Budget: Osborne set to encourage council tax freeze

Page last updated at 10:57 GMT, Monday, 21 June 2010 11:57 UK

BBC News...

 

 

A council tax freeze was in the Tory election manifesto The government will press ahead with plans to encourage a council tax freeze in England next year, it is understood.

 

The move is expected in Tuesday's Budget to soften the anticipated blow of harsh spending cuts and tax rises.

 

Chancellor George Osborne warned on Sunday that Britain was "on the road to ruin" unless the deficit was cut.

 

The Conservative manifesto proposed a two-year council tax freeze paid for "by reducing spending on government consultants and advertising".

 

That plan involved providing extra funding to councils who proposed only small council tax increases, so they could then freeze them.

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Analysis

Norman Smith,

Chief political correspondent, BBC Radio 4

 

The problem facing George Osborne is that he knows where we're spending all our money - public sector pay, pensions and benefits - but getting much of it back any time soon is going to be incredibly difficult.

 

Take welfare. Yes, there are potentially huge savings but welfare reform is a long, slow slog.

 

All the evidence from the United States, where they've already gone down this road, is that in the short term welfare reform actually costs money. Why? Because you have to provide more support, advice, training, childcare and so on to move people off benefits and back into work.

 

Similarly with pension reform. Yes, you can reform the system for the future, but there's not much you can do about those already receiving what Nick Clegg called "gold-plated pension pots."

 

So while the coalition is keen to press ahead with pension and welfare reform, it isn't going to solve our immediate budget crisis.

 

The bad news is that can only mean - in the short term - steeper cuts and tax rises elsewhere.

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It is not entirely clear yet how the coalition government's plans would work, or how much it will cost.

 

The council tax initiative is one of a series of "good news" measures trailed ahead of a Budget which Mr Osborne said would set out a four-year plan to slash the UK's deficit by cutting spending and increasing taxes.

 

He said tough action was "unavoidable" - if not, he said: "We will find higher interest rates, businesses going bust, unemployment rising and our living standards declining. I am not prepared to put up with that."

 

But as well as the council tax freeze - and the decision to axe Labour's plan to raise more money from a National Insurance increase - the Budget will also provide a partial National Insurance exemption for new firms based outside the south-east of England.

 

Other measures known to be included in Mr Osborne's statement at 1230 BST (1130 GMT) will be a levy on banks and an increase in non-business capital gains tax.

 

The capital gains tax would rise despite a free market think tank, the Adam Smith Institute, warning it could actually cost the government as much as £2.48bn in lost revenues as people opt not to sell assets.

 

Mr Osborne refused to say whether the proposed crackdown on public sector pay would include a multi-year freeze, or confirm newspaper reports that welfare payments may be frozen.

 

But he announced that former Labour cabinet minister John Hutton had agreed to head a commission looking into the future of public sector pensions.

 

The commission is set to produce an interim report by September with a full set of recommendations for next year's Budget - recommendations which seem set to lead to increased contributions for scheme members.

 

George Osborne: "Unless we take... action, we will find our country on the road to ruin"

 

Prime Minister David Cameron has already suggested public sector pay and pensions will be hit, saying the deficit could not be dealt with by "just hitting either the rich or the welfare scrounger", and said the Budget would be when "the rubber really hits the road".

 

Senior Tories and Lib Dems signed off the Budget on Friday with Mr Cameron, Mr Osborne, Deputy Prime Minister Nick Clegg and Chief Secretary to the Treasury Danny Alexander all present.

 

Discussing the cuts to be announced in the Budget, Sir Steve Bullock, chairman of Local Government Employers, said: "All authorities are facing very, very difficult decisions in the coming months...

 

"There will be intense scrutiny of how this comes. It makes things very difficult in terms of how we prioritise our services."

 

Shadow chancellor Alistair Darling said the Conservatives were "using the current circumstances" as an excuse to make "ideologically driven" cuts they had planned anyway and said they were "using" the Lib Dems "as cover".

 

Continue reading the main story

 

"If the Budget is shown to have discriminated against the less prosperous regions beyond the M25, tensions inside the Lib Dems are likely to emerge"

George Parker & Alex Barker

 

 

General secretary of the TUC, Brendan Barber, said the chancellor's approach "is based on a series of myths. Deep urgent cuts are not needed, and run the risk of the double dip - especially now much of Europe has signed up to the same deficit fetishism."

 

Bob Crow, general secretary of the Rail Maritime and Transport union, said he feared the coalition Government was planning to hit pay, jobs and pensions in the public sector as part of cuts and called for an emergency meeting of the TUC to plan a campaign of industrial and political action.

