Budget cuts benefits, risks debt

23/06/2010

Budget cuts benefits, risks debt

People already struggling with debt problems could be hardest hit by the coalition's emergency budget as Chancellor George Osborne has unveiled a series of tough measures designed to slash Britain's huge public debt.

One of the headline changes is a rise in VAT from 17.5 percent to 20 percent in a move that will make nearly all retail goods more expensive and hit those on a limited budget.

The Chancellor has also targeted benefits, aiming to cut £11 billion a year from benefit and welfare payments.

Mr. Osborne said that the wide ranging cuts were "unavoidable" putting the blame for the country's financial difficulties squarely at the feet of the previous Labour government.

He said that his budget was "tough but fair" and that it was necessary to take decisive action to prevent "a catastrophic collapse" in financial confidence.

"The years of debt and spending make this unavoidable." he said "Today, we take decisive action to deal with the debts we have inherited."

"When we say we are all in this together, we mean it."

"Everyone will pay something, but the people at the bottom of the income scale will pay proportionately less than those at the top. This is a progressive Budget."

However Labour Leader Harriet Harman did not agree saying that the Budget would hit those who could afford it least the hardest and claiming that the measures were "reckless" and would lead to people being thrown out of work.

Families earning over £40,000 a year will have their tax credits cut and there is to be a two year freeze on the salaries of public servants earning over £21,000.

People on Disability Living Allowance may also face new medical tests and housing benefit payments are to be cut by nearly two billion pounds.

Nearly all public services, except health and foreign aid, are likely to see their budgets slashed by a quarter over the next four years.

There was some good news however with no additional tax on alcohol, tobacco and fuel and many companies will be pleased to see corporation tax fall from 28 percent to 24 percent over the next four years.

Mr. Osborne has claimed that the range of measures will reduce the country's massive debt of £149 billion pounds, to just £20 billion pounds in five years time, a move which he says is needed to reassure the markets that Britain is taking sufficient action to tackle it's debts.

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