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Budget: Private sector likely to applaud

Robert Peston | 14:25 UK time, Tuesday, 22 June 2010

The market reaction to the Budget seems fairly rational: a rise in the price of government debt; a fall in sterling; a drop in bank share prices; a modest fall in some retail shares.

How so?

Well, lenders to the government were bound to like Mr Osborne's plan to accelerate plans to reduce the deficit and start reducing the national debt as a share of GDP from 2015/16.

Even this year, the volume of gilt issuance will be £20bn lower than the March forecast at £165bn.

Sterling's weakness reflects the likelihood that the Bank of England will keep interest rates lower for longer, in response to the public-sector squeeze.

And what a squeeze! The numbers on pages 40 to 41 of the Budget book - which has reverted to the traditional simple red crepe binding - are remarkable: a cumulative aggregated retrenchment of £120bn over five years.

The state is being shrunk significantly: the share of the private sector in the economy is put on to a serious rising trend, absent some kind of shock that tips us back into recession.

As for the banks: well, some may say they got off lightly, with a levy to raise a maximum of £2.5bn by 2013-14.

It will be a tax on the total size of their balance sheets, minus their insured retail deposits and their capital, and with a lower rate applicable to longer-term wholesale funding.

Budget Osborne

On that basis, I would expect Lloyds and Royal Bank of Scotland - the semi-nationalised banks - to make the biggest proportionate contributions, with Lloyds most exposed relative to its size.

Barclays should also pay a good chunk.

As for HSBC, given that almost all its UK lending is financed by customer deposits, it would pay proportionately less. Which is perhaps a reward for its prudence in never becoming dangerously reliant on undependable wholesale finance.

One big immediate question is whether the tax will deter Lloyds - an important bank - from lending as much as the economy needs.

The deferred rise in VAT to raise £12.1bn and rising a year from 2011/12 is a significant anxiety for retailers and other consumer-facing businesses. That said, many would argue that the UK became too dependent on retail spending in the boom years running up to 2007.

Manufacturers will probably breathe a sigh of relief that the reduction in capital allowances is more modest than expected - raising £3.1bn by 2013-14.

By then, reductions in the headline rates of corporation tax should give £3.4bn back to business, rising to £4.1bn in the following year.

What of the planned tax rise that sparked the greatest controversy in the weeks preceding this historic Budget, capital gains tax?

In the end, those on basic-rate tax won't see any CGT tax increase - and the rate for those on higher income-tax rates will rise to just 28%, far less than the 50% top rate of income tax.

The net take from that CGT change will be less than £1bn. Which few would argue, probably, would drown the enterprise baby.

Update 1655: I said that the response of markets to the Budget was rational.

But I note that by the close, there had been a modest 1% or more rise in the share prices of the likes of Next, M&S and Home Retail (the owner of Argos).

Which seems odd, in view of the looming VAT rise, which surely ought to put something of a chill into consumer spending.

But maybe investors reckon that what matters more to the fortunes of shops is the likelihood that interest rates will stay lower for longer.

As for the banks, the bounce in Lloyds' shares and the absence of any significant move in RBS's share price may simply tell us that investors were expecting a rather more swingeing levy.

In the round, this Budget won't be seen as anti-business, even if there are (predictable) howls of pain from some quarters (private equity says that the CGT increase will hurt the supply of risk capital to entrepreneurial wealth creators).

And that matters to the chancellor - and probably to the rest of us. Because the growth forecasts that underpin the Budget (prepared for him by the newly-created Office for Budget Responsibility) depend on a sharp recovery in business confidence and a significant bounce in business investment.

Without that investment bounce, next year's fairly tepid economic growth would be more than a third lower.


  • Comment number 1.

    A fall in Sterling? I see a field of green????

  • Comment number 2.

    Er, sterling went up Robert.....

  • Comment number 3.