 

Meanwhile business organisation, the CBI, called for changes to strike ballots laws so they could only go ahead if 40% of a balloted workforce supported action, as well as a simple majority of those voting

 

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So, are we to believe the Tories that Public sector cuts are indeed "necessary"...? And how can we believe the Lib Dems, who were against early cuts during the election campaign, and now we're supposed to buy that they've had some "road to Damascus"-style epiphany.... Pull the other one, it's got bells on.... Danny Blanchflower of the Bank of England reckons it's gonna cause a Double Dip recession, and, well, seeing as how he was about the ONLY one sounding the alarm bells about recession back in '07, when the FSA and Gordon Broon were still insisting that all was hunky dory, perhaps we should be listening to him and not George bloody Osbourne.....

 

Tbh, I think Norman Smith, the Beeb's political correspondant kinda has a point....

I think there will be a so called double dip recession. It's not a bad thing in my books, I see the reduction in expenditure more like a sick patient taking the medicine. In terms of how the UK government are going to achieve cuts I have no real idea. Cutting trident seems an inevitability economic action that can't yet be announced for political reasons. Some direct cost cutting, for example, freezing now and ending later payment into all public section pensions is the scale of the type of cuts required - this is not cutting wages directly, which is another option. Having followed the activity of the coalition so far, I must say I'm impressed by the effective way they work, especially Cameron. Still it's a very tough job and many problems involved, not least of which is the uninformed public.

I think there will be a so called double dip recession. It's not a bad thing in my books, I see the reduction in expenditure more like a sick patient taking the medicine. In terms of how the UK government are going to achieve cuts I have no real idea. Cutting trident seems an inevitability economic action that can't yet be announced for political reasons. Some direct cost cutting, for example, freezing now and ending later payment into all public section pensions is the scale of the type of cuts required - this is not cutting wages directly, which is another option. Having followed the activity of the coalition so far, I must say I'm impressed by the effective way they work, especially Cameron. Still it's a very tough job and many problems involved, not least of which is the uninformed public.

 

Err, I think you'll find a Double Dip recession is potentially disastrous, it's near-as-dammit Economic Depression, which is what Blanchflower is warning us about.. "uninformed public" makes us all sound ignorant for being against savage cuts tbh, and frankly I think that's baloney, I would say the public is only too aware of the issues and the causes... Causes were - banks, greedy people in the City and Wall St (in short, people probably more likely to vote Conservative..), NOT nurses, teachers, the Police, the low-paid public sector workers and people on benefits.... Guess who gets anally raped though.... NOT the c/unts who actually deserve it.... <_<

You have no idea how socially divisive these cuts or a double-dip recession will be Ricky. It'll be the 80s all over again, but to the power of two...

You have no idea how socially divisive these cuts or a double-dip recession will be Ricky. It'll be the 80s all over again, but to the power of two...

 

In a nutshell... I guess they've not noticed the pictures coming out of Greece over the past few months then.....

In a nutshell... I guess they've not noticed the pictures coming out of Greece over the past few months then.....

Indeed, Greece rioting is where we are heading if we don't get a grip of our debt. And unlike Greece there will be no Germany to bail us out.

Basically we are in the $h!t without a paddle ever since the banks rippped us off got bailed out.

Indeed, Greece rioting is where we are heading if we don't get a grip of our debt. And unlike Greece there will be no Germany to bail us out.

Basically we are in the $h!t without a paddle ever since the banks rippped us off got bailed out.

This is an absolute myth which is really beginning to p*** me off. There is NO way that we will end up in Greece's situation in the near future - we would have to bail out the banks every year until 2015 to get anywhere near close! Our debt makes up 63% of our GDP, Greece's debt makes up 113% of its GDP, and is mainly composed of short-term loans which they can't pay off. Our debt is made up of long-term loans which we can very easily pay off, and there's no point in trying to 'satiate' the markets with vicious cuts - they downgraded Spain's credit rating for doing the exact same thing because it led to reduced growth projections!

Talk about hamming it up. Cuts have been inevitable for years; the boom in the public and welfare sectors needs to be redressed in favour of those who pay in.

 

The simple fact is that there is a budget deficit and it needs to be cleared. The size of the government and public sectors need to be reduced in size to facilitate tax cuts, for the people who drive the economy forwards, once the deficit is cleared.

 

It’s a tough world out there; the government should be providing the tools for survival not bankrupting itself pretending otherwise. I dare say some will be upset that their free ride gravy train is about to run out of track, but that’s tough luck.

Hmm, tax cuts for the people who drive the economy forwards. That would be the financial sector, wouldn't it? Yeah, let's just go ahead and reward them FURTHER for f***ing up the economy, all the while destroying what few pitiful social safety nets we have. Yeah, that's going to lead to a great society isn't it?

