Budget
Responsibility: Deficit Reduction
The Coalition Government inherited a record deficit - the British state is borrowing one pound for every four it spends. The new, independent Office for Budget Responsibility has said that the UK is borrowing more than almost any other G20 economy.
To continue with existing plans would not be sustainable, and would put the recovery at risk. The consequences of not acting are serious: higher interest rates, business failures and rising unemployment.
Tackling the deficit is the Government’s top priority. So the Budget marks the start of the long-term task of moving from an economy built on debt to one based on saving, investment and exports where growth is spread more widely.
The Budget announces urgent action to tackle the deficit:
- A new fiscal mandate for the Government to get the public finances back under control. The Office for Budget Responsibility will hold the Government to account against its fiscal mandate.
- Reductions in current spending of £30 billion a year by 2014-15, on top of existing plans. Final spending settlements for each department, and the split between departmental expenditure and annually managed expenditure on welfare, will be set in the Spending Review on 20th October.
- VAT will increase from 17.5 per cent to 20 per cent from 4 January 2011, but items such as food, children’s clothes and books will remain zero-rated for VAT purposes.
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