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Cut benefits to the poorest in society to fund tax cuts for corporations - yes, we really are in this together aren't we Gideon.

I think that the CPI measure falls into George Osborne's rhetoric of removing benefits dependency. It makes working for any wage stronger than expecting benefits to rise each year.

What a clever budget! Avoids the headline grabbing increases on alcohol etc, spreads the pain around. VAT increase brings in billions, but it just means the price of ,say,a tv goes up by £7, easily saved if you shop around. Stops the benefit excesses, such as ridiculously high housing benefit.

Just a quick question - where do the dividend payments from the State - owned preferential shares go? No politician seems to be commenting on this - if it turns out that the board meetings of State - owned institutions decide that there will be no dividend whilst paying huge bonuses to staff this would be an absolute scandal.

Similarly, do these figures factor in any return for sales of State - owned shares? Obviously, these can't all be sold at once and some may be issued as security for Government debt etc but even so, there should be a return here.

Reducing Corporation Tax and increasing the NI threshold should be good for job creation, perhaps this isn't going far enough considering the steep falls in private sector output since 2008.

Still no comment on what will be cut from government departments though. The impact of these will be much more substantial on 'the average citizen' than a lot of the measures announced here - VAT excluded. ( I suspect that there is an element of politicking here - VAT rises announced, let's see how the economy goes then review later and pass it off as a tax cut).

Not bad though George - reasonably balanced. Interesting to see the markets reaction. My instinct is that this will be good as there is a clear demonstration to repay the national debt.

Now, over the election there was a lot of talk about restarting manufacturing - where was the incentive to do this today?

A question not a comment:

How much of our national debt is held as bank shares and guarantees?

Surely Family Child Allowance was brought in to make sure we maintained our population. If we are over populated now is it not the time to abandon this Allowance.

I haven't seen all of the budget yet, but I think that 'Boy George' or 'Georgeous George' or whatever the lefties want to call him has put in a towering performance. Overall, this is a highly impressive and progressive budget.

Yes APbbforum, I totally agree with your sentiment. It is this notion of George Osborne's "all in this together" that really sticks in my craw. I wonder if he would mind sharing with the nation how these cuts are going to personally affect him and what adjustments to his lifestyle he will be making?

"Cut benefits to the poorest in society to fund tax cuts for corporations". A simplistic view - remember that corporations employ people and can't increase their wages if they are not making any money.

Most non public sector workers have already had their two year pay freeze...

As someone who has multiple sclerosis and is reliant on employment and support allowance, disability living allowance and housing benefits, i am now sick with worry.

So they are swapping from the RPI index to the CPI index for this September. Is this not the third time in 3 years the Government of the day have swapped to the index showing the lowest inflation in September month. Thus reducing any April the following year increase in both State Pension and Company Pensions. Do they really consider the People so dumbed down that we do not notice this fraud?

PLEASE someone question where George Osborne got the figure that some families are getting £104,000 per year in housing benefit??? There are already limits on housing benefit, its called LHA local housing allowance which would prevent this. So PLEASE ask government to justify that quote and how their new limits are markedly different to limits which already exist. It is necessary to dispel the MYTH that housing benefit claimants are all on the make, when surely they are simply trying to keep a roof over their heads. How much do they really hope to save from changes to the housing benefit system....there must be more to this story.

It's going to be an interesting 10 years.

Its basically a criminal budget.

If you cant get a job that pays even a basic living standard then what else is there- a deteriorating benefits system, criminal activity, or black economy, which is basically criminal activity.

I think that regardless of its significance and consequences, the central issue is that it is now done/over and businesses and individuals can face up to and plan for a future within the confines/consequences of this budget.

I am sure we will hear more of the consequences of this budget when some take to the streets in demonstration.

Detrimental consequences will I think be widely ignored until victims become the norm of daily media reporting.

