Emergency Budget Report 2010 George Osborne's Budget has been described as "tough but fair". The Chancellor has set out a strategy of fixing public finances through a balance of 77% in spending cuts and of 23% in tax rises. The Office for Budget Responsibility has forecasted that borrowing is to be £149 billion this year, £116 billion next year and £89 billion in 2012-13, before falling to £20 billion in 2015-16.

There will be a 25% reduction in non-ring fenced Government departmental spending over four years with public sector pay, for many being frozen for two years.

Personal taxation increases included an increase in VAT to 20% from January next year. Very much expected and is predicted to generate £13 billion annually. The predicted increase in capital gains tax to 40% for higher rate tax payers did not happen; there was an increase to 28 per cent effective immediately. Basic rate taxpayers have been given a status quo with the rate remaining at 18 per cent. There is a “long term objective” to move the personal allowance to £10,000 but for now it increases by £1,000 from April next year.

Incentives were given to businesses; Corporation tax falls for large companies by 4% over the 4 years and by 1% for small companies.

The threshold at which employers start paying national insurance contributions also increased by £21 a week. The rate of capital gains tax for gains qualifying for entrepreneurs' relief remains at 10per cent. The lifetime limit on gains qualifying for entrepreneurs' relief is increased from £2 million to £5 million with effect from 23 June 2010.

For businesses investing in plant & machinery the annual investment allowance which only recently increased from £50,000 to £100,000 will now be reduced to £25,000 per annum. This will be effective from April 2012.

For Inheritance tax the nil rate band remains at £325,000. There are no major changes that have not already been announced in the previous Budget.

There are no new increases in duties on alcohol, tobacco or fuel and Labour’s plan to increase the duty on cider by 10% above inflation will be scrapped from the end of this month.

It is the Chancellor's hope that over the coming months and years, by encouraging the private sector to take up the reins of growth and trimming the public sector, it will lead to a sustained economic recovery, and not a double-dip recession. Time will tell.

Oct 2010 Sherborne Community
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