Mr Osborne will deliver his first Budget on Tuesday. It is likely to be the most difficult delivered by a British Chancellor for 30 years. A senior source confirmed that freezing benefits was “something George really feels it is necessary to do”. However, the final decision has yet to be made and Mr Osborne could decide to pull back as he finalises the measures this weekend.
The figure put on the potential saving by the Treasury is £4.4 billion. The Institute for Fiscal Studies puts it at £4.1billion for a one-year freeze, rising to £24.6 billion if it were extended for the whole parliament. While it is highly unlikely that Mr Osborne will announce a freeze for longer than 12 months, documents in circulation talk about the “year one saving” of £4.4billion.
VAT is expected to rise from 17.5 per cent in the Budget, but last night government sources suggested it would not go as high as 20 per cent, as has been mooted. Corporation tax will be cut to encourage businesses.
There will also be measures to ensure entrepreneurs and savers are not heavily penalised by promised rises in Capital Gains Tax. After pressure from senior Tory MPs and supporters, allied to a campaign by The Daily Telegraph, Mr Osborne is expected to announce a “taper” relief system. That would ensure that ordinary savers who may have bought a second home as an investment for retirement are not treated in the same way as the real targets of the rise, wealthy financiers who use CGT to avoid paying full rates of income tax.
The Budget will also include a change in the way air travel is taxed. Instead of airlines being charged per passenger, they will be charged per plane, with costs passed on to the customer. This will be opposed by long-haul flight operators, who fear it will severely hamper their businesses.
David Cameron and Mr Osborne have been preparing the ground for Tuesday’s Budget with a series of speeches arguing that the public finances are in a worse state than they had imagined before they took power. They have also made it clear that the public should be braced for a host of very tough spending decisions.
In a recent interview Mr Cameron said there were years of “pain” ahead. He hinted at the freeze in benefits when he said: “You have to address the massive welfare bills.” Earlier this week ministers announced that they were scrapping or suspending £10billion of projects.
Nick Clegg, the Deputy Prime Minister, disclosed that radical changes would be made to the system of child tax credits, which will be taken away from middle-class families, and limited to those on the lowest incomes.
The benefit, which can currently be claimed by parents with a combined income of £58,000, or £66,000 if their child is under the age of one, will be restricted to those on less than £30,000, or even £25,000.
In a speech Mr Clegg said that the middle classes did not “need” benefits. He promised that in return, those on middle incomes would be able to keep more of their own money under plans, also due to be detailed in next week’s Budget, to raise the point at which income tax begins to be paid.
Nine out of 10 families with children under the age of 16 are currently eligible for child tax credits. By restricting the benefit to those earning less than £30,000, more than two million would lose out.
Saturday, 19 June 2010
George Osborne considering freeze on benefits to save £4.4bn - Telegraph
via telegraph.co.uk
