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'Council tax freeze' softener for budget cuts

By Channel 4 News

Updated on 21 June 2010

Some councils will be able to offer their residents a two-year free on council tax increases, it will be announced in tomorrow's emergency budget, and Business Correspondent Siobhan Kennedy writes that there will be one of the biggest crackdowns on the welfare state to be announced in a generation.

A council dustman passes a Royal Bank of Scotland branch in central London. (Getty images)

Chancellor George Osborne is expected to announce severe spending cuts in tomorrow's emergency budgets along with expected tax rises.

In a bid to soften the blow, there are reports that there will be a promise for a two-year council tax freeze. However, this freeze does not appear to be across the board and will probably only apply to councils that have managed to make savings already on government consultants and advertising.

Expert view: a tough budget
John Whiting of the Chartered Institute of Taxation writes for Channel 4 News:

"This is going to be a tough budget, with spending cuts featuring heavily. There may be some additions to tax credits for the lower paid to help compensate for any VAT increase.

"But good news is likely to be limited to a personal allowance increase, which at least will help cushion lower and average earners."

- Read more: what will the budget bring? 

Public sector workers could also be forced to pay more towards their pension funds, after Mr Osborne revealed yesterday that former Labour cabinet minister John Hutton has been given the task of reducing the cost of the taxpayer-funded retirement packages.

Mr Osborne is also expected to raise VAT from 17.5 per cent to 20 per cent, which research for comparison website Kelkoo says will cost the typical household more than £400 per year.

More on council tax rises from Cathy Newman's Factcheck: 
- Coalition agreement: 'bad news' for Tory voters?
- Labour dossier: marriage tax breaks, non-doms and council tax freezes

Yesterday, Osborne promised a "tough but fair" budget, but warned that Britain could not avoid facing up to the financial realities:

"As a new government, we have inherited a truly awful financial situation," he told BBC1's Andrew Marr Show. "No incoming chancellor has ever faced a set of public finances like this."

He continued: "We sit here as the country in Europe with the largest budget deficit of any major economy, at a time when markets and investors and businesses look around the world at countries that can't control their debts.

"We have got to deal with that. In that sense, it is an unavoidable budget.

"But what I am determined to do is make sure the measures are tough but they are also fair and that we are all in this together."

Crackdown on the welfare state
People who rely on benefits because they cannot find work will face much tougher tests and government scrutiny in one of the biggest crackdowns on the welfare state to be announced in a generation, writes Channel 4 News business correspondent Siobhan Kennedy.

Treasury sources told Channel 4 News that George Osborne's emergency budget on Tuesday would include tough new checks targeted at the five million people who are able to work but who do not and instead live on benefits, such as disability and incapacity payments, for extended periods of time.

"We'll step up the level of checks, make tougher tests and where there are no tests currently, we will introduce them," a Treasury aide said.

The aim is to radically reduce the £180bn a year welfare bill and funnel the money instead towards paying down Britain's £156bn budget deficit.

The Treasury will also target those middle income families - with household incomes of £30,000 and above - who currently qualify for child benefit, tax credits and in some cases housing benefit.

Read more

Spending on welfare, including child tax credits, benefit allowances are expected to come under the chop, while those working in the public sector facing are also bracing themselves for the fall of the axe.

His emergency budget was agreed by the coalition leaders, Prime Minister David Cameron, Deputy Prime Minister Nick Clegg and Chief Treasury Secretary Danny Alexander, late last week.

It will be the first serious test of the coalition as Osborne's plans to cut "faster and further" goes against the arguments made by the Lib Dems during the election campaign.

Government to sell off high-speed rail link
Transport Secretary Philip Hammond announced the sale of High Speed 1 (HS1) the 68 mile rail link between London's St Pancras station and the Channel Tunnel in Kent.

The line is expected to raise £1.5bn, the winning bidder would then operate the line for 30 years.

HS1 is currently used by Eurostar and Southeastern Javelin trains.

However any new line owner may be allowed to open it up to more operators.

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