    The new UK budget is the first in a series of cuts and tightening of the economy. Some figures at first may not seem so significant but in reality are include the massive cut of 25% in expenditure on the public sector over 4 years, as this tends to be closely associated with employment levels, it could roughly represent as much as a 25% reduction in staff, based on 6 million in the UK public sector as many as 1.5 million jobs over just 4 years, which is a significant percentage of the UK workforce. This could well lead to a falling economy meaning an increase in unemployment.
    Add to that a freeze on council taxes that local authorities use to fund local government, will mean further job losses, plus cutting of contracts from private firms, more job losses and the result of tightening in the economy, increased taxes, reduced benefits which are also more than expected, as well as the severe knock on effect of the job losses in the public sector all hitting the private sector, possibly just as much, maybe even more as the economy nosedives an d the consumer in a vicious circle of debt. This also means increases in the cost of unemployment benefits and reducing income tax revenues as more and more people are forced out of work.
    Whilst the sovereign debt has reached it s limits and tightening is the next step, this is rather like what happened at the beginning of the Great Depression, only this time governments have no room to manoeuvre and have already maxed out their credit limits by adding debt.
    Another point is the government is talking about these measures leading to balancing its books by 2016, even with a very slight surplus, however the debt to GDP is to remain high and they forecast it to increase to 70% of GDP by 2014. It could be argued that this is still too high in spite of these cuts. What’s more the government have already warned more cuts to follow after the autumn review and another budget later this year, and progressive cuts in each year, so things will get even worse, and yet their target still leaves debt to GDP close to 70%.
    If interest base rates and credit default swaps rise at all in the next few years this could seriously jeopardise the forecasts, in other words even with these severe progressive cuts there no knowing if it is enough to save the economy and if ratings agencies suspect this may not work , they may well downgrade UK debt and if so the whole thing snowballs as all borrowing automatically rises, as happened in Greece.

  • Comment number 4.

    Go on, admit it, a pretty good first budget given the hand they've been dealt.

  • Comment number 5.

    From a very small company perspective, it looks as good as it is going to get.

    Well delivered and seemingly had sufficient detail to please most of the audience.

    Time will tell!

  • Comment number 6.

    What are you on about Robert? A fall in the value of sterling? I watched sterling whilst watching the budget, and it rose in value. It is 0.55% up against the Euro and 0.42% up against the dollar, and those figures are taken from your own BBC data, from what I would consider to be the reference currencies! Indeed, it is pretty much up against all but 3 currencies in the BBC market data section!

  • Comment number 7.

    Well now we know CGT has risen by less than expected
    -Are we all happy?

    Well many will still be horified! 18% from gains built up over 20yrs+ without any deduction for inflation is very wrong. So without any more complaining action WILL be taken. We will NOT SELL.
    Pity that the government (and country) will not receive a penny as to be fair gains made over and above inflation could have helped the country pay off its debt (caused by labour spending and to a far lesser extent by the Banks)

  • Comment number 8.

    Your'e wrong on one count Robert, during Osborne's speech, Sterling increased almost 1 cent against the US Dollar.

  • Comment number 9.

    I wish the budget success for the sake of the country, but unless I go back to the 80s when there was a quasi-religious belief in the power of lower taxation to bring forth investment in industry and commercial success I fear for our welfare. I get that lower taxation encourages investment PROVIDED there is a demand for the output from that investment. The growth in the late 80s and 90s, in the context of a universally supported easing of regulation and taxation in this country, was fuelled not by manufacturing industry but by services, notably banking. That party ended when towards the end people realized that demand was manufactured through recycling of promises to pay and asset inflation. Where is the demand now and where will it be in the future? Our business community really needs to work out what are the market opportunities in Asia very quickly. What are the world's current needs? Natural resource management, water, energy and food; we need new technologies to face the next century. The government would do well to consider what they cut carefully: let all the bankers move to Switzerland but make sure you retain R&D capital in the UK. If the eventual innovation is attractive,useful and therefore profitable enough the investors will fly from Switzerland to lend money. Then the economy will be able to continue funding successive governments' mistakes whatever their rhetoric.

  • Comment number 10.

    Dear Sir,

    Perhaps I'm misinterpreting the blog editorial or there is a degree of information asymmetry, however in regard to your opening paragraph I’m witnessing very much opposite effects on Sterling, bank shares and even general retailers, as to those stated in your writing.
    Now whilst my information is largely based on indices as opposed to individual shares, the general direction shouldn’t be very different I would imagine. These broad based budget measures could reasonably be expected to affect all participants across the markets, being it banks, general retailers, as well as the general sentiment around Sterling and Government debt.