 

I really fucking hate libertarians. There's such arrogance behind everything they say - 'go ahead, create your own Big Society, I don't want to pay anything into it. Take care of everything yourself and stop weeping about the end of the gravy train'. You think £50 a week's a gravy train, and you don't think tax cuts on people who earn £1million+ per annum IS a gravy train? Get real!

The simple fact is that there is a budget deficit and it needs to be cleared.

 

Why exactly? What exactly is it that you and Ricky and the Coalition fear so much about a big Budget deficit? That the markets won't like it? It was knee-jerk pandering to the markets that caused the entire mess in the first place, so if anything we should have a general rule that we'll do the exact OPPOSITE of what the markets apparently want.

 

You can talk about how Greece have suffered all you want, but the fact is that Spain's plummet has ACCELERATED since they accounced their huge spending cuts, so we're damned if we do, damned if we don't when it comes to the markets. So it's better to stop worrying about what the markets are going to say next week and instead focus on historical precedent - which showed the last time all the world's major powers slashed spending when the global economy was on its heels, there was a Depression. The Coalition can go on about the f***ing "Canadian experience" all they want, but the fact is that when Canada's economy was in trouble, they were able to fall back on strong trade with their booming American neighbours - while we have EU countries who are also idiotically slashing spending as our trading partners, so we don't have that vital luxury.

Err, I think you'll find a Double Dip recession is potentially disastrous, it's near-as-dammit Economic Depression, which is what Blanchflower is warning us about.. "uninformed public" makes us all sound ignorant for being against savage cuts tbh, and frankly I think that's baloney, I would say the public is only too aware of the issues and the causes... Causes were - banks, greedy people in the City and Wall St (in short, people probably more likely to vote Conservative..), NOT nurses, teachers, the Police, the low-paid public sector workers and people on benefits.... Guess who gets anally raped though.... NOT the c/unts who actually deserve it.... <_>A double dip recession is not a depression. A depression lasts for 3 plus years, a recession is for 2 plus quarters. I'd prefer to have a recession now then a prolonged pulling down of the economy for the long term. Yes, your right about the causes. Greed it was, wholesale gambling in the financial markets.

 

This is an absolute myth which is really beginning to p*** me off. There is NO way that we will end up in Greece's situation in the near future - we would have to bail out the banks every year until 2015 to get anywhere near close! Our debt makes up 63% of our GDP, Greece's debt makes up 113% of its GDP, and is mainly composed of short-term loans which they can't pay off. Our debt is made up of long-term loans which we can very easily pay off, and there's no point in trying to 'satiate' the markets with vicious cuts - they downgraded Spain's credit rating for doing the exact same thing because it led to reduced growth projections!

I agree that a Greece situation for the short term is most unlikely, even without an political energy to resolve the issue; long term is a different story. What is more likely to follow if spending is not cut is the situation that Spain found itself it. Economically Spain where caught between a rock and a hard place. They had to implement austerity measures as it's debt liabilities had become problematic. I don't want to see the UK going there, hence I see the action to reduce spending as appropriate. Yes, it's a fine balance between no action, acting appropriately and over-reacting. I like the analogy Nick Clegg give by saying it's like pruning a tree, if you prune it appropriately it flourishes afterwards. If you prune it to hard it may die. I'd like a pruning that leads to a flourishing afterwards.

The problem is that the government if it so wished could call ANY cuts a simple 'pruning' leading to a flourish!

A double dip recession is not a depression. A depression lasts for 3 plus years, a recession is for 2 plus quarters. I'd prefer to have a recession now then a prolonged pulling down of the economy for the long term. Yes, your right about the causes. Greed it was, wholesale gambling in the financial markets.

 

I agree that a Greece situation for the short term is most unlikely, even without an political energy to resolve the issue; long term is a different story. What is more likely to follow if spending is not cut is the situation that Spain found itself it. Economically Spain where caught between a rock and a hard place. They had to implement austerity measures as it's debt liabilities had become problematic. I don't want to see the UK going there, hence I see the action to reduce spending as appropriate. Yes, it's a fine balance between no action, acting appropriately and over-reacting. I like the analogy Nick Clegg give by saying it's like pruning a tree, if you prune it appropriately it flourishes afterwards. If you prune it to hard it may die. I'd like a pruning that leads to a flourishing afterwards.

 

"Pruning" it would be about £20bn of cuts tops that don't affect people's lives (ie. don't cut people's public-sector jobs thus increasing the amount of welfare the state gives out AND decreasing the amount of tax it takes in, as well as not cutting/freezing benefits which would reduce social mobility). The huge cuts the coalition are about to propose is savaging the roots of the tree, which means it's going to die.

