Yesterday’s emergency budget speech, the first made by new Chancellor George Osborne, was delivered in two distinct halves.
The Chancellor spent the first section of his speech outlining the current state of the economy and explaining the need for an “unavoidable budget” that would “pay for the past and plan for the future”.
When considering the wider state of the economy Osborne made a number of announcements:
- The expected level of growth in GDP for the current year was reduced from 1.3% to 1.2% and from 2.6% to 2.3% for 2011
- Stated that, and going much further than experts had predicted, the budget aimed to reduce public sector debt from 10.1% of the economy to 1.1% by the end of the current parliament
- That CPI (Consumer Price Index) would peak at 2.7% at the end of the current year and then start to fall in the medium term. He also confirmed that the Bank of England’s target for inflation remained at 2%
- Stated that he believed unemployment would peak at the end of 2010 and then start to fall
Mr Osborne also talked about the banks, which is where he believes the current crisis started. He confirmed that the British government would work with others in Europe and introduce a levy, based on the balance sheets of banks, which would be aimed at encouraging banks to remove less risky assets.
Furthermore the Chancellor said he would be taking action on unacceptable bank bonuses.
Mr Osborne went on to say that the state now accounted for “almost half” of all national income which was “completely unsustainable”.
This belief explains the Chancellor’s ‘rule of thumb’ that 80% of the deficit reduction should be funded through cuts with the balancing 20% paid for from tax rises, it seems that he is not far off meeting that rule, stating that 77% would come from cuts and 23% from tax rises.
To achieve his aim though severe cuts will be needed averaging in real terms 25% over four years, except for health and international aid.
So, the aim is bold, but what measures did he actually announce, and how will they affect you, click here to find out.