Take a look at our guide and see how your finances may have been affected by the emergency Budget.
Emergency Budget 2010 highlights
Economy
– Growth is forecast to be 1.2 per cent this year, taking into account the emergency Budget measures. It is forecast to be 2.3 per cent next year, 2.8 per cent in 2012, 2.9 per cent in 2013 and 2.7 per cent in both 2014 and 2015.
– Debt will be falling and structural current deficit should be balanced by 2014.
– Consumer price inflation is expected to reach 2.7 per cent by the end of the year, returning to target in the medium term.
– Unemployment rate forecast to peak at 8.1 per cent this year and then fall for each of the next four years to reach 6.1 per cent in 2015.
– 77 per cent of total consolidation to be achieved through spending reductions and 23 per cent through tax increases.
– Public sector net borrowing will be £149bn this year, £116bn next year, £89bn in 2102/13, £60bn in 2013/14, £37bn in 2014/15, falling to £20bn in 2015/16.
– Public sector net debt as share of GDP will be 62 per cent this year and will peak at 70 per cent in 2013/14. It will then begin to fall, reaching 67 per cent in 2015/16.
– Additional current expenditure reductions of £30bn a year by 2014/15.
– No further reductions in capital spending totals.
Public sector
– Two-year public sector pay freeze on staff earning more than £21,000.
– People earning less than £21,000 will each receive a flat pay rise worth £250 in each of the two years.
– Operational allowance for troops in Afghanistan doubled to £4,800.
– Will Hutton to draw up plans for fairer pay across the public sector, without increasing the overall pay bill, so that those at the top of organisations are paid no more than 20 times the salaries of those at the bottom.
– An independent commission chaired by John Hutton will review public sector pensions. There will also be consultation on scrapping the default retirement age.
– Rise in the state pension age to 66 will be accelerated.
– Government will seek private capital injection into the Royal Mail Group.
Welfare
– Benefits, tax credits and public service pensions will increase in line with consumer prices rather than the Retail Price Index.
– Child benefit to be frozen for the next three years.
– Caps on housing benefit to be introduced from £280 a week for a one-bedroom property to £400 a week for a four-bedroom or larger. Together with other measures, this will reduce costs of housing benefit by £1.8bn a year by the end of the parliament.
– Sure Start Maternity Grant will go to the first child only.
– Eligibility for child tax credits to be reduced for families with a household income of more than £40,000 from April next year.
– The baby element of child tax credit will be abolished from April next year.
– Child element of the child tax credit to increase by £150 above indexation next year.
Taxes
– VAT to increase to 20 per cent on 4 January next year.
– Government to work with local authorities to freeze council tax for one year from April next year.
– Capital gains tax, increased for higher earners from 18 per cent to 28 per cent from midnight on 23 June. Low- and middle-income savers will continue to pay 18 per cent.
– Personal income tax allowance to be raised by £1,000 from April to £7,475.
– Higher-rate income tax threshold frozen until 2013.
– The standard rate of insurance premium tax to rise from 5 per cent to 6 per cent and the higher rate to increase from 17.5 per cent to 20 per cent.
– 50p-a-month levy on phone lines to pay for the rollout of superfast broadband scrapped.
Banking and savings
– Bank levy to be introduced in January next year, to apply to the balance sheets of UK banks and building societies and to the UK operations of banks from abroad.
Pensions
– From April next year the basic state pension will be re-linked with earnings.
– Basic state pension will increase every year by highest of earnings, inflation or
2.5 per cent.