Guys, it's simple economic sense that, if all the major countries are slashing spending at the same time, trade collapses and the markets collapse. There's no ifs or buts about it.

for me im fine with increases in VAT etc but this really (as the topic describes) is not the problem. For months now the private sector have taken pay freezes, reduced work, lost jobs - crazy hours just to ensure you are in a job when they start cleaning out but the public sector have been relatively unscathed. We need to sort out the crazy public sector pay and benefits, "final salary" pensions when life expectancy is increasing all the time. Look at BA for an example, a privatised company with public sector benefits not able to survive in the real world. And thats an important point - we escalate the importance of doctors, nurses, teachers etc but in the private sector they get nothing like the benefits they have in the public sector. If they have a good pension its because THEY paid for it. Right now the govt doesn't put aside money for these vast public sector pensions so in fact its the private sector indirectly through taxes who fund it!!!

 

Absolute nonsense and we need to sort this out.

for me im fine with increases in VAT etc but this really (as the topic describes) is not the problem. For months now the private sector have taken pay freezes, reduced work, lost jobs - crazy hours just to ensure you are in a job when they start cleaning out but the public sector have been relatively unscathed. We need to sort out the crazy public sector pay and benefits, "final salary" pensions when life expectancy is increasing all the time. Look at BA for an example, a privatised company with public sector benefits not able to survive in the real world. And thats an important point - we escalate the importance of doctors, nurses, teachers etc but in the private sector they get nothing like the benefits they have in the public sector. If they have a good pension its because THEY paid for it. Right now the govt doesn't put aside money for these vast public sector pensions so in fact its the private sector indirectly through taxes who fund it!!!

 

Absolute nonsense and we need to sort this out.

 

This post is ridiculous. The answer to your queries is to bring in business reforms to ensure that big businesses can't rip off their employees, not to bring down public-sector workers' pay just to make them suffer as much out of principle.

 

Why are you fine with increases in VAT btw?

Edited June 21, 201015 yr by Danny

From the Independent:

 

According to the Chancellor, the public sector has put the nation on "the road to ruin". The Prime Minister insists that it is "fair" that public workers on £18,000 should have their pay frozen when inflation is running at 5 per cent. The Deputy Prime Minister argues that public sector pensions are "unfair and unaffordable".

 

 

The choreographed process of softening up for today's Budget has been skilful; barely a day goes by without another grim warning about the dangers to the nation from the build-up of debt, and with it a new round of cuts. Britain is the new Greece, we are told. We need to act, and now.

 

Yet even if ministers are correct in this analysis – and there are plenty of respected economists who doubt it – it inevitably leaves public servants feeling demonised, scapegoated and abused, despite routine declarations about their hard work and devotion.

 

True, there are well-documented cases of public sector staff who are paid obscene amounts – local authority chief executives and BBC bureaucrats are egregious examples. Three public servants now earn more than £1m, and 171 are paid in excess of £150,000 a year, more than the Prime Minister. Yet these lucky few have to be set in a context of 6 million public sector workers, the vast majority on unenviable "packages" – the man who empties the bins on £12,000 a year; the nurse auxiliary on £13,000; the classroom assistant on £14,000. Their pensions, when they arrive, will be a few thousand pounds a year, and taxable.

 

Average regular pay in the public sector, excluding financial services, was £454 per week in April 2010. By comparison, average regular pay on the same basis in the private sector was £419 per week. That is not such an enormous gulf. Public sector pay did catch up with the private sector under Labour, although the gap has not narrowed much in more recent years. But much of that was in response to public shame about the poverty pay that nurses, for example, received. Politicians and parents agreed that gifted headteachers should be rewarded well. Our armed forces remain underpaid by most standards.

 

In the lean years under the last Conservative government, many low-paid public workers could not even afford the contributions to their supposedly lavish pension schemes. Now reformed, you will receive just 1/80th of your final salary for every year you spend in the NHS. Thus after 20 years, a qualified, experienced nurse will see a pension of just one-quarter of final salary, say £7,500 or so.

 

The money that goes into the public sector is not uniformly wasted on fat cattery, an obvious point that is worth repeating in the present feverish climate. Most of the core functions of the public sector need to be done, and the state cannot be suddenly cut back without any harmful effects. Students will still need to be taught by lecturers, rotten teeth extracted by dentists, babies delivered by midwives, a war to be fought in Afghanistan, drunks to be arrested on a Saturday night, children to be protected from harm. Less emotively, we will still need stats to be gathered, weather forecasts to be made. We may soon discover just how difficult it is to find real waste in the public sector, and how meanly in reality we look after those who help us with extraordinary dedication. Or is all this more ideologically driven?