    Is this perhaps something you would be able to elaborate on.


  • Comment number 11.

    well what can i say i am a nurse and my husband is a prison worker so thanks alot. we have 3 children so again thanks alot. i dont understand why they have not cut benefits for thopse who choose not to work, and those from different countries that claim on our benefit system. why has he not privatised some companies, doing this to the low cat prisons would save a small fortune on its own. No rise in alcohol and tobacco why not i ask u. i am very dissapointed with this budget it is again the workers that suffer. so again i voted to in so thanks for the pay back

  • Comment number 12.

    We all knew it would be bad news all round and George Osbourne didn't have the room to do some of the things he wanted to do but I can't help thinking that the proposed cuts in the Corporation Tax rate is insufficient for the private sector to prosper and make the UK a location of choice for business.

    In many trades we can't compete with low cost economies such as China etc. Yes China maybe tinkering with the RMB exchange rate etc and encouraging their factories to give their workers payrises to develop their home market but its all a bit irrelvant to the UK. The difference in costs is vast. We can't compete on the things that they are good at and have high labour input.

    We can however compete in Europe for some of the jobs that will stay in Europe. We can compete with Germany, Spain, France etc for the higher skilled jobs. They have as many regulations and overheads as we do (even if they are not always so vigourously enforced). And to attract the businesses that can chose where they locate in Europe that means a competitive tax regime. Yes we have the advantage of speaking English but so does Ireland and their Corporation Tax rate is much more competitive that ours.

    It is the private sector that will provide the jobs and hence the income of the future. Lower CT rates and especially the tax on jobs Employers NI are a must if we want to attract private enterprise and its jobs. George Osbourne may have done too little on those fronts today.

  • Comment number 13.

    Oh how mild a budget! What about insisting that the banks invest in British industry? Either take the tax and invest if in Sheffield Forgmasters or insist the banks loan the £80M they need. We have to get back to an enterprise and manufacturing economy.
    This was a good start but there is so much more that needs doing!

  • Comment number 14.

    Er, sterling went up Robert.....

    So did my Supermarket shares :)

  • Comment number 15.

    IMHO a rise in VAT makes far more sense than Gordon Brown's cut in VAT. Please note that life essentials are not VATable, basic foodstuffs and kids clothes are not taxed - this means that the revebue made is not made off the backs of the poorest tax-payers. Gordon's cut in tax made absolutley no impression on the poor - it was surely only done to massage infation figures.
    Adding to the tax threshold is to be welcomed, but maybe indicates a less than iron grip (a token gesture which will need recouping elsewhere), and while he was at it, why not take the chance to screw more taxes out of drinkers, gamblers and smokers as well as taking a pot shot at the bankers.
    I think this gets the 'well done, but could do better' from me - so early in this governments tenure, it would have been easy to come in hard with an awsome budget that would make a real dent in the deficit, I believe what we have been given maybe a budget that will make a tiny dent in the deficit, meaning that a few more austere budgets will be needed. Every new budget is a step closer to re-election and obviously no-one is going to want to deliver a Mr Nasty budget when there is an election around the corner...

  • Comment number 16.

    Well congratulations on your blog you got the main points on international reaction wrong the markets and value of the pound.
    Nurse 2709 you should be pleased If you are low paid as you always say! £150 per child and £20 + hubbys £20 per week let me see that is about £49 per week better off. What is not to like in your case? Ah maybe it is because you are actually not among the low paid anymore so won't be getting the child tax credit!

  • Comment number 17.

    Dear God, please help the poor, because this government wont.

  • Comment number 18.

    This was not a budget. This was a slasher movie.

  • Comment number 19.

    15. At 3:23pm on 22 Jun 2010, livewyre wrote:

    "Please note that life essentials are not VATable"

    Well that depends on your definition of essentials. I do class toothpaste and soap as essentials, as is the VAT on the fuel used to transport essential items to shops, and the VAT on fuel, sevicing and MOTs for running public transport as well as private cars.

    However, the rise in pensions and personal tax allowance should help the poorest workers. It is those on benefits who will struggle the most, and I don't just mean long-term JSA or fake DLA claimants. Full time carers for disabled relatives save the government an awful lot of money.

  • Comment number 20.