I myself would have hit the banks harder and set a levy on the bonuses and renumeration of banks, not on profits. In 2009/2010 the banks paid out £60billion in renumeration/bonuses. Even a 2 year rate of 10% on these bonuses as at 2009/2010 rate, and a reduction to 5% would have achieved very substantial gains and amount to £21billion over 5 years, a large percentage of the extra money gained of which I personally would have used to pump into a UK business and manufacturing investment initiative to doubly ensure and maximise the potential for substantial wealth creation, especially in green energy via ensuring we actually manufacture that which we are planning to spend huge amounts of UK financial and economic wealth on.

Unfortunately, I do not trust or believe this government, if they managed to help gain investment for such things as Sheffield Forgemasters and building a nuclear component manufacturing base and re-opening the now closed/defunct wind turbine plant, then my opinions and belief and trust in this government and its overall ideological intentions would shift more in its favour, especially as just these 2 areas are highly significant to creating a more sustainable economy, which means manufacturing/providing more of that which we use.

Osborne sounded transformed from his pre-election persona - quite impressive to listen to.

Not sure he was wise to give Labour a stick to hit the Coalition with by increasing VAT but he needs the numbers it provides without other changes. No plan either to really move - radically - away from the consumption culture but there's time for additional tweaks to the system. And as I feared, he is planning to inflate the economy further. He missed an opportunity with the change to CPI indexing to set a lower inflation limit.

This comment was removed because the moderators found it broke the house rules. Explain.

So what happens when, some time down the line, the CPI is bigger than the RPI ? This, I think, has happened relatively recently. Will benefits continue to be raised at, what then, would be the higher inflation rate ?

9. BUGSPLAT wrote "Most non public sector workers have already had their two year pay freeze..."

In some private sector jobs they have had a pay freeze (or pay cut), but it hs not universally been applied across every job. Also, both RPI and CPI were very, very low in 2009 (RPI was in negative figures !!!!!), so the impact of private sector staff facing a pay freeze in 2009 was minimal in terms of their standard of living. Fast forward to 2010 onwards, when inflation has been creeping upwards and VAT projected to go up 2.5% - a very real cut in the standard of living for public sector workers.

Secondly, with the massive cuts in public sector spending & tax rises outlined in this budget, the private sector is hardly going to be slush with spare profits to pay their staff... So private sector pay awards are hardly going to improve in next couple of years either. Is this George Osborne's idea of sharing the pain ?!??!?!?!?

As expected from the Tories, the poor will be hit the hardest & the rich will continue to get richer. The increse in V.A.T. will hit everyone but only the low income familys (£30,000 & under) will suffer.
The fact that D.L.A. will be cut is disgusting especially for those who are retired & only survive on a small pension & their D.L.A.
When will we get a government that realise the mega rich can get this country out of dept instead of hitting the poor everytime we need to reduce our deficit, a realistic reduction in tax's for low earners & a realistic increase in tax's for high earners plus corporate business is a fair way to deal with the deficit not an increase in V.A.T. & cuts to Child Credits, D.L.A. & benifits for those who genuinely need them.
Also how can he say they intened to freez the cost of fuel at the pumps if they're going to increase V.A.T. to 20% then surely that means fuel will increase by 2.5% also. The Tories policy has always been the same, make the rich, richer & the poor, poorer & with Nick (the sellout) Clegg who has now got his 5mins of fame joining them it looks like it will never change.
Strikes me its a fair budget alright, fair if your rich, very unfair if your not. How long before we lose everything this country has spent the last 30yrs trying to rebuild after the 80's & Thatcher selling off every industry in the UK in order to reduce our deficit. If you look at the country as a company then think about it, If you no longer have anything to sell because you've sold off all the patents you had to other companies then your only destined for bankrupsy unless you can come up with something people want to buy. In order to rebuild this countries economy we need to rebuild our industry in the way of British Car Manufacturers, Iron/Steel Works, etc etc. But most of these skill's have long gone as people only seem interested in computers, well they wont rebuid our industry & neither will taxing the poor to stupidity either.
It's time the Government woke up & understood that not everyone gets paid 50k+ a year & Thatcherism is long gone. Some things that have gone around should never come back around, howerever it would seem that Thatcherism has returned...

