The newly appointed Chancellor of the Exchequer, George Osborne, has announced the date of his Emergency Budget. The new coalition government had stated that it would host an Emergency Budget within 50 days and the date has now been set for June 22nd. It is expected that when the Budget is delivered it will contain tax rises and spending cuts.
Under the Labour government, tax receipts were considerably less than government spending on the whole. It is, therefore, no surprise that the fiscal finances are in a bad way. Of course, this issue was compounded by the global economic crisis which means that this government has a huge deficit to recover. This is sure to result in some unpopular decisions at the Budget on 22nd June.
It is expected that George Osborne will detail how he plans to cut £6bn in public spending. Of course, this is just the beginning. It is likely that he will also announce tax increases. The first tax increase is expected to see VAT increased from 17.5% to 20%. Also, as Capital Gains Tax rates on non-business assets currently sits at 18%, this is likely to be increased to approximately 40%.
However, the Conservative manifesto laid out plans to decrease corporation tax rates. Small companies can expect to benefit from a 1p cut in their rate – down to 20p from 21p. The Liberal Democrats had laid out plans to increase the lower threshold of income tax to £10,000. This is unlikely to happen in all at once under the coalition government. Instead it is likely there will be an incremental increase over the term of the government.