 

Britain is not Greece. We have our own currency, so we are not trapped in a currency zone unable to devalue; our debt has a much longer maturity, so we don't have to roll it over so often and risk a crisis; our national debt will peak at about 75 per cent of GDP – better than most of Europe, and where it was in the 1960s. At the end of the Second World War it stood at 262 per cent of GDP, and we went ahead and built a welfare state. Most of it is owed within the UK. It is not "out of control".

 

Even Mr Osborne's much-vaunted Office for Budget Responsibility admitted that public borrowing was about £11bn less than anticipated last year, and would be £8bn better this year even if Mr Osborne left Alistair Darling's plans untouched.

 

The Liberal Democrats have now apparently undergone a Damascene conversion to Tory fiscal principles. Yet, in a world that seems impossibly remote now, the general election campaign, Vince Cable and Nick Clegg were warning time and again about the dangers of cutting too early, of the panic cuts that could undermine the recovery, of taking risks with people's jobs and homes. It is odd indeed to hear them sound more Tory than the Tories. The National Institute of Economic and Social Research says a full-blown Tory attack on the deficit would push us into a double dip recession.

 

There has been some unfortunate briefing too about ministers actually enjoying "throwing the axe around", taking some sort of sadistic joy in it. And was it not David Cameron who told us not so very long ago that cutting down on waste was the oldest trick in the political book?

 

To turn the Prime Minister's soundbite around, the suspicion is that the Government is cutting as heavily as it is not because it has to, but because it wants to.

 

Case studies: 'People don't know how hard we work'

 

Steve Holman, 50, bus driver in east London. Earns around £29,000 a year

 

I've worked for the same bus company in east London for 26 years, but I'm massively worried about the impact of the Budget on Transport for London.

 

It's quite simple – either they pass the cuts on to passengers, which they won't do, or on to services without affecting passengers, through cuts to wages.

 

I work anything from a 38-hour week to a 60-hour week. I've worked for 26 years, on an average of six days a week – sometimes seven – in order to live in London.

 

When you speak with the general public they don't understand how hard we work. We develop an affinity with them though.

 

I earn £29,000 a year, which is one of the better positions, but we're not in an enviable position. We take home £350 a week and in London that's not a king's ransom, is it?

 

I'm massively against any cuts in services to London passengers. We've spent years building the network up. It will have an effect on passengers travelling on buses.

 

Bob Sutcliffe, 58, grave digger for Warrington Borough Council. Earns £20,500

 

I first started working for the council 15 years ago. I enjoy it, but it's hard work. You never know how much work there's going to be, and it's not like you can say, "No, we'll do it tomorrow." This week we did nine graves, but it's a year-round job, and you get more in winter.

 

We've got a mini-digger, but it can't get to all the plots. If we can use the machine it takes two-and-a-half hours per grave. If we're doing it by hand it takes all day. There's five of us, working across four cemeteries, 8 'til 5.

 

I don't think we could be stretched any further, especially as we have to do other jobs too.

 

Denise Boyce, 26, nurse. Earns £22,663

 

I qualified in April and work in the neonatal unit at St George's in Tooting, where I'm doing intensive care training. I work mainly with premature babies on life-support machines, and I help new mums with breast-feeding. It's hard work but very rewarding – although not financially. We're the leading neonatal unit for south-west London, but we're pretty stretched. We've got 140 nurses for 36 cots. It might seem like a lot, but that's on a 24-hour system, and most of the babies require one-to-one care.

 

Oh, and even the Daily Telegraph are against the likely scale of the cuts, saying it's nonsensical to throw millions of people onto the dole in the middle of a recession and entrench poverty. When the Telegraph are opposing public spending cuts and supporting higher taxation instead, you KNOW the government's about to make the biggest f***-up of our generation.

George Osbourne has done fantastically well with that budget, in redressing the balance between the private and public sectors and cutting the obscene welfare state. The only major criticism I have is that Health spending should be cut by 25% in real terms over the next four years too, with more emphasis on private healthcare solutions.

 

This country is going to be amazing after >10 years of (conservative) libertarianism... ^_^

Yeah, for selfish cunts like you who can afford it maybe. Emphasis on PRIVATE HEALTHCARE SOLUTIONS? You do realise the vast majority of people can't fucking afford private healthcare?

 

>10 years? Just you watch. The Tories are OUT next election in a landslide Labour victory, providing Labour choose the right leader. Margaret Thatcher only managed to get away with less thanks to Labour imploding and the Falklands.