He promised it would be tough - and he didn't disappoint. George Osborne, in his first Budget as chancellor, let rip with the most swingeing cuts to the public coffers since the Second World War. By his calculations, Britain needs to find an eye-watering £113 billion if it's to avoid falling off a financial precipice. That's a hit of £4,300 a year to every household in the UK. The age of austerity is undoubtedly looming. The impact, he warned, would be felt throughout the country. Osborne's Whitehall colleagues can attest to that: most government departments - the NHS and foreign aid were spared the chopping block - must slash their budgets by 25% by 2014/15.
Bankers will have to cough up over £2 billion a year to pay an annual bank levy. Value-added tax is to be hiked from 17.5% to 20% in January 2011.
As expected, capital gains tax for higher-rate taxpayers also shot up, from18% to 28%.
Elsewhere, benefit schemes are either to be frozen, abandoned, or face major overhauls.
There were, however, some sweeteners -
- Income tax allowance for many will rise by £1,000, taking some 880,000 people out of the tax system altogether.
- Those partial to tobacco or a tipple were also delighted to find their vices untouched by Osborne.
- Entrepreneurs were encouraged to be more entrepreneurial after the capital gains threshold for businesses was raised to £5 million, up from £2 million.
- He aims to get back to "pension simplification", with a promise to consult on and revise the complicated rules devised by Darling and which were to be introduced in April 2011.
Reaction to the Budget was mixed. Harriet Harman, acting Labour leader, called it "reckless". In contrast, the Organisation for Economic Cooperation and Development described the Budget as a "courageous move". Gilt yields, which have an inverse relationship to prices, briefly touched a nine-month low, suggesting that investors are willing to cut the government some slack - for now.