The Emergency Budget - Grim News For Everyone

Last week’s emergency budget brought the expected grim news for everyone in the country, as we attempt to deal with the misery from the recent economic crisis and the deficit that Britain faces.  Chancellor of the coalition government, George Osborne has attempted to keep things as positive as they could be, but has still taken the opportunity to hammer people the best as possible.

The most notable change is the increase in VAT, from 17.5% to 20%.  The change will take place, as in effect from January 4^th 2011.  The VAT measures will consequently see a litre of unleaded petrol rise by 3p, a pint of lager go up by 7p and a Ford Focus car, rise in price by over £300.  This VAT alteration will stick for good, unlike the emergency reduction taken out by former Chancellor, Alistair Darling back in November 2008.

Benefits for families, such as the controversial child tax credits will be removed, and public spending has also been reduced, with schools, universities and the police seeing their budgets restricted by a further 25%.  Other big announcements included the rise of the state pension age to 66, and in the recent days, there have been growing suggestions that the retirement age will be increased, so people may be forced to work longer, than they previously thought.  Osbourne also confirmed the selling off by the government of the Student Finance Company.  Student Finance has borne the brunt of thousands of complaints for delays and cancellations of loan and grant payments to hundreds of University students across the country.  This news could make things even more uncertain for students, attempting to beat the recession issue.  Surprisingly, tuition fees were not raised though, which raised an eyebrow with some.

Personal tax allowances have been raised to £7,475 from next April and there will also be a freeze on council tax for a year.  Below are some of the other key points from the Osbourne speech at the House of Commons last Tuesday:

• ·         A two-year pay freeze on the public sector, but there will be a £250 pay rise for workers who earn under £21,000 a year.
• ·         A probe has been announced into public service pensions.
• ·         Economic growth is predicted to be lower than forecast at 1.2% this year. 
• ·         The 10% cider duty rise tax has been axed.
• ·         Tax credits to families earning over £40,000 have been cut.

Immediately, the government has received intense scrutiny, as anticipated, with Labour really pulling the punches in the House of Commons.  The acting leader Harriet Harman has condemned the budget as ‘unfair,’ whilst Ed Balls, a leadership contender for the opposition called it ‘The Budget from Hell.’  Deputy Prime Minister Nick Clegg is also feeling the heat, as it seems like he supported the VAT increase, despite claiming that was never an option in his election campaign.  How much influence David Cameron had on Clegg’s decision remains to be seen.  However, Clegg probably gave in, realising that if he disagreed, he was more than likely going to be outnumbered by Tory MP’s. 

Osbourne has claimed that it was an ‘unavoidable budget,’ and that there was no alternative, but to tackle the massive government borrowing, which has brought Britain onto its sorry knees.  This was a budget that was always going to hit the country hard, whatever the outcome.  Some areas have been hit harder, probably unfair on them, but these cuts/freezes have had to be sorted out, otherwise we will be in an even bigger mess than we were before.  This is something that as a country, we must unite and stick together through the expected pain, as Britain attempts to grapple with the aftermath from the recession.