Posted: 29/06/10 by Moore Stephens East Midlands
Chancellor George Osborne delivered what he described as a “tough but fair” Budget on 22 June, announcing increases in both VAT and capital gains tax, a freeze on public sector pay for most workers and a major reform of welfare benefits as he seeks to raise an additional £40 billion to help plug the country’s eye-watering deficit by 2015/16. The Chancellor laid the blame for the tough measures firmly at the door of the previous Labour government, repeatedly referring to the changes as “unavoidable” in order to create “a new balanced economy”. Spending cuts rather than tax rises are the government’s favoured means of addressing the deficit, with around 77% of the deficit reduction anticipated to come from cuts in spending.
There was some good news mixed in with the doom and gloom, notably the re-linking of pensions to earnings and the surprise increase in capital gains tax, changing entrepreneurs’ relief threshold from £2 million to £5 million. The Chancellor also announced plans to reform the corporation tax system with lower rates, simpler rules and greater certainty to enable companies to invest, attract foreign investment and boost growth. In the meantime, the standard rate of corporation tax will be reduced progressively over the next five years to 24% by 2014. For smaller business, there will be a reduction to 20% from April 2011.
The Chancellor stated that “the failures of the banks imposed a huge cost on society”, adding that banks should make a more appropriate contribution reflecting the many risks they take and announcing the introduction of a bank levy from January 2011.