Budget 2010 - The key pointsPosted on: 23 June 2010 by Mark O'haire
The rate of VAT has been raised from 17.5% to 20% by Chancellor George Osborne. Tony Page analyses the knock-on effects of the Coalition’s emergency Budget.
OK folks it’s all over and we know the worse that Mr Osborne and the Coalition have to deliver to the great unwashed public – us! At first sight it has a few hidden gems - the best one being the scrapping of the pension rules that you have convert any pension into an annuity by the time you reach 75. This goes next April and good riddance to it.
Pensions will be index linked (but not to RPI but CPI instead) and they will go up automatically as the cost of living increase -another tick for this. For those of us who have the ability to make capital gains the tax rate doesn’t change unless you are in the higher tax bracket (not clear whether this is 40p in the pound or the new rate of 50p).
As I foretold VAT is going up but only to 20% and not the 21.5% I said! This is going to bring is a lump of cash to help balance the books. The range of products and services subject to VAT has not been widened as many expected. Other than VAT there are no big tax increase and ciggies, booze and fuel all slipped through the net.
Business got some help and that’s good as we need them to earn the profits to create the jobs and pay the taxes we so desperately need! To sweeten the bitter pill of VAT increase 900,000 people are going to be taken out of being taxed and will be better off to the tune of about £170 pa. Children’s allowance stays for everyone so that’s good for families and grandparents as there will be a lower need for ‘family subsidy’!
Now the bite! Non ring fenced government departments will have their budgets reduced by 25% over the life of this parliament and there is to be a wage freeze for public sector workers for two years. These two measures are going to really hurt a large section of society and will result in massive job losses over the next five years and it will slow our recovery.
It’s the one area that will result in action by the likes of the unions Unite and Unison. Will we see the ‘strife’ of the Thatcher years –more than like not but it is going to hurt a lot of families and will rebound into the wider family circle and create demands on us older members
So what is the real impact – if you are older or in retirement and not big spenders it’s an OK Budget? If you have capital gains to make you are more than likely OK. You’ll get a little bit more money but it will go in VAT!If you are dependent on public services you will see the difference over the next twenty four months as councils cut back on local services and staffing. This will affect all of us!
In my opinion we have got off light and the pain is evenly spread with the rich taking a hit and the less well off being protected – a little! Will this sort out the problems of this nation –no, but it’s a step in the right direction.
Oh, I almost forgot they are going after the benefit fraudsters and the ones who don’t really qualify but have got away with it up to now. Will they make a real difference - only time will tell!
Last, but by no means least, there is going to be a £2 billion tax every year on banks – couldn’t have happened to a nice group of people. Sad thing is – the UK owns RBS and Lloyds TSB so it’s from one pocket to the other.
Well Mr Osborne, not bad for a first budget – now keep up the pressure and make sure these cuts really do work – we don’t want a repeat of the past two years – well not in my lifetime anyway!
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