Latest Channel 4 News:
Row over Malaysian state's coins
'Four shot at abandoned mine shaft'
Rain fails to stop Moscow wildfires
Cancer blow for identical twins
Need for Afghan progress 'signs'

Emergency budget: will you be out of pocket?

By Channel 4 News

Updated on 22 June 2010

Chancellor Osborne says it is the only road to recovery - but the coalition wants to shave £66bn off public spending with a raft of measures from spending cuts to a hike in VAT. Faisal Islam analyses how the measures will affect us all.

What's in your wallet? (credit: Getty)

From tax increases, to public sector spending cuts, to an increase in VAT, this is a budget that will be felt by all: rich and poor, individuals and businesses.

Even the Queen will have to share some of the public's pain as her annual state allowance is frozen; ahead of a review.

According to figures released by the Treasury, the budget changes will cost, on average, just under £400 per person in the next year.

"The road to ruin"
The Chancellor says the public sector has put the nation on "the road to ruin." Deputy prime minister Nick Clegg had already described public sector pensions 'unfair and unaffordable'.

Today the government asked public sector workers to accept a two-year pay freeze, with protection for the 1.7 million public servants earning less than £21,000.

Unions argue many of those carrying out vital roles are not well paid; the man who empties your bins earns around £12,000 a year, an auxiliary nurse £13,000, a class room assistant takes home £14,00 while an army private expected to serve in Afghanistan will have a starting wage of around £16,000 a year.

 Budget in brief
-Tax credit payments to families earning more than £40,000 to be reduced.
- Health in pregnancy grant to be scrapped.
- Child benefits to be frozen for three years.
- Disability benefits to be reassessed from 2013.
- Maximum housing benefit limits reduced to £400 a week for a house.
- Council tax to be frozen for a year.
- Personal tax allowance raised to £7,475 from April 2011.
- More support for poorer families. Child element of child tax credit increased by 150 per cent above inflation.
- National Insurance threshold rises by 21 per cent next year.
- Corporation tax of 28% cut next year by 1 per cent and each year afterwards to 24 per cent.
- Planned tax relief for the video games industry cancelled.
- Bank levy introduced from January to generate £2 billion a year.
- Green investment bank planned and investment in digital infrastructure.

Acting Labour leader Harriet Harman condemned the budget measures, calling the announcement "a Tory Budget that will throw people out of work, that will hold back economic growth and will harm vital public services."

The government believes the bulk of debt reduction must come from cuts in spending rather than taxation rises.

Families earning enough to pay higher rate tax will pay more, and have their tax credits reduced - which in theory should hit the highest earners hardest.

While the coalition hopes this will deflect of today's budget, what does it mean? Channel 4 News looks at three different income brackets to determine what the talk means, in practice. 

UK salary tax bands
Band 1) £0 - £7,475 (from April 2011) - no tax
Band 2) £0 – 37,400 – basic rate -20% tax
Band 3) £37,401 - £150,000 - higher rate - 40% tax
Over £150,000 - additional rate - 50% tax

We asked the Institute for Chartered Accountants in England and Wales to calculate the  differencs this budget would make to people within three different income brackets:

A single man, working full time for a salary of £10,000:  This man would save £157 under the plans to raise the income tax threshhold to £7,034. However he would pay £43 more in national insurance contributions. As the taper rate for tax credits is raised from 39% to 41% he would also lose £72 in tax credits. Total annual saving: £85  

A single mother of two children, working full time for the NHS and paying £200 per week for child care: Taking into account saving made from the rise in income tax threshold and the extra cost of national insurance contributions this woman wuld be £6 better off per year. Not even double figures. Added to that this women would lose £72 in tax credits due to the rise in taper rate. Total annual saving: minus £66

A married father of two on a salary of £55,000 whose wife does not work: Taking into account income tax allowances and the increase in national insurance contributions this man would be £593 worse off. In addition he would lose £212 in tax credits: Total annual savings: minus £805

 Regional impact 
- White papers on tackling regional economic differences and rebalancing economy in Northern Ireland
- Upgrade to the Tyne and Wear metro
- Manchester metrolink to be extended
- Birmingham New Street station to be redeveloped
- Rail links to Sheffield, Liverpool and Leeds to be improved
- National Insurance incentives to start up companies outside South East and East.
- click here for more on the the Treasury's plans for the regions

This budget is unique because, unlike the March budgets which have a turnaround of just weeks, most of these planned changes will not come into force for many months.

Industry experts say they hope this will enable them to have a fuller role in the drafting of new laws.

Ten facts about the budget box
1. It was made in 1860 for Chancellor of the Exchequer William Gladstone, who held the post four times.
2. Gladstone was originally a Conservative MP before becoming a Liberal Prime Minister.
3. The box has been used by 44 different chancellors in its lifetime.
4. James Callaghan and Gordon Brown are the only two chancellors not to use the original box.
5. According to William Hague, Chancellor Norman Lamont kept a bottle of Highland Park whisky in the box.
6. The box is lined with black satin and covered in scarlet-stained ram’s leather.
7. The custom of holding the box aloft for a photo began with Hugh Dalton, the Chancellor in 1947.
8. In 1868, Chancellor George Ward-Hunt opened the box to find that he had left his speech at home.
9. Locks on ministerial boxes are on the bottom to ensure they are locked before being carried.
10. The box will now spend its retirement on display at the Cabinet War Rooms in Whitehall.


Send this article by email

More on this story

Channel 4 is not responsible for the content of external websites.

Watch the Latest Channel 4 News

Watch Channel 4 News when you want

Latest Domestic politics news

More News blogs

View RSS feed

Cartoon coalition


How Channel 4 News viewers picture the coalition in cartoon form

Token candidate?

Labour leadership candidate Diane Abbott (credit:Getty Images)

Diane Abbott: I am the genuine move-on candidate for Labour

'Mr Ordinary'

Andy Burnham, Getty images

Andy Burnham targets Labour's 'ordinary' person.

Iraq inquiry: day by day

Tony Blair mask burnt during protest outside the Iraq inquiry. (Credit: Getty)

Keep track of Sir John Chilcot's Iraq war findings day by day.

The Freedom Files

Freedom Files

Revealed: the stories they didn't want to tell.

Making a FoI request?

Channel 4 News tells you how to unearth information.

Channel 4 © 2010. Channel 4 is not responsible for the content of external websites.