    Some good stuff in his first budget. Particularly like the capital gains tax reduction for small companies and the partial exemption from employers' NI payments for start-ups outside the SE of Englandshire.

    However - I dont see anything that will improve the availability of risk equity capital that can be used to fund start-ups. I think Ozzy has missed a trick here. He should have done a deal with the banks whereby any risk equity (venture capital) they make available can be offset against the Bank Levy.

  • Comment number 21.

    I'm glad someone finally mentioned interest rates - the elephant in the room.

    At present, interest rates are low and mortgage payments are affordable. But interest rates will inevitably rise in future, and people will cope less well with mortgage rates back to more normal 7%-8% range.

    Better the chancellor makes ambitious cuts now, leaving room for manouvre in future, than to be timid now, only to have to deliver big cuts when they will hurt all the worst.

  • Comment number 22.

    No fall in Sterling!!!

    This is probably too little and will result in an increase in other measures next year.

    An opportunity lost.

  • Comment number 23.

    16. At 3:48pm on 22 Jun 2010, skintsparky wrote:

    "Well congratulations on your blog you got the main points on international reaction wrong the markets and value of the pound.
    Nurse 2709 you should be pleased If you are low paid as you always say! £150 per child and £20 + hubbys £20 per week let me see that is about £49 per week better off. What is not to like in your case? Ah maybe it is because you are actually not among the low paid anymore so won't be getting the child tax credit!"

    Actually, nurses haven't been badly paid for a long time. Starting salary is over £20 000 and as "key workers" they are entitled to government assisted housing. I think an awful lot of people here need to realise what being on low income actually means. Working 40 hours per week excluding bank holidays and 20 days annual leave, minimum wage is around £11 000. Nurses, teachers and anyone else who thinks that they are low income at £22 000 really ought to realise that they are paid TWICE the minimum wage.

  • Comment number 24.

    I was awarded Disability Allowance two years ago after attempting to get it for 3 years. It took so long because I was constantly refused by the DWP on ridiculous grounds but (unfortunately for me and fortunately for the government) I was too ill to appeal!

    Eventually I was given a medical by an ex-GP who understood nothing of my particular condition and, in fact, spent much of the time telling me about his career. I was refused again so went to a tribunal. After the DWP had steadfastly refused my claim for 3 years on the basis I was not ill, their representative left the tribunal just before my case was heard (!) but before leaving she informed the tribunal that the DWP fully accepted my claim! I was given mobility and care allowance, even though the claim refused by the DWP for 3 years was only for the mobility allowance. Also, it was given to me "indefinitely", which in my dictionary means forever.

    So having gone through the trauma of a medical by an uncaring ex-GP on a fat fee I now find I have to repeat the process again in 2013 (so "indefinite" means "not for long"!) on the basis that the government knows full well that most of the medical examiners will not lose their cushy job by allowing too many claims ... they would be shown the door and a replaced by a more hardline examiner (until they find one who refuses most cases). I am not sure if they will still allow appeals (but I suspect not); if they do, then the tribunals will be inundated.

    I think they are looking to set up a system whereby about 80% of claims are refused, with no appeal, and knowing that generally the only people who have any concerns for the disabled are the disabled.

    Meanwhile the very rich have a lower-than-expected CGT, lower National Insurance at the top end of income, 40% pensions allowance (we all help give the very rich 40% of their pension contributions!) and even a winter fuel allowance. But then, it makes sense that the Tories would rather protect the interests of their wealthy chums rather than the disabled .... the disabled generally do not have villas and yachts to lend to their Tory chums for vacations.

  • Comment number 25.

    Although the government has no choice other than to choose the route of extreme austerity in current situation, the scheduled increase in VAT from Jan 2011 but the increase in personal tax free income effective only from April, 2011 do not actually correspond with what the government is claiming that it is trying to ease the financial difficulty of the low-earners. The low earners seem to be worse off with this change rather than not.

  • Comment number 26.

    As a DLA claimaint, I'm now left feeling like an asylum seeker in my own country. Why should Disabled people constantly have to justify our entitlement to the meagre allowance we get? Non-disabled people wouldn't put up with the same level of intrusive questioning we face. I had to fight to get my DLA reinstated at the proper rate, and it was emotionally exhausting. I was supposedly granted it for life, but that has been thrown out of the window.It's not like my impairments are suddenly going to get better. Menawhile, more people are becoming Disabled every day, courtesy of a war we should not be involved in.

