The 2010 Budget at a Glance

By: Priyanka Boghani
25-Mar-2010

Chancellor Alistair Darling took centre stage to give the customary Budget Day broadcast to the nation on Wednesday. With his traditional Red Box in hand, the Chancellor delivered the Budget speech to Parliament where the focus was to "secure a recovery" and look to the future. Here is an overview of what was said.

Banking and Borrowing

This year Darling forecasts that borrowing will reach 167 billion GBP, 1.1 billion GBP lower than expected. In the next five years, borrowing is predicted to fall from 163 billion GBP to 74 billion GBP.

On the banking front, the one-off bank bonus tax that was implemented at the start of the year will be raised to 2 billion GBP, which is double the amount forecasted. Darling announced that he is backing taxes on bank transactions, nicknamed the 'Robin Hood Tax', but specified that the tax must be implemented on a global basis.

The report outlines plans by Royal Bank of Scotland and the Lloyds Bank Group to provide 94 billion GBP in small business loans.  In light of the recession, the Chancellor also proposed basic bank accounts for a million extra people.  This marks a continuation of the government's efforts to make personal banking accessible to all.

Tax Allowance

While tax allowances for those earning over 100,000 GBP is going to be gradually removed, Darling has promised to clampdown on tax avoidance in efforts to raise 500 million GBP. New tax information exchange agreements have also been arranged with three new countries: Belize, Grenada and Dominica. On a more domestic level, there will be an increase of 4 GBP a week in child tax credit from 2012 onwards for parents of one and two-year old children.

Boost for First Time Buyers

For the next two years, the Stamp Duty threshold for first time buyers will be 250,000 GBP.  This means that this property tax will not apply for nine out of ten first time home buyers, representing a saving of up to 2,500 GBP.  This is expected to help boost the UK's property sales, provided that first time buyer mortgages also become more widely available. 

Of course funding for this must come from somewhere, and so the Stamp Duty on homes worth 1 million GBP or more is set to increase to 5%.  Dubbed the 'mansion tax', this initiative takes the maximum tax payout to 50,000 GBP for buyers at the higher end of the property market. 

Employment and Training

Darling has stated that the scheme to provide work or training to people under 24 who have been out of work for over six months will now continue until 2012.  This was originally set to end in March 2011.  At the other end of the age spectrum, the amount of time that over-65 year olds have to work to receive work credits will be reduced.

UK Businesses and the Public Sector

To support UK business, the Labour Party will fund small businesses to boost skills and encourage innovation with 2.5 billion GBP. Furthermore, investment allowance for small firms is set to double to 100,000 GBP. One-year business rate cuts from October will also be introduced to help 500,000 companies. In light of the recent bad weather, the Chancellor states a pledge of 385 million GBP to maintain road network.

Already in the pipeline and stated in the pre-budget report released in December is a cap of 1% on public sector pay rises for two years from 2011. However, in today's speech, Alistair Darling proposes funding for 20,000 new university places in science and math. A 3.5 million GBP enterprise fund has also been introduced to help university-launched businesses. On the green front, a 2.5 billion GBP investment bank was outlined to back low-carbon industries such as transport. The pensioners' higher winter fuel payment of 250 GBP and 400 GBP for the over-80 category has been guaranteed for yet another year.

The government is on track to achieve 11 billion GBP efficiency saving targets. Another form of saving identified in the report is to relocate 15000 civil servants to outside of London.
In light of the recession, Darling commented that the economy has contracted by 6% and predicted a growth of -1.125% in 2010. Downgrade growth has been forecasted for 2011 to 3-3.5%.

Alcohol and Tobacco Duty

The Chancellor stated that there would be a 3p fuel duty rise to be phased between April and January 2011. Duty on cider was also to rise by 10% from Sunday while wine, beer and spirit duty will increase by 2% a year until 2013. Tobacco duty will be upped by 1% this year and 2% a year in future years.

The speech ended with the Chancellor making an appeal to voters to stay with the Labour party in the upcoming election. "The choice before the country is whether to support those whose policies will suffocate our recovery and put our future at risk, or support a Government which has been right about the recession, right about the recovery and is right about supporting the people and businesses of this country to build a prosperous future."