Not enough done to protect high earners. For that reason I'm off. You can pay your own way.

So it seems that the increase in manufacturing to re-balance the economy is going to come from small firms (less than ten employees) in every region outside of London, the East of England and the South-East? I'm afraid it is going to take more than this. Perhaps all those bankers will leave the City and set up small firms in the provinces with their bonuses? Or perhaps not...

Interesting that the areas where he had to give detail - VAT, child benefit, public sector pay restraint - were less radical than expected whilst the areas that required no detail (department spending cuts) were more radical.

Then there was the ridiculous charade of the Opposition pretending to be outraged at VAT increases that they would quite obviously have had to implement themselves

#4 Jack_Dwakins

Re: bank shares. A pundit compared Gideon's budget with the first Howe budget earlier and wondered if the reaction would be "as bad". "It'll be worse," I thought. "Gideon doesn't have any council houses to sell to keep people on side". Presumably, the bank shares are Gideon's council houses. They'll be sold at knock down prices to buy goodwill at some point after these spending cuts are causing unacceptable levels of unrest, which they will.

The big question now is can industry use the "certainty" their spokespeople were all celebrating on the bbc and rise to the challenge in a socially useful way for the uk i.e. generate some jobs here as well as offshoring lots of work to Asia. If the people seeking these jobs also respond to the removal of some perverse incentives around benefit withdrawal with earnings maybe this will genuinely do some good two to three years down the road.
It's in all our interests that it does. There will be no prizes for being right in a double dip recession. We can work for success of the UK or squabble and damage our own interests (British Airways stop hiding at the back) For me the really big questions on this are left for another day. How intelligently will the axe be swung on the public services over the summer. This is a generational opportunity to prune back deadwood and remove complexity added based on good intentions but dismal short termism over decades. Think of the potential benefits of a real shakedown:
Less time wasted by our poor public servants on managing statistics for central government command and control (shame on you Mr Brown)
Less fake accountability by review and committee and a bit more losing your job when you screw up repeatedly (Shame on you Sir Humphrey). Reduced interference with citizens' lives from a smaller bureaucracy with fewer agencies and touch points. Fewer quangos, agencies and duplicating layers "collaborating" each with senior staff and diluting accountability amongst themselves wildly while sending the poor consumer in circles.
Improved focus on core common good items and less nice to have politically correct communications, PR and social engineering lite. Either tackle a big issue and pull legal and economic incentive levers hard or leave well alone. Stop messing around in the middle trying to look like something is being done. Some hard choices actually made on defence and our reduced role in the world. A balanced (inclusive) approach to energy policy without all our eggs in a single basket - wind, nuke, solar or fossil
Completion of Public Sector pensions reform. RIB DB. It has been dead for a while. Killed by increased longevity (and hooray for living longer)
Social expectations start to revise on what the state will do vs what I need to do for myself in my family and community (a long overdue row back on a corrosive dependency culture). A slight crimp in lifestyle support for feckless lifestyle choices. Do as thou wilt if it harm no one - just don't expect the rest of us to pay you more and more to do it. ConDems and DWP need to be super careful on DLA and ESA. The vulnerable core on these benefits need to be protected from harm in these changes. Yet it is also true that a goodly number on INCAP need to be on JSA instead of ESA - so picking out the two groups will require sensitivity to protect the vulnerable while ignoring some of the wailing while the tough love to cut the "on the sick" benefits of the able goes through.

Let's hope the UK can actually get some economic mojo back. With some broader industry and wealth creation we can publicly and privately afford some of the long term transport infrastructure and civic pride projects once again.