    No-one in the media has pointed out the extra expenditure that comes with being Disabled, including having to buy mobility equipment in niche markets that charge whatever they want, because they know we have no choice. Who will fight our corner but us?

  • Comment number 27.

    We need a string of budgets that help the creation of real jobs.
    Decreasing corporation tax and increasing vat is a crude tool but is probably on balance working in correct direction as it will hurt manufacturing companies less than those that just make a cut from selling imported stuff

    I copied below snippet from the budget at a glance on BBC News page:
    'No further reductions in capital spending totals but there will be "careful choices" about how the money was spent. Projects with "a significant economic return to the country" would be prioritised.'

    It is how the government allocates its discretionary spending that is likely to have the biggest impact on the private sector and hence the future of the country. To me any project that decreases the nations dependence on non renewable energy will be most important in the future.

  • Comment number 28.

    The faint contributions by the banks for the mess they caused and the money they stold. Just a further reflection of why it all happened, governmental handmaidens doing the bidding for the banks. Bonuses were more than the proposed tax on the banks. Your suggestion that a higher tax on the private sector may cause a recession seems to infer that one is currently not in place.
    The government is here to help...hold on to your wallet as the wealthy have no intention in sharing in the suffering of the population as a whole. My, my what people will accept as "fair" when presented by a smartly dressed gentleman.

  • Comment number 29.

    Define "THE POOR". My income is under 10K pa,I am on no benefits,I pay full whack for everything.I have a centrally heated semi,a decent car and eat well and enjoy a drink.

  • Comment number 30.

    Nurse 2709,

    Who spoke earlier, your soak the rich rhetoric is sickening and classist. The wealthy are about to be hit by a tax hike to 50% of their income. The wealthy create jobs and if people like you think they are stealing from you, think again. Without them (the industry leaders) you would have no job, no benefits or anything. Also abandon your Racism, most immigrants are far more hard working than British natives. Try living in North Korea for a while and see where your path takes you.

    NOW onto the budget.

    This budget is finally overcoming the issue of:

    AND finally confronting the real POOR:


    We've been binging for 13 years now we must pay the bill live with it.

  • Comment number 31.

    Missed chance of getting rid of the universal child benefit which in effect families on means tested social security benefits do not get the benefit from. Landlords appear to have done well out of this budget, business people too. Vat @ 20%, I may be wrong but is VAT supposed to be collected on behalf of the European Union for the European Parliament to redistribute, at least that was the way it was sold to me when it was introduced. Who really pays the VAT anyway, the non self employed I suppose.
    Be nice to get housing back to a reasonable cost to buy, trouble is a lot of the "Banks" assets are valued in bricks and mortar....landlords are happy, housing benefits stay more or less the same, rents are assured for them as long as it is near impossible for people to buy property at a reasonable price.
    Still, there will be plenty low paid work around soon, "we are all in it together" (hope he does not have it in mind to start mining in Afganistan)
    I have just lost one years State Pension, no matter as I do not expect to see 65 years anyway, my sort tend to be well "done in" at around 60.

  • Comment number 32.

    the ultimate answer is 42 or 101010 in binary notation.

  • Comment number 33.

    I am glad that someone mentioned the difference VAT will make to petrol prices.3or4p per litre at least.Transport costs will rise overall and beome a burden to the modestly paid.

  • Comment number 34.

    Sterling up or Sterling down, little boys and little girls? Or did someone just dreamily press the wrong button whilst listening to Georgie's little budget lullaby?

    So how come some big boy and big girl independent analysts think it is an awful budget that'll do nothing to renovate the UK dolls' house?

    Or is this just more trivia to prove that this whole market thing is a little boys and little girls game? Send you little kids up the chimneys is what I say.

  • Comment number 35.

    Tax credits of every type should have gone. They were Browns creation and how he loved taking a mans wage and handing him back what he thought was "enough" The man was a control freak. Tax codes would be fairer and easier and save billions£ on admin.

