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UK Budget Explained
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Key Points
- French and German governments pledge to join UK and introduce a
bank balance sheet levy
- Banking sector needs to make a more appropriate contribution to
the nation's finances - a banking levy introduced from January
2011. Tier 1 assets will be exempt from levy which is expected to
raise £2bn.
- Annual investment allowance for small firms reduced to
£25,000
- Abolishing proposed tax change for video game industry
- Reductions in tax must be paid for by other measures in
business tax - these include a small reduction in capital
expenditure allowances
- Corporation tax to be cut by 1% a year over the next four
years, taking it to 24 per cent by 2014-15. From April 2011, the
threshold for National Insurance will rise by £21 above
inflation to ease the cost of hiring new staff. Small companies tax
rate to be cut to 20 per cent. Enterprise Finance Guarantee Scheme
to be extended
- Government to review housing benefit and introduce new limits
of £280 for 2 bed properties and £400 a week for 4-bed
houses. Government expects these changes to save £1.8bn a
year or 7 per cent of total housing benefit spending
- Welfare control measures to save £11bn by 2015
- Tax credit payments for families earning over £40,000 per
year to be reduced
- From next year, benefits payments will update with reference to
consumer price inflation not retail price inflation. Indexation of
tax system also to be moved to the consumer price index and away
from current linking to retail price index
- Welfare spending has increased by 45 per cent in the last 10
years to £192bn
- State pension age to rise to 66, earlier than planned
- Public service pensions are one of the biggest burdens on state
finances - John Hutton's interim report, due in September, will
allow the issue to be addressed as part of the full spending review
in October
- Government seeks additional £17bn of departmental budget
cuts by 2014-15, implying average real cuts of 25 per cent for
unprotected departments - and chancellor asks the public sector to
accept a two-year pay freeze. The 1.7m public servants earning less
than £21,000 a year will recieve a flat pay rise of
£250. Government to double servicemen's allowance to
£4,800.
- Government plans spending cuts of 25 per cent on government
departments of the next 5 years but keeps protection for NHS and
overseas aid budgets
- The amount provided by the Civil List to fund the Queen's
duties as head of state will remain frozen at £7.9m, and will
be subject to scrutiny from the National Audit Office
- Government will look to sell Nats, air traffic control system,
the sudent loan book and Tote, the betting chain. It will also seek
private sector investment for the Royal Mail
- VAT to increase from 17.5% to 20% from January 4 2011
- Government to publish shortly the details of a large regional
growth fund
- Proposed tax on land lines to be abolished but government hopes
to encourage investment in telecom infrastructure
- "Green Investment bank" to be created to invest in
environmentally freindly ventures
- Propose to switch tax on air travel from a passenger tax to a
plane levy
- From April next year the earnings link on the basic state
pension will be re-introduced
- Income tax personal allowance to increase by £1,000 to
£7,475. Government sticks with target to raise personal
income tax allowance to £10,000 during the current
parliament. Increase on personal allowance takes 880,000 people out
of income tax.
- Child element of tax credit to be increased
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