Appeciate your analysis Stephanie. A couple of questions/observations on details:

You note: "The chancellor says that debt as a share of national income will peak at 70% in 2013-14, not 80% several years later, as Labour had planned."

The figures Labour published in their March budget for debt:GDP were 74.5% in 2013-14 and 74.9% in 2014-15, which they claimed would be the peak (so debt would start falling as a share of GDP in 2015-16).

They may have been using sophistry to conceal the fact that it was projected to continue rising beyond the end of the forecast horizon (ie it actually would have risen further in 2015-16 and beyond), but it does look from the small gap between the previous two years' figures as if it was set to stabilise or possibly fall in 2015-16.

Since net debt levels depend on actual borrowing not structural borrowing, and this was revised slightly downwards by the OBR, the OBR forecasts for net debt were slightly lower: 73.7% of GDP in 2013-14 and 74.4% in 2014-15. So it looks as if on unchanged policies (ie prior to this budget) debt would have peaked at around 75% of GDP, either in 2014-15 or 2015-16.

So the result of this budget is that debt is projected to peak at 70% of GDP rather than 75%, and that it will peak at least one year earlier.

That's still important for debt dynamics of course, and I think it's the right strategy, but it does illustrate how long it takes to turn round the debt:GDP figures. Even the substantial extra tightening announced today will make a relatively small difference to the headline debt totals.

Secondly, you say: "The forecast for the structural deficit in 2014-15, in the OBR's report, only rose by 0.3% of GDP, or about £4bn. It's hard to know without seeing the Budget book, but it looks as though he is raising through VAT what he has not raised from capital gains, where the change is less dramatic than expected, netting only £1bn according to the chancellor."

As you say, the OBR forecast was for structural PSNB of 2.8% of GDP in 2014-15 compared to 2.5% in the March budget (while the OBR put the structural current deficit at 1.6% rather than 1.3%).

But on VAT v capital gains, I can't believe there was any kind of straight trade-off, because the revenue raised by a VAT rise to 20% is massively more than was ever going to come from a CGT rise.

The Lib Dems' original plans were only forecast to yield £1.9bn, and Osborne is expecting to raise more than £1bn. So the 'shortfall' he had to make up as a result of watering down the CGT changes was less than £1bn, whereas the VAT rise is projected to raise £13bn.

(In any case Danny Alexander claims the Treasury advised that 28% was the revenue-maximising CGT rate, so that extra revenue from a higher CGT rate may have been illusory anyway.)

In reality, the VAT rise was needed in order to fund the tax cuts elsewhere - raising the income tax personal allowance, the employers' NI threshold and cutting corporation tax (especially since it looks like Osborne has scaled back his planned cuts in capital allowances, so the corporation tax changes presumably were net tax cuts rather than revenue-neutral...).

Indeed, totting up the tax rises and cuts in the Red Book, it looks like the tax rises total £20.82bn in 2015-16 while the tax cuts total £12.59bn, giving a net tax rise of £8.23bn. VAT brings in £13.45bn in 2015-16, so very similar to the figure for tax cuts.

So you could say the VAT rise is paying for the tax cuts elsewhere, while the bank levy and other tax rises are going towards deficit reduction.

The coalition government obviously judges that a rise in VAT (however painful) is a price worth paying for the other tax-cutting measures which fulfil election promises on both sides and - arguably - will boost the economy's supply-side growth potential more.

Is this a 25% cut next in year in what governments spends in cash ? or this 25% over 5 years compared to previous notional total of spend, or even against some inflation assumption ?
I am very confused, could we really be spending 25% in cash terms next year ?

20. At 3:13pm on 22 Jun 2010, MBfool wrote:
Not enough done to protect high earners. For that reason I'm off. You can pay your own way.

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Bye! Good riddance. Close the door after you. Anyone want his job? Yes, please. Yes, over here! No, I want it here!! Me, me ME, PLEASE, here!

Do you remember MBfool? Who? No. Did he work here and live down the road. No, no recollection.