Financial Times calls Budget "this bloodbath"

Submitted by martin on 23 June, 2010 - 11:36

The 22 June Budget means public spending cut by 25% almost everywhere except health by 2014-5.

The details will not be spelled out until the autumn spending review, but the certainty is (as the Financial Times headline put it): "huge jobs cull looms as services hit".

Public sector workers also face a two-year pay freeze (with a tiny exception for some lower-paid) and increased pension contributions, i.e. a cash cut in take-home pay at a time when inflation is running over 5%.

VAT will rise from 17.5% to 20% from January 2011, in effect raising the prices of most goods and services by a further 2.1%.

Child benefit will be frozen for two years, and benefits and pensions will rise only in line with the consumer price index (which excludes housing costs, and thus usually rises less than the retail price index).

Housing benefit will be cut 7%, by tightening the limits on rent levels it will cover.

Disability benefit changes are "intended to strip 600,000 beneficiaries of about £70 a week" (FT).

And the rich? The FT summed it up well there too: "Well paid breathe collective sigh of relief".

At the same time as spending is chopped, the government will cut taxes for the rich. Corporation tax will go down, bit by bit, from 28% now to 24% in 2014-5. Employers' national insurance payments will be adjusted to rise much less than the Labour government planned.

The capital gains tax increase and the levy on banks' balance sheets are only minor offsets here.

In sum, the plans will cost the average household £5000 a year by 2015-6, in lost services, reduced benefits, reduced pay, and increased VAT.

As Martin Wolf put it in the FT: "Nothing in the election campaign prepared the British public for this bloodbath".

The Labour government was already planning cuts, but Osborne has increased the cuts-plan total from £52 billion to £84 billion per year (by 2014-5).

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