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  1. Wealth
June 22, 2010

Budget 2010 Liveblog

By Spear's

Headlines: CGT up to 28% for higher-rate tax payers. Income tax allowance up by ’1,000 for basic rate payers. VAT up to 20%. Bank levy with France and Germany too, amount unspecified. Corporation tax down to 24% in four years.

Headlines: CGT up to 28% for higher-rate tax payers. Income tax allowance up by £1,000 for basic rate payers. VAT up to 20%. Bank levy with France and Germany too, amount unspecified. Corporation tax down to 24% in four years.

Deficit: £149bn 2010-11, £20bn 2015-16. Deficit percentage: 10.1% now, 1.1% in 2015-16. OBR on growth: 1.2% 2010-11, 2.3% 2011-12, 2.8% 2012-13, 2.9% 2013-14, 2.7% 2014-15 and 2015-16. 25% cut in unprotected departments.


1:24 Richest to pay more than poorest as theme of Budget. ‘Progressive Alliance governing in the national interest.’

Earnings link on pensions to be restored from April – very popular. Triple-lock: rise in basic state pension in line with earnings, prices or 2.5% increase, whichever greater. Memories of Labour’s most hated/embarrassing policies.

Child element of tax credit increased by £150 above indexation – another vote-winner.

1:21 Income tax: abolition of 10% rate led to low-income higher taxes. Hence, £6,475 allowance increasing by £1,000 in April. Much as trailed. 23m will gain £170 a year. 880,000 taken out of tax altogether. But is it worth it? £4 a week. Higher-rate tax-payers won’t benefit.

1:18 Council tax: possible freeze.

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No surprises so far really.

Capital Gains Tax: ref to Ronald Cohen and his cleaner. 32% gap between CGT and top income tax rate to be closed, costs £1bn a year. Basic-rate income tax-payers will continue at 18%. From midnight, higher-rate tax payers to pay 28% – not as bad as thought. To promote enterprise, 10% entrepreneurs’ rate to be extended from £2m over lifetime to £5m. Good move. No tapers – too complex – but rate above 28% would have been futile.

28% is a surprise, and clever – won’t frighten people and isn’t complex.

1:16 Duties: no increases on tobacco, alcohol, fuel, air tax. To be reviewed in autumn. Rural rebate on fuel: appeals to Tory heartland.

1:14 Sov debt crisis means structural deficit to come down sooner: £40bn fiscal tightening by end of Parliament. 4/1/10 – VAT up to 20%. House in uproar. Dep Speaker reprimands. Osborne steely. £13bn extra revenue every year. Food, kids’ clothes, books, papers still exempt.

1:11 Huge job-creation imbalance across the country to be redressed: White Paper in the summer. BTW, in Liverpool 71% of people are employed by or live on benefits from the state, I learned yesterday. Transport infrastructure projects to stay. Any new business outside London/SE, up to £5,000 of NI exempt for first ten employees.

1:09 Banks: crisis started in banking sector. Banks to contribute – financial activities tax on remuneration discussed internationally. From Jan 2011, bank levy: balance sheets of banks and building societies, UK and foreign banks over here. Generate £2bn annually. French and Germans agree on levy – huge coup to get it simultaneously. Five-year plan to reform corporation tax.

1:08 Plant expenditure down to £25,000 – 95% below this anyway.

1:05 Right, private sector measures. Threshold of NI rises 21% above inflation – 650,000 employees out of NI. ‘Open for business’ – every Chancellor uses this. Corporation tax going from 28% to 27% in 2011, 26% 2012, 25% 2013, 24% in 2014 – lowest-ever rate. Small companies tax rate to be cut to 20%. Enterprise Finance Guarantee Scheme to be maintained. No video games tax relief – foolish – massive industry.

1:03 Getting the unpopular measures – 25% departmental cuts, massive benefits cuts – out of the way first. £11bn saved by 2014-15.

1:00 Child benefit: freeze it for three years. ‘Tough decision’ but strikes balance. Many catcalls and jeers. Disability benefit: not reduced rate, but three times original claimants, four times cost. Medical assessment from 2013 for both new and existing claimants.

12:56 Welfare bill: from £132bn in 2000 to £190bn in 2010. Too many people trapped on benefits for all their lives: tough messages, as expected from Tories. Consumer Price Index of everyday prices to determine all benefits except pensions.

Tax credits: £18bn in 2003 to £30bn now. Families up to £83,000 eligible for tax credits – now over £40,000 from next year to be cut. Bonfire of entitlements.

12:53 Public sector pay and pensions. Two-year pay freeze, but all those under £21,000 protected – flat payrise worth £250 each year. Armed services’ operational allowance doubled – measure of decency. No more than 20x bottom salary for chiefs of public bodies.

