George Osborne has delivered his first budget, and by all accounts the "unavoidable" budget was largely a success; but with a few notable exceptionsTaxThe changes to the tax system are wide ranging, as expected; however there are a couple of points that are surprising.
VAT increased to 20%, a tough decision for sure; and one that will hurt many people in the pocket. However Osborne has pledged that for the length of the coalition parliament, the exception for children's clothing, food and such VAT-free items is to remain VAT free. This is to be welcomed, not least because it makes sure that the VAT increase doesn't disproportionately hurt the middle earning families out there any more that it must. Those VAT exceptions being maintained were unexpected and unpredicted, with many experts predicting they would be abolished - but thankfully they were not.
Alongside that, the goal for the first £10,000 to be exempt from taxation altogether remains on track, with this budget making a major inroad with £7,475 now being before tax. This is predicted to raise as much as 900,000 people out of paying tax altogether-
according to the BBC website. It is important to note that this reform is suggestive that the coalition is planning to push to implement the LibDem goal of a restructured tax system. Conservatives ought to broadly welcome the aimed for redistribution of the burden of taxation up onto higher earners. Progressive change today.
PensionersOne of the mistakes of the 1980s has been reversed; by a Tory led government. Now pensions are guaranteed to rise in line with with earnings, prices or 2.5pc, whichever is greatest. It takes a Conservative led government to do what 13 years of Labour could not. Again, another deeply progressive change as part of the Osborne emergency budget - the left are silenced over their shame for not having done so when they were in power.
Yet more news, as the basic state pension is also being linked to earnings, to ensure that there will never again by an insulting 75p increase under future Labour governments.
It is vital that the most vulnerable are protected from the hard realities of having to pay back Labour's debt mountain; thus the protection and help offered to pensioners must be welcomed by all, no matter political disposition.
Public sector changesChild tax benefit is to be removed from any family earning over $40,000 a year. This is surely common sense, as benefits must be a safety net for the very poorest, if the benefits handed out each year is diluted then the total amount available to the most needy is reduced. Osborne is correct to attack the Brownite policies of tax benefit complications for the upper middle classes. If you can afford to live without these tax credit complications, then you ought to. Benefits are a support mechanism for the genuinely needy, it is there to help them. Not the affluent middle classes.
Again, ironic that it takes a Tory led government to make this reality, after 13 wasted years under the previous labour government.
As part of this theme the chancellor has also announced that tax credits will be reduced for families earning more than £40,000. Another proud step forward for common sense and human dignity.
Yet, there is some tough medicine as well, it isn't all silver linings and sunlit uplands.
Housing benefit is to be restricted to a maximum of £400 per week, and there is to be an acceleration of the retirement age to 66 within this parliament. Tough, but as Osborne said unavoidable given the realities of £1.4 trn of Labour debts to service.
UnemploymentOsborne continued with his pledge for open and transparent government, and has revealed that unemployment will peak at around 8.1% over 2010-11. However he matched this with a new regional fund, to be accessed by Wales, Northern England, Scotland and Northern Ireland. The goal is to provide Westminster money for major capital projects in these regions, that will aid the private sector, create jobs and reduce the headline levels of unemployment.
And given that regions like Northern Ireland and Scotland will be disproportionately hurt by reducing the size of the unaffordable public sector it is only right that such funds exist to support job creation. No one must be left on the scrap heap like Thatcher did, ours is a progressive revolution.
The aim therefore is to see unemployment headline figures [claimant count, so not accurate enough for my liking, accepted] to fall to 6.1% by 2015, the date of the election.
Good bag there, but the unemployment peak will be a sore point; but given the proper support for those made redundant, I see no long term problems.
Growth and businessThe expected UK economy growth figures have been issued, and thanks to the Office of Budget Responsibility the coalition introduced are believable:
UK economy to grow by 1.2pc in 2010
UK economy to grow by 2.3pc in 2011
UK economy to grow by 2.8pc in 2012
No politicisation of the numbers unlike the previous labour government era.
But the business reforms are a mixed bag, good and bad. Before launching back into my current theme of CGT, lets cover the other stuff first.
Good news includes Corporation tax being cut to 27pc next year, alongside Corporation tax cut by 1pc point a year for next three years to 24pc. Small companies are set to benefit even more, with tax rate cuts to 20pc for them. This will aid job creation, and push up economic growth.
Furthermore there is to be a UK bank and building society levy from 2011, aiming to encourage more longer term responsibility in the financial services world. Thus a new levy also on UK operations of foreign banks is to be introduced, to reduce the risk factor from the banking institutions.
However, rightfully smaller banks not liable for a levy, enabling more growth for them, and creating more competition in the banking world, which is all too often the preserve for major transnational conglomerate empires.
Overall the banks levy alone is expected to raise more than £2bn a year. All going to the £50bn in structural debt reduction goals.
Yet, there it remains; capital gains tax. The madness is now reality for any entrepreneur in the UK. How on earth does Osborne hope to put up any sign saying "Open for Business" if we are attacking share owners, and damaging entrepreneurs? Oh, and I didn't hear about any opt outs for pensioners...a major sore point for any self respecting Tory. But at least the increase was by only 10%, keeping the rate under 30-40% as planned.
But there the mistake remains: 10pc CGT rate for entrepreneurs extended to first £5m of qualifying gains. Bad news.