Emergency Budget 2010: Speech headlines

22 June 2010

The Chancellor has concluded his emergency Budget speech. We are now in the process of updating our Budget Report and putting together a series of news articles.

However, the headline news from the Chancellor's statement is:

Economy and government borrowing and spending

measures to re-balance the economy, based on saving, investment and exports

no reliance on "backward looking" fiscal rules; debt falling as percentage of GDP by 2015/16; eliminating the structural deficit by 2015/2016

growth as predicted by Office for Budget Responsibility is:1.2 per cent this year, 2.3 per cent in 2011, 2.8 per cent in 2012, 2.9 per cent in 2013 and 2.7 per cent in 2014

77 per cent of the reduction in the structural deficit - that part of government borrowing that does not fall when tax revenues climb - to be achieved through spending cuts, 23 per cent through tax increases

OBR predicts borrowing of £149 billion this year, £116 billion next year and £89 billion in 2012-13, £60 billion in 2013/14, £37 billion in 2014/15, falling to £20 billion in 2015/16

borrowing will be 10.1 per cent this year; by 2015-16 it will be 1.1 per cent; by the end of this parliament debt interest payments will be £3 billion a year lower than they would have been

government will not join the euro in this Parliament

no further reductions in capital spending

departmental spending will fall by £17 billion by 2014-15; budgets in non-protected departments will fall by 25 per cent over four years; more details will be announced in the spending review on 20 October

public sector pay will be frozen for two years, but safeguards will be introduced for those workers on less than £21,000

Benefits and pensions

government will accelerate the increase in the state pension age to 66

from next year, with the exception of pensions and pension credits, benefits, tax credits and public service pensions will rise in line with consumer prices rather than retail prices

tax credits will be reduced for families earning more than £40,000

child benefit to be frozen for next three years

from April next year, the state pension will be linked to earnings, not inflation, and will rise by earnings, inflation or 2.5 per cent, whichever is greater

the child element in the tax credit system will rise by £150 above inflation

Taxes

main rate of VAT up from 17.5 per cent to 20 per cent as from 4 January 2011; zero-rated items to remain

no new alcohol or tobacco or fuel duties

council tax freeze for one year as from next April

capital gains tax rate for low and middle income savers stays at 18 per cent, but for top rate taxpayers it rises to 28 per cent as from 22 June; exemption to remain at £10,100, rising by inflation over the years; no tapers or indexation

entrepreneurs' relief of 10 per cent to be extended to £5 million of lifetime gains

the personal income tax allowance has been raised by £1,000 to £7,475, taking some 880,000 people out of the tax system, with 23 million basic income tax payers set to receive a tax cut of £170 a year; those on higher incomes will see their allowance thresholds frozen until 2013; government committed to raising the personal allowance threshold to £10,000

Business

the threshold at which employers start paying national insurance is to rise by £21 a week

firms set up outside London and the south-east of England will not have to pay employers' national insurance contributions on their first ten employees during their first year in business; the exemption is to be limited to a maximum of £5,000 per employee or £50,000 per firm, and can be applied for at any time over the next three years

the headline rate of corporation tax is to be cut by 1 per cent per year for four years from next year, eventually bringing it down to 24 per cent

small companies corporation tax rate to be reduced to 20 per cent next year

a levy is to be charged on banking profits