Pensions: By 2015-16, £10bn a year to meet gap. John Hutton mentioned – Tories cheer, Labour rrrrrrrr. Consultation on whether default retirement age to go.

12:51 Osborne is fluent, rather dry wit, perhaps smarmy.

Labour had £44bn cuts – 20% per unprotected department. £17bn by 2014-15 extra to go. 25% average cut over four years. Defence and Education dealt with more carefully, Health still protected.

12:50 Civil List to remain frozen, but means to be changed. Civil List expenditure to be scrutinised by Public Accounts Committee.

12:48 General spending to rise; early nineties’ Tory cutting in capex was wrong – no capex cut now. High Speed 1, NATS, Student Loan Book, Tote (finally) all to be sold: massive privatisation, a la the Eighties.

12:45 Deficit: £149bn 2010-11, £116bn, £89bn 20212-13, £60bn, £37bn 2014-15, £20bn 2015-16. Deficit percentage: 10.1% now 1.1% in 2015-16. Massive success if possible without plunging us into an abyss. +.8% in 2015-16. Deficit: 62%, 70% 2013-14, 69% 2014-15, 60% 2015-16. Debt interest payments £3bn lower every year.

Abolished Euro Preparation Unit! Who knew there was one?

12:44 80% lower spending, 20% higher taxes rule: 77%-23% in reality.

12:43 Angry shouting from Labour as Osborne says Labour’s previous plans would lead to higher interest rates.

12:41 OBR on growth: 1.2% 2010-11, 2.3% 2011-12, 2.8% 2012-13, 2.9% 2013-14, 2.7% 2014-15 and 2015-16. Unemployment to fall from 8.1% high, inflation target still 2%.

12:40 Structural deficit (not closed by growth) to be closed by 2015-16. Fixed target for debt: falling as percentage of GDP by 2015-16. OBR judgement says on track to meet goals – in 2014-15.

12:38 Last Budget with Golden Rule (balanced budget over the cycle) – missed by £485bn in this cycle. Tories laugh in horror. Forward-looking measure instead, judged by OBR.

12:33 ‘Deals decisively with record debt’ – ‘enterprise-led recovery’. Threat of higher interest rates, loss of employment, loss of confidence, double-dip if no changes – the ‘unavoidable budget’. No hiding details in the small print. Brave.

12:30 Budget time. House is packed.

12:22 How will Osborne encourage entrepreneurs? Any allowances they receive repay themselves time and again, but increasing/maintaining them may look bad. Given what entrepreneurs do for the economy, it’s worth looking bad to help them.

12:17 Will we see a bank levy? Most probably. It’s a vote-winner (or rather a vote-reward) and it will help to offset the rise in income tax allowance which has been forecast – up by £1,000, saving £200 a year.

12:12 The Office for Budget Responsibility is now producing the Government’s forecasts: they lowered the borrowing figure to £155bn, but they raised the structural deficit figure from £69bn to £74bn, which means Osborne needs to make deeper tax changes.

The Tories have indicated, however, that they’ll be cutting Corporation Tax, probably from 28% to 25%, which means things like VAT and Capital Gains Tax will go up. (Income tax won’t go up – indeed, the allowance most likely will.) Raising CGT is pointless and ostentatious, which punishes – unless it has a sharp taper, like David Davis recommends – long-held assets, many of which will be the results of already-taxed income.

12:05 Spear’s Economics Editor thinks that we should tax luxury goods rather than taxing currently exempt items like food, books and children’s clothes.

11:58 A quick recap of Alistair Darling’s key economic predictions from the last Budget (24 March this year):

> 12:55 Govt borrowing: forecast £178bn this year. He’s stringing this out – must be good news. Good tax receipts in Jan? Borrowing for the first time in years. Corporation tax, income tax up. Borrowing this year £167bn, £11bn lower. £163bn next year, £131bn 2011/2, £110bn 2012/13, £89bn 2013/14, £74bn 2014/5 – £8bn lower than December forecast. Budget deficit: 11.8% of GDP this year, 11.1%, 8.5%, 6.8%, 5.2%, 4% 2014/15. Pointing to promised halving over 4 year period. Structural deficiti 8.4 this year, 5.2 in four years. Net debt: 54% this year, 75% by 2014/15, but as share of GDP will fall year after that. Fastest deficit reduction plan of any G7 countries.

As we now know, the borrowing for 2010-11 was initially forecast to be £178bn, then Darling revised it down in March to £167bn, but the latest figure from the Office for Budget Responsibility is £155bn, which in some senses is an improvement, tho’ as all the figures were largely fictional to start with, not much of one.

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