After the longest and deepest recession since the Second World War, last week's Budget has set out a five year plan to rebuild the British economy based on the Government’s values of responsibility, freedom and fairness. It shows how the Government will make the tough choices required to carry out Britain’s deficit reduction plan in a fair way that strengthens and unites the country.It is a decisive budget that deals with the record deficit the Coalition Government inherited from Labour. It is tough but fair. Everyone will contribute, but the Coalition Government’s plans will ensure that those with the broadest shoulders will bear the heaviest burden.
Thanks to Labour, we have one of the largest budget deficits in Europe. Thanks to their incompetence, we are now are borrowing one pound for every four we spend. There is nothing progressive about a party that chose to saddle our children with their debts. Every time a Labour politician complains about budget cuts, he or she should be reminded that it was the former Labour Government that presided over the shambles that got our economy into this perilous state.
We only have to look at Greece to see what happens to countries that don’t live within their means, and where the government failed to take decisive action - more businesses going bust, higher unemployment, and rising interest rates.
If we fail to deal with the deficit it will be the poorest who suffer the most.
The Liberal Democrats and Conservatives have come together to tackle the debt crisis facing our country, acting quickly and taking the tough decisions that the Governor of the Bank of England and the G20 support, and that Labour ducked.
However the Budget doesn’t just pay the bills of the past, it also starts planning for the future. The Budget is written with responsibility, fairness and enterprise at its heart.
Helping low and middle income earners
As we promised in our manifesto and our coalition agreement we are raising the income tax threshold. The first step to lifting it to £10,000 a year has been taken by increasing the threshold by £1,000 to £7,475 a year, which will give 23 million low and middle income earners up to £190 back in their pocket to spend. This measure will take 880,000 people out of income tax altogether.
Those with the broadest shoulders bear the heaviest burden
As we promised in both our manifesto and our coalition agreement we are ensuring that the wealthier pay their fair share. We are increasing the rate of Capital Gains Tax to 28% for higher rate taxpayers while keeping it at 18% for basic rate taxpayers. In line with the Coalition Agreement we are also increasing Entrepreneurs Relief from £2m to £5m. There will be no indexation and no taper relief- these only complicate the tax system. This will raise an extra £1bn and end the disgraceful situation of bankers paying a lower rate of tax than their cleaners.
Securing a fair deal for Pensioners
As we promised in our manifesto we are introducing a ‘triple lock’ to protect pensioners. In future pensions will rise with the higher of earnings, 2.5% or inflation. This year because RPI will be higher than CPI it will rise with RPI, in future the inflation measure will be CPI. The standard minimum income guarantee in Pension Credit will be increased in line with RPI this year so that the poorest pensioners receive the full benefit of the rise in the Basic State Pension. We believe that it is only fair that pensioners are guaranteed a decent pension from the state on which to live.
Tackling Child Poverty
We believe that every child deserves a fair star in life. And this budget keeps a commitment to tackling child poverty in meaningful way. Despite this Budget representing an unprecedented fiscal consolidation the Coalition Government has taken action to ensure that there is no measurable impact on child poverty. This has been achieved by committing a further £2bn in to the Child Element of tax credits. The coalition also remains committed to introducing the Pupil Premium – which will give more money to the pupils and schools that need it the most.
The Environment
We believe that climate change is one of the most serious threats that the world faces and the Coalition Government has pledged to make this the greenest government ever. The Coalition Government is committed to:
* providing the right incentives for low carbon investment. The Government will publish proposals in the autumn to reform the climate change levy in order to provide more certainty and support to the carbon price;
* creating a Green Investment Bank. Detailed proposals of which will be provided after the Spending Review; and
* establishing the Green Deal for households, to help individuals invest in home energy efficiency improvements that can pay for themselves from the savings in energy bills.
Rebalancing the economy
The Coalition Budget introduces a bank levy (based on balance sheet size), which will raise £2.5bn a year. It is only fair that that the banks pay their fair share back to the taxpayers who helped bail them out. This will contribute to tax cuts for all other types of business. Corporation tax will be cut from 28% to 24%, over 4 years, with 1% cut each year. The small companies' rate will not rise to 22% as proposed by Labour; instead it will be cut to 20%.
The government has an enormous task ahead, thanks to the incompetence of the previous Labour Government, but it has made a positive and responsible start in ensuring that our country returns to economic growth and prosperity.