iForgive the Budget?

It's Budget day in the UK so we're going to make ourselves comfortable on the iForgiven cloud and report on the Budget as it happens, with whether or not we can iForgive the tight cuts that are heading our way! 

Here's hoping it doesn't fluff our feathers up too much...

The toughest package of tax increases and spending cuts in a generation is expected to be unveiled by Chancellor George Osborne in this, his first Budget. We believe he will say that the measures, designed to tackle Britain's record deficit of £155bn, will be based on fairness, with the better-off paying more. 

Expected Measures:

• Duty on wine, beer, cider and cigarettes likely to rise
• Income tax personal allowance to rise by £1,000
• Council tax in England to be frozen
• Levy on banks
• Aviation tax change may be levied per plane rather than per passenger
• Employer NI threshold to rise
• Capital gains tax to rise on non-business assets like second homes
• Corporation tax to be simplified - headline rate cut
• Formal rules/targets to be set for deficit cutting plan

The iForgiven Angels will be updating this post from 12:30 GMT when the Budget is announced, plus voicing our thoughts on iForgiveness for the measures taken.

You can see live reporting on the Budget here

Pre Budget Commentary:


This is the first Conservative Budget in 30 years and the first coalition Budget in 70 years. This emergency budget deals with the countries record debt and George Osborne has said:

"It pays for the past and plans for the future,"


1 pound in every 4 we spend is borrowed and we have identified 6 billion pounds of savings in a review conducted over the last 7 weeks.

"Early, determined action has earned us credibility in international markets," says Mr Osborne

"I'm not going to hide hard choices from the British people or bury them in the small print of the Budget document, everyone will be asked to contribute to reducing the deficit and that everyone will share in the rewards when we succeed".

The Budget Facts:

• Economic growth is expected to be: 
• 1.2% this year
• 2.3% in 2011
• 2.8% in 2012 
• 2.9% in 2013 
• 2.7% in 2014

• To achieve this Budget, there will be a 77% reduction in spending and 23% gained by raising taxes.
• The inflation target remains at 2.3%
• Consumer price inflation is expected to reach 2.7% by the end of the year.
• Government borrowing will be 149BN this year and 116BN in 2011. 30 billion to be cut on public spending by 2014. 
• We will not be joining the Euro this year, so the department responsible for this has been dissolved.
• No capital spending cuts.
• With the full agreement of The Queen, the Civil List will remain frozen at £7.9 million for the coming year. 
• Departmental spending cut by 25%. 
• The Spending Review will be presented on Wednesday 20th October cuts in non-ringfenced departments will now be 25%. 
• Students could now be chased for their student debts by private firms 
• Queen's income to be frozen
• There will be a public sector pay freeze for 2 years, but those earning less than £21,000 will be protected 
• John Hutton will provide answer on pensions in September (public sector workers will also have (almost certainly) to pay more into their pensions as well)
• Benefits, tax credits and public service pensions will be up-rated in line with consumer prices rather than retail prices - Translation: you'll get less. 
• Reduce payments to families earning over 40k next year
• Freeze child benefit for the next 3 years
• Disability benefit is one of the largest items of government spending. From 2013, there will be a medical assessment which will be applied to new and existing claimants
• There will be maximum limits set on housing benefit (max 400 a week) and this can now only be backdated to 1 month and not 3 as it currently is. Housing benefit costs will be reduced by £1.8 bn a year by the end of the Parliament, or 7 per cent of the total budget.
• It will be cheaper for companies to employ people as the threshold at which employers start to pay NI will rise by £21 per week 
• Reduce the small companies tax rate to 20p
• Business tax will be cut by 1% annually between 2011-2013
• Four annual reductions in the rate of corporation tax will take it down to just 24%
• Banks will be paying for the risks and rewards of International Banking. Bank levy to be introduced in January 2011
• Total cuts: 11bn off welfare. 17bn off departmental spending added to 44bn planned by Labour.
• 5 year plan to reform the business tax system
• Telephone tax is to be scrapped and they will support private broadband initiatives so we are not tied to BT
• Plans to create a green investment bank
• New businesses created outside of London and the South East will be subject to a new tax scheme - new businesses will be exempt from up to £5k of employer NI payments for 1st 10 employees hired
• VAT set to rise from 17.5% to 20% on 4th January 2011. This will create more than 13BN a year of extra revenues
• No new increases in duties on alcohol, tobacco or fuel
• We will help local authorities in England to freeze council tax for one year from next April.
• Taxpayers on higher rates will pay 28% on their capital gains
• 880,000 of the lowest paid workers will no longer pay income tax
• Increase in the income tax personal allowance by £1,000 in April
• Lasting help for pensioners: From April 2011, the basic state pension will be re-linked to earnings to protect those who have worked all of their lives (although will they be heavily hit by VAT?)
• Increase the child element of the child tax credit 150 above indexation in 2011  

So how will this affect you? If you are a:

• Pensioner, you will be £5 worse off per year
• Single Mum you will be £20 worse off per year
• Low Income Family you will be £75 worse off per year
• Middle Income Family you will be £483 worse off per year
• Public Sector Worker, you will be £240 worse off per year

iForgiven Angels Analysis:

We've had some time to digest the UK Budget 2010 now and this is what we think:

 

It's certainly a tough Budget and those most affected are those on benefits, the rich and the banks. In theory this sounds great, as we believe that the banks should be more accountable and that the rich should pay more than the poor. For this, the Chancellor is iForgiven. 

 

Regarding benefits, this is incredibly tricky. The Chancellor seemed to infer that this Budget will sift out those that do not deserve benefits and are not looking for work, those who are wrongly receiving medical benefits and also those who have children when they cannot afford them. Although these measures will, ultimately, affect people not in these groups, we do think that this system needs cleaning up. It's incredibly tough, but here on the iForgiven cloud, we do believe that this is long overdue. 

 

It will be a tough few years for all, but hopefully the tax breaks for those with the lowest pay and the money brought in from higher VAT will help to lessen our debt and promote economic growth. There are also breaks for new and small businesses which will also assist the economy.

So, the final conclusion: It's tough, but we iForgive these tough measures, because if the Government is true to their stated intentions, this should benefit all in the long run.