Shoppers are to pay the price of Britain’s runaway debts as George Osborne announces a hike in the rate of VAT in today’s emergency budget.
The Chancellor will reveal a four-year package of painful tax increases and spending cuts as the Government struggles to reduce borrowing, currently running at £155 billion a year.
But there may be some good news for the West Midlands, as employers in the region are set to benefit from a tax break aimed at creating private sector jobs outside the south east.
Mr Osborne has insisted his package will be “tough but fair”.
Major announcements expected today include:
* An increase in VAT from the current rate of 17.5 per cent, perhaps to 20 per cent. This would add about 2.5p to a litre of petrol and 7p to a pint of lager, but any increase in VAT will hit people on lower incomes.
* A tax break for West Midlands businesses, as firms outside London and the south east become exempt from paying national insurance for the first 10 new employees they take on. But this is designed partly to make up for the loss of jobs in the public sector which will result from spending cuts.
* A council tax freeze in 2011-12. This is a step back from the promise made in the Conservative election manifesto, which talked of a two-year freeze.
* Measures to control public sector pay. Mr Osborne has refused to be drawn on whether he will freeze public sector pay for those earning over £18,000 for more than a year.
* A new bank tax to protect the taxpayer against future collapses.
* All firms are expected to receive a helping hand from a cut in the headline rate of corporation tax, currently 28 per cent.
* Welfare payments may be frozen or cut. Family tax credit will be axed for people on middle incomes.
* Capital gains tax will be increased from the current level of 18 per cent to 40 or even 50 per cent. Mr Osborne has apparently been persuaded by critics who argued that capital gains tax was used by the rich as a way of avoiding paying the full rate of income tax.
* Alcohol, tobacco and flight taxes are all set to increase.
Labour MP John Spellar (Warley) said: “It is going to be a budget designed to put cause maximum pain in poorer areas and industrial Britain.”
But Liberal Democrat MP John Hemming (Yardley) said: “What I’m looking for is a Budget which is fair in terms of taxing the rich to a greater extent than Labour, and which is fair in terms of protecting people on lower incomes.”
>More: Follow the Emergency Budget live from 12pm at www.birminghampost.net/live