UK slashes spending, raises VAT and taxes banks

09:25, June 23, 2010      

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British finance minister George Osborne Tuesday produced the harshest budget in a generation, slashing spending, raising taxes and slapping a levy on banks in a drive to cut a record budget deficit to almost nothing in five years.

Osborne said government spending would fall by around 25 percent over four years and announced VAT sales tax would go up to 20 percent from 17.5 next year, with a new 2 billion pound ($3 billion) levy on banks introduced at the same time.

Nearly a million of the poorest-paid people will be taken out of the income tax net altogether by raising its starting point, while the headline rate of corporation tax will drop by one percentage point to 27 percent next year and then keep falling.

"It will affect me quite strongly," a sales assistant named Jackie at WHSmith, one of UK's leading retail groups, told the Global Times. Jackie said although the government will not tax her as she is "earning the minimum pay," she will pay more for goods with the rising VAT.

Osborne said just over three-quarters of the tightening would come from spending cuts and the rest from tax raises. Welfare payments, including child and housing benefits would be targeted and even the expenditure of Britain's royal family will be subject to closer scrutiny.

"When we say that we are all in this together, we mean it," Osborne told parliament.

"This cutting will freak out everybody," Sarha Edmonds, a healthcare nurse living in London, told the Global Times. She received child benefit for her first child but now she is pregnant again. "My new baby will not get any benefit."

"And I've got a mortgage, it's going to be tough," she added.

According to The Guardian, nearly three-quarters of voters believe the government's priority should be to cut spending, rather than increase taxes.

In addition, Britain, France and Germany have agreed to introduce levies on banks to make them help pay for global recovery, they said in a joint statement Tuesday as Osborne said it would come into effect at the start of 2011.

Source: Global Times


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