Osborne to lift a million people out of income tax in bid to ease pain of ‘bloodbath’ budget

Almost one million people will be lifted out of income tax in today’s emergency Budget.

The move is designed to ease the pain of a ‘bloodbath’ package – likely to include a VAT rise – that will mean every family being hit by tax hikes elsewhere and the deepest public spending cuts for a generation.

The Budget is being billed as the hardest-hitting since Geoffrey Howe took draconian steps to put ‘sick man’ Britain on the road to recovery in 1981.

'Facing a massive task': Chancellor George Osborne is set to deliver the hardest- hitting budget since 1981's swingeing cuts by fellow Tory Geoffrey Howe, right

'Facing a massive task': Chancellor George Osborne is set to deliver the hardest- hitting budget since 1981's swingeing cuts by fellow Tory Geoffrey Howe, right

Deputy Prime Minister Nick Clegg warned last night that the tax hikes and spending cuts needed to undo the damage wrought on the public finances by Labour would be ‘one of the hardest things we ever have to do’.

Public spending is expected to be slashed by a fifth over four painful years – a retrenchment that militant union leaders say could mean a million public sector workers losing their jobs.

Mr Osborne will announce an increase of £1,000 in the income tax threshold, meaning 880,000 people – including many part-time workers – will be freed from tax altogether.

All basic rate taxpayers will also benefit – saving £200 a year on their income tax bill – as the threshold increases from £6,475 to £7,475.

But the tax break will not be extended to higher rate taxpayers, who will also be hit by the one penny increase in National Insurance announced by Labour and due to come into effect next year.

Everyone will be hit by an expected rise in VAT – likely to be deferred until next year – and an unprecedented assault on welfare handouts.

Big cuts will be announced to housing benefit, the cost of which has risen from

£14billion to £21billion in ten years and has meant some families being paid as much as £104,000 a year by the taxpayer.

The middle classes will be stripped of child tax credits and child trust funds, while child benefit could be withdrawn from higher earners.

And the best- off will be hammered by rises in capital gains tax, with the top 10 per cent of earners to be hit hardest overall.

Shadow Chancellor Alistair Darling predicted that VAT would rise to 20 per cent.

The Government could also break the traditional link between increases in benefits and the retail price index, attaching it instead to the consumer price index, which excludes mortgage costs and council tax.

As a result, the Treasury could save about £1billion a year.

Raising VAT to 20 per cent would cost families more than £400 a year.

Consumer website Kelkoo found the increase would add 2.5p to a litre of petrol and 7p to a pint of lager.

Big ticket items such as cars would see prices rise by hundreds of pounds.

A £3billion a year levy on the banks is expected, as is a review of aviation taxation, which will mean a switch from a per-passenger tax to a per-plane tax.

Measures to promote growth will include scrapping the employers’ element of Labour’s National Insurance rise. Mr Osborne will lift 650,000 employees out of employers’ NI altogether.

New firms setting up in the regions will be exempted from paying NI for the first ten people they take on.

And corporation tax will be cut over five years, with the aim of making Britain the most competitive place to do business in the leading G20 group of nations.

Overall, spending is expected to be slashed by as much as £ 40billion over four years, with tax rises of £10billion.


The Chancellor will describe the task ahead as ‘massive’, but insist that the coalition has managed to spread the impact fairly while protecting the worst-off.

‘Despite the appalling inheritance left by Labour, the Budget will show that the coalition has managed to ensure that the pain is distributed equally,’ said one Government source.

‘The richest will pay the most, but there is no Middle England bulge. Everyone knows it’s going to be difficult, but the impact is broadly even.’

Mr Clegg, in a message to restive Liberal Democrat supporters, conceded that his party will face accusations that it has ‘sold out to go along with Conservative cuts’.

But he insisted: ‘We have taken the difficult decisions with care, and with fairness at their heart. You will see the stamp of our Liberal Democrat values in tomorrow’s Budget.’

David Cameron, giving a statement on last week’s European summit, ridiculed Labour for claiming immediate spending cuts were not necessary.

‘The Labour Party are now completely isolated in Europe in not believing we need to take early action on the deficit,’ the Prime Minister told MPs.

A poll last night showed that voters believe the Government’s economic policies will pay off.

The Reuters/Ipsos MORI poll also showed Mr Cameron enjoys an impressive approval rating of 57 per cent after just over a month in the job.

Three in five agreed the new government is being honest about the state of public finances.

Voters would prefer public spending cuts to tax increases

Three-quarters of voters want the Government to cut spending rather than impose tax rises.

According to a Guardian/ICM poll, there is great anxiety about the impact the chancellor’s plans will have on the country.

There is widespread opposition to tax hikes on the scale George Osborne is likely to declare and only 22 per cent of those surveyed said they should pay more in tax and 73 per cent disagreed.

Most voters are prepared to give the coalition the benefit of the doubt and trust it to make the right decisions about spending and the economy.

But a minority are strongly opposed to the prospect of cuts and many have yet to make up their mind either way, suggesting opposition could grow strongly once the pain is felt.

Nonetheless, most people – 60 per cent – say they trust the Government to make the right decisions on the economy and spending.

More than half of voters – 55 per cent – are optimistic about what the consequences of the budget will be, believing the Government’s actions will improve Britain’s economic performance over the next few years.

Only 30 per cent think they will not.

Many voters are worried they could push the economy back into recession – while 46 per cent think it won’t happen, 45 per cent think it is a possibility.


The rate at which people start paying income tax to rise by £1,000 to £7,475

As a sweetener for voters, a two-year freeze in council tax

VAT, currently at 17.5%, to rise by up to 2.5% to 20%. This would cost the average family about £400 a year

Benefit payments to middle earners, including child tax credits worth hundreds of pounds a year to two million families, to be scrapped

A proposed 1% rise in National Insurance paid by employers to be axed, but NI for workers earning more than £20,000 will rise from 11% to 12%

New businesses will be given a one-year National Insurance holiday on the first 10 staff they employ, only in some regions

Capital gains tax to rise from its current 18% to closer to 40%, with exemptions for savers and entrepreneurs

Bank tax to be introduced, raising up to £3bn a year

Increase in airport departure levies from November, which will add £300 onto a family of four’s long-haul flights

Higher taxes on tobacco, beer, wine and spirits inevitable

Corporation tax cuts likely, aimed at boosting the private sector and stimulating jobs

Tax on holiday lets scrapped, so landlords who let out holiday accommodation will be able to offset the cost of furniture and fittings against tax.

source: dailymail.co.uk

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