The toughest Budget package of
spending cuts and tax increases in a generation means the UK “can look to
a brighter future”, George Osborne has said.
The chancellor said “decisive
action” to raise VAT and cut spending would boost confidence in the
He also said spending cuts might be
reduced if more savings could be found in the welfare budget.
Labour’s Alistair Darling said it
could be “dire for many” and the coalition might be unable to implement
Mr Osborne put the case for the
coalition’s “tough but fair” Budget – which will leave households on
average $599 a year worse off – in a series of media interviews while David
Cameron will face scrutiny by MPs at the weekly prime minister’s questions.
In his first Budget, Mr Osborne
announced a two-year pay freeze for public sector workers earning over $ 31,400
and substantial welfare savings including a three-year freeze in child benefit,
a cap on housing benefit and a reduction in tax credits for families earning
more than $60,000.
He said the main rate of VAT would
rise from 17.5 per cent to 20 per cent from next January, a move raising an
estimated £$19 billion and was “unavoidable” given the dire state of
the public finances. But he raised the personal income tax allowance by $1,500.
“Because I took decisive
action, we’re going to have confidence in this economy, the forecasts show unemployment
is going to fall, and that is a good news story,” Mr Osborne said.
“I’m not claiming that people
are immediately better off as a result of the Budget – I have said that
everyone is making a contribution.
“But by increasing the
personal income tax allowance for people on the basic rate what I have done is
tried to protect low and middle income earners, people who are in work, I
wanted to reward work.”
He said if he has stuck with
Labour’s plans “we would now be in a proper economic crisis in this
country” and accused Labour of “carping from the sidelines”.
In the Budget he revealed that
government departments – excluding health and international aid – face an
average 25 per cent real terms squeeze in their budgets over the course of the
That includes the
freeze in public sector pay, which is expected to save $5 billion a year by