    With regards to cuts ??? We havnt even started with the waste.
    You just have to look at the proposed cutting of the new "Visitor Centre" at Stone Henge !!!!!!! £30m PLUS For what !!!! most private companies could get a very adequate visitor centre for a couple of £million ??? The whole system is mad mad mad. Out of that £30m PLUS there would have been fees probably topping £6m ??? If anyone can justify that, they need carting away by men in white coats. OK that one has been axed but how many others are there still going ahead and earning a fortune for anyone involved.
    This Government will NEVER tame those excessive quango aliens.

  • Comment number 36.

    people moan to much these days,in general people are better off than ever before,around here, we have 4 x 4s coming out of our earoles,most people go abroad for a holiday, most homes around here(essex area) have about 20 000 cars each, i mean get real, stop moaning enjoy the good weather be glad your healthy and living and be gratefull for what you have ...because you could be a lot worse off and... you are dead for an awfull long time.

  • Comment number 37.


    'I am glad that someone mentioned the difference VAT will make to petrol prices.3or4p per litre at least.Transport costs will rise overall and beome a burden to the modestly paid.'

    In fact the VAT on fuel used for transport of goods is all reclaimed so this will make no difference.

  • Comment number 38.

    The Chancellor did start the removal of Social Security Benefits from the well off, and not before time. But one that the missed is Winter Fuel Allowance. This £250 sum is paid indiscriminately to everyone over 60 including those in well paid jobs (like me) or receiving large pensions, with another hike when they become 80.
    This should be taxed, or better still means-tested!

  • Comment number 39.

    #35 Bobby Grumpy

    £30 million for a visitor centre does seem a little extreme, presumably all those private architects, builders, plasterers and plumbers will be glad to see the back of that project in rural Wiltshire. I don't suppose that the jobs it would have created would be needed, nor the spending of all the tourists attracted to the area.
    Yes cut that waste.
    (private enterprise sucking up all that public money, I bet all the bosses have gold plated pensions, probably got a 7% pay rise this year anyway)

    #36 ronnieboy1

    'most homes around here(essex area) have about 20 000 cars each'

    I knew the traffic round there was bad, now we know the reason :)

    As to the budget, this is just the stuff that George needs to get through parliament. (the 20% bit of the austerity)
    The actual departmental cuts (the cuts that will have a major effect on your life) will take place in the autumn, he doesn't need anybody's permission for those, he just cuts with his pen. (this is the 80% bit of his austerity plan)

  • Comment number 40.

    The £30m ( which was £25m yesterday ) Stonehenge visitor centre would have included re-routing a main road, removing and replacing a number of buildings and many other changes.

    The current facilities are pathetic on what is supposed to be one of the UKs most important visitor attractions. Nearly 1 million people visit each year yet catering appears to be done from the back of a van.

    The previous Government spent a long time ( years ) debating a much more ambitious scheme then decided it couldn't be afforded. Pay your money and take your choice here. The previous Government could have saved a small fortune by opting for the small scale scheme in the first place, so it's their fault. Or, the new Government is saving a relatively small amount of money at the cost of damaging long term tourism revenue so it's a bad decision.

  • Comment number 41.


    £30m little extreme ! Its Nuts, and dont for a minute think the vast waste in that figure goes to the small builders, plasterers and tradesmen. Not a chance, fat fees for the big boys and its OUR money. If you are happy to see waste on that scale to fund a few jobs (which would be there anyway for tradesmen even if the building was constructed at £2million) you mustnt care about your taxes being wasted or you are one of the few receiving vastly inflated "fees"
    Because of the vastly inflated costs the "Visitors" have lost out on a facilty that could have easily been provided for a couple of £million.
    Madness all round and the last Government had a degree in waste of epic proportions.

  • Comment number 42.

    Did anyone notice that we have a comprehensively outlined 5 year plan. Makes a difference to the tinkering and reactive tactical approach we are so used to!

    The Coalition ambition to reduce the deficit to around £20-30 billion is some target. The banks obviously think they are getting off lightly and no mention in the Budget of the possible value of RBS and Lloyds in this 5 year plan.

    I only hope they can achieve the budget plan - the main issue might be the Eurozone if it decides to mplode.

  • Comment number 43.

    #41 Bobby Grumpy,

    You miss my point, that is £30 million missing from the private sector, that same private sector that is supposed to replace the public sector, how do you think that the private sector is going to cope when their major customer suddenly decides not to have that shiny new building, that new extension, that road, that railway, that power station.

