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Coalition Budget Commendable But A Gamble

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On Tuesday, Chancellor George Osbourne announced the austerity measures taken by the coalition Government to reduce Britain’s budget deficit.

The headline announcements from a budget that detailed £40bn in cuts on top of those already planned by the previous administration include:

-          VAT rise of 2.5%

-          Corporation Tax cut of 4%

-          Departmental budget cuts of 25% across the board

-          Abolition of the Regional Development Agencies

 

Commenting on Budget 2010, Daniel Fell, Head of Policy at the Chamber, said:

“The coalition’s ambition to turn a record budget deficit into a budget surplus within five years is admirable, but the growth forecasts from the independent Office of Budget Responsibility reveal the extent of the gamble taken by the coalition Government. Unless the significant spare capacity in the economy can suppress inflation sufficiently in the coming months, the 2.5% increase in VAT scheduled for January 2011 could see inflation pushed higher and force the Bank of England to raise interest rates – further damaging GDP growth prospects that have already been downgraded due to public sector spending cuts.

However, the Chamber must applaud the ambition of the coalition Government in pushing this budget through a House of Commons in which no single party has an overall majority. This parliamentary term will define prosperity for the next generation. Measures introduced now have the potential to restore growth and reduce debt within five years.

The Chamber remains cautious, however, over the timing of these measures, in light of the fragility of the economy in the short-term and it’s vulnerability to events in the EU.”

To read the Chamber’s Budget Briefing, click here

To read the full Budget Document, click here