | 89 |
| Debt interest | 44 |
| Defence | 40 |
| Public order and safety | 35 |
| Personal social services | 32 |
| Housing and environment | 27 |
| Transport | 22 |
| Industry, agriculture and employment | 20 |
| Other | 73 |
| Total government spending | 697 |
In the light of the change in ruling party, the recession, the novelty of coalition government and the strain which the painful decisions would put on the coalition,[12] this Budget generated a high degree of public interest and discussion in advance.
The government's top priority is to reducegovernment borrowing from its peacetime record highs. Prime MinisterDavid Cameron said the previous Labour government had refused to publish its own projections showing the escalating cost of interest. He argued that taxes should be spent on public services rather than paying interest on the national debt.[13]
The changes to the UK Budget were expected to focus on cuts togovernment spending rather than increases intaxation. The Chancellor stated early on thathealth andinternational aid expenditure would be protected.[14] On 24 May, he then outlined £6.2 billion of spending cuts.[15]
Thecoalition agreement included an intention to reducechild tax credits andChild trust funds for better-off families.The parties had agreed to raise the rate ofcapital gains tax (CGT) to match individuals' highest rates of income tax, excluding gains on business investments, and to reduce the rise in employers'National Insurance contributions which Labour had planned. The Conservatives had also agreed to Liberal Democrat wishes to gradually raise thepersonal allowance, i.e. the level of income on which notax is paid.[14]
Tory statements before the election also pointed to a reduction inCorporate tax, perhaps partly paid for by changes tocapital allowances which are currently seen as complex.
TheBusiness Secretary, Liberal DemocratVince Cable, had announced that reducingtax avoidance is a priority of the new government.[16]
The coalition agreement did not resolve all areas of differences between the two parties' tax policies, and tax advisers were complaining of uncertainty ahead of the budget.[17] The Liberal Democrats had wanted to reduce the annual exemption from CGT, and to cap the rate of relief forpension contributions.[18]John Redwood andDavid Davis publicly argued against the rise in the CGT rate, but Cable insisted that the parties were not divided over the issue.[19]
 | This section needs to beupdated. Please help update this article to reflect recent events or newly available information.(April 2023) |
Acting Labour leaderHarriet Harman responded for the opposition, calling the speech a "Tory budget", and predicting that it would increase unemployment and stifle growth.[20]
Some Liberal Democrats were disappointed thatcapital gains tax (CGT) remained lower than the rates of income tax. Meanwhile, theBritish Venture Capital Association expressed entrepreneurs' "deep concern" over the CGT hike, warning that it could deter overseas investors. The immediate implementation date for the rise surprised tax advisers.[6]
However, former Bank of England rate setterDavid Blanchflower warned that the budget risked sending the UK into another recession, and that a "double-dip" is now the best case scenario,[21][22]
TheMinister for Women and Equalities,Theresa May, had written to the Chancellor emphasising the need to assess the effect of the budget on women, disabled people and ethnic minorities.[23] In September 2010 theFawcett Society was sought ajudicial review of the emergency budget for failing to demonstrate that such an assessment had been made.[24] The High Court refused to grant permission for such a review in December 2010.
A report published in October 2010 byResearch Councils UK voiced the opinion that cuts toresearch and development were likely to do immense damage to the UK economy.[25] The report's author,Romesh Vaitilingam, stated that evidence suggests private sector spending and productivity is encouraged by public sector spending.[25][26]
Cuts in UK government spending on research and development (R&D) are likely to do immense damage to the UK economy, a new report claims. [...] "All the evidence suggests that public expenditure on research actually encourages the private sector to spend more and increases the productivity of private sector spending," said Romesh Vaitilingam, the report's author.