    The costs for the private sector to build infrastructure vastly outweigh the public benefit (risk + interest on building cost + running costs + profit) and so it is not built, simple as.

  • Comment number 44.

    The huge hike in VAT will simply put people off spending.
    So the retailers will be well cheesed off, people will cut the tax bill by only buying what is absolutely necessary.
    Which in my view will lead to a massive slump in the consumption, food still has to be bought and also clothing but you can kiss good bye to anything else.
    The raising of tax thresholds is a good idea taking the strain off people on low incomes.Housing & cars will be hit hard no question of that.
    For people just about to retire he has moved the goal posts further back, which is a bit mean on them.

  • Comment number 45.

    24: 'we all help give the very rich 40% of their pension contributions!'

    This is a common misconception. Pensions are a means of deferring income which is taxed at the point it is available to be spent. So, if I defer £1000 of my current income I will not pay £400 in tax I would otherwise pay. However, when I retire that £1000 can be spent plus any investment return and it will all be taxed at 40% at that time. What is unfair is if my income is taxed now and taxed again when I need it in my old age.

  • Comment number 46.

    The attack on the benefit system does need to be rethought. We need someway of helping the poor without creating a wide range of distortions and unintended consequences. Housing benefit, for example, supports rents in the lower end of the housing market at what is seen as a commercial level. This serves to prop up the prices of property in this sector rather than allowing them to adjust to what the market would otherwise be able to sustain. This makes low end housing too expensive for first time buyers. Giving child benefit supports families with young children - fair enough. But is also provides an incentive to young single girls - often encouraged by their parents - to have children that they cannot effectively care for. Unemployment and related benefits produce poverty gap effects which provide powerful disincentives to reentering the job market - and so the list goes on. Most people can see that shipping surplus grain to the 3rd world can wreck local agriculture and markets. The same logic applies in trying to help the poor and those in need through a centralised benefit system. We need to get a whole lot smarter about helping the poor: negative income tax, work to earn, and so on. Only by complete reform can we get to a welfare system which supports the poor, but does not incentivise cheating or socially undesirable consequences. The problem with the Government's slash and burn approach is that it is not getting to grips with the real problem of creating a sustainable welfare state.

  • Comment number 47.

    "Nurses, teachers and anyone else who thinks that they are low income at £22 000 really ought to realise that they are paid TWICE the minimum wage".

    Lets hope so! Teachers have to have a degree and then further training often leaving them in debt to before they get a job. As a newly qualified teacher you'll earn £22k yes, but wouldn't you expect someone with a post graduate to be a higher earner than someone on a minimum wage?.
    If we need to pay bankers six figure salaries to get the 'best people' what message does that send a teacher on 22k? Is it the current generation of students are worth so little that we don't need to attract good people so pay peanuts?

  • Comment number 48.

    I daresay the Private Sector will be very pleased all the way to the unscrupulous Banks!!

  • Comment number 49.

    Incidentally the bit on CGT is wrong. If you dispose of your asset at a net value which when added to you taxable income exceeds the amount where hight rate tax become payable you will pay 28%.

  • Comment number 50.

    A good budget(something we have not had for sometime) for all, not just the Private Sector. It is the start of a general trend towards reducing the public sector drain on our economy.

    I am alarmed how little commentators such as yourself have remarked on the risks taken by the previous Government in regards to this matter.

  • Comment number 51.

    Osborne's schoolboy economics will reduce growth and slow any recovery to a level that may just tip the scales toward a "double-dip"recession as investors realise that spending has gone through the floor.At the same time his tactic of concentrating wealth in the hands of the private sector is exactly what Gordon Brown did,with disastrous results,the private sector is,in comparison to the public sector,very loosely regulated and does not have a remit of public duty,or anything like it.Osborne and Cameron's financial zeitgeist is the private contractors schadenfreude.If the private sector gets its way then it will exploit the nations needs to make huge profits,if it does not get its way it will abandon us all to zero service provision,zero growth,extreme resource decline and a vastly reduced credit rating,entrenching postcode-poverty and a two-tier society,the haves and the have absolutely nothing,the future is a sharpened stick......


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