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Emergency Budget 2010
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Emergency Budget 2010Chancellor of the Exchequer George Osborne delivered the first budget of the new Coalition Government in the House of Commons on Wednesday 22nd June 2010. The Budget sets out the Government’s 5 year plan for the UK Economy. Some of the headline points to come out of the Budget, which have implications for the economy and labour market of the Hull and Humber Ports City Region are as follows: Economic and labour market forecasts
Consumer price inflation is forecast to reach 2.7 percent by the end of 2010 before returning to target which remains at 2 percent. This is measured by the Consumer Prices Index. Unemployment is forecast to peak during 2010 at 8.1 percent and then fall for each of the next four years, to reach 6.1 percent in 2015. Deficit reduction
The Chancellor announced that the structural current deficit "should be in balance" by 2015/16. To do this there should be a balance of both spending cuts, contributing 77 percent, and tax rises, contributing 23 percent to the deficit reduction. Whilst some initial spending cuts are outlined below, additional details of how the Government intends to tackle the deficit are expected to be announced with the release of the Comprehensive Spending Review on October 20th 2010. This will set spending plans for the whole of the current Parliament. There will be a two year pay freeze for public sector workers, although the 1.7 million lowest paid will get a flat £250 pay rise. An investigation is to be launched into public sector pensions, whilst planned increase in the state pension age from 65 to 66 is to be accelerated. There were no more details on any cuts to capital project spending. From January 4th 2011, the main rate of VAT will rise from 17.5 percent to 20 percent. Certain items, such as food, children’s clothes and magazines will remain exempt, as a means to protect low income and vulnerable groups. Key points for businesses The coalition government’s economic plans will be based on private sector growth and exports. A Regional Growth Fund in 2011/12 and 2012/13, aimed at supporting increases in business employment and growth proposals from private and public-private bodies that create sustainable increases in business employment and growth. Corporation Tax will be cut in 2011 to 27 percent, and by 1 percent annually until it reaches 24 percent in 2014. The small companies' tax rate will be cut to 20 percent. The 10 percent capital gains tax rate for entrepreneurs, which currently applies to the first £2 million in qualifying gains, will be extended to the first £5 million. A new three year scheme will exempt new businesses from up to £5,000 of employer National Insurance Contributions (NICs). This could potentially benefit up to 50,000 new businesses in the Yorkshire and Humber region. From April 2011, the threshold at which employers start to pay National Insurance will rise by £21 per week, above inflation. Implications for the Hull and Humber Ports City Region • The Government has already legislated to freeze payments of certain significant backdated business rates bills until April 2011, including for businesses in ports. To resolve this issue, it will bring forward legislation to cancel such bills for newly assessed properties that were split from a larger rateable property. • The manufacturing sector as a whole will pay less corporation tax as a result of the Government’s reform. • For start-up companies, there will be National Insurance (NI) incentives to companies starting businesses outside London, the South East and Eastern region. • The repeal of the special tax rules for furnished holiday lettings will not be implemented. This will assist individuals who receive an income from furnished holiday lettings and will provide a boost to tourism. • The Government will undertake a fundamental review of all capital spending plans to ensure they are affordable and to identify the areas of spending that will achieve the greatest economic returns. It is unclear as to what planned schemes in the city region may be affected. • The Government will also continue to work on creating green financial products to provide individuals with opportunities to invest in the infrastructure necessary to support the green economy. This may include the creation of a Green Infrastructure Bank to help the UK meet the low-carbon investment challenge. • The Government is considering the case for introducing a fuel duty discount in remote rural areas • It will drive private sector investment in superfast broadband by making regulatory changes to reduce the cost of roll-out. The Government will also fund three pilots to bring superfast broadband to hard-to-reach areas. These areas are yet to be confirmed. Budget Links All of the documents for the Emergency Budget 2010 can be accessed and downloaded from the HM Treasury website by following the link below: http://www.hm-treasury.gov.uk/2010_june_budget.htm For a summary of implications for the Yorkshire and Humber Region, follow the link below: http://www.hm-treasury.gov.uk/junebudget_yorkshire_and_the_humber.htm The BBC News website has an Emergency Budget 2010 Special Report Section, which includes detailed analysis and reaction to the Budget. This can be accessed by following the link below: http://news.bbc.co.uk/1/hi/in_depth/business/2010/emergency_budget Over the coming few weeks, HEP will continue to analyse the details of the Budget 2010 and what the economic implications might be for businesses and people in the Hull and Humber Ports City Region. We welcome your views on how you think the announcements made yesterday might affect your business or organisation. | |||||||||||||||||||||||||||||||||
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