Britain braced for Osborne’s cuts
The outcry against George Osborne’s emergency Budget is already reaching deafening levels, with just one day to go until the most significant reshaping of Britain’s finances in a generation.
The chancellor is expected to mix nearly £30 billion of spending cuts with tax rises worth about £15 billion when he steps up to the despatch box tomorrow.
But he is believed to be planning to freeze council tax in England in a bid to limit public anger at the drastic steps being taken to restore the structural deficit.
Precisely how this will work is not yet clear, with central government likely to provide additional funds for councils with low levels of the tax.
Meanwhile, health secretary Andrew Lansley annnounced plans to cut down on NHS management by £850 million by 2013/14 today.
Yesterday Mr Osborne told The Andrew Marr Show a failure to take “determined and concerted action” would lead Britain on the “road to ruin”.
His warning that higher interest rates, failing businesses and a decline in living standards would be the consequence of inaction did not stop the waves of criticism which gathered further momentum today.
A letter from 110 business figures opposing the expected hike in capital gains tax (CGT), which is due to be raised from 18% to around 40% to help pay for the Lib Dem-favoured increase in the income tax threshold.
“We support many of the changes proposed, particularly those preventing some high net worth individuals disguising income as capital gains,” the letter notes.
“However, we believe any blanket increase in CGT could have a significant long-term detrimental effect on entrepreneurial activity in the UK.”
Controversy over CGT is an issue which has riled the traditional right of the Conservatives, with senior MPs John Redwood and David Davis among those loudly opposing an increase.
The left of the coalition has been riled too, however, with many left-leaning Lib Dem MPs indicating disquiet over plans to clampdown on public sector pay.
A day after former Labour minister John Hutton was appointed to chair an independent commission into public sector pensions, the Telegraph reported that nurses, teachers, police and council workers were facing a sharp increase in the levels of their pension contributions.
Unions and charities are among those pressuring the chancellor not to take steps which they fear would hit poor people hardest.
TUC general secretary Brendan Barber, who favours new taxes on top earners and a Robin Hood financial transactions tax on the banks, said Mr Osborne’s approach was based on “a series of myths”.
“Deep urgent cuts are not needed, and run the risk of the double dip – especially now much of Europe has signed up to the same deficit fetishism,” he argued.
“Getting the fundamental Budget judgement wrong will increase unemployment, particularly among young people – a million of whom are already on the dole – and hit the vital public services on which low and middle income households depend.”
The Lib Dem leadership is committed to the spending cuts, however, after deputy prime minister Nick Clegg and chief secretary to the Treasury Danny Alexander signed off the plans at a meeting with David Cameron and Mr Osborne on Friday.
Other measures expected to be included are steps to reduce Britain’s £180 billion by reducing child tax credits and child benefit for higher earners; a tax break for new businesses outside London and the south-east; and an increase in VAT from its current 17.5% rate.
Yesterday bookmaker William Hill placed the odds of a VAT hike at 1/7 and 4/1 that it remains at its present level.
