Latest Public Sector News

21.03.13

Public sector pay cap extended another year – Budget 2013

The Government is committed to its financial strategy, Chancellor George Osborne reiterated in his fourth Budget yesterday.

He admitted that work to cut the deficit was taking longer than expected, with growth of just 0.6% expected for 2013, down from 1.3% predicted in his Autumn Statement.

Osborne said: “We are, slowly but surely, fixing our country's economic problems”.

The UK’s national debt will rise to 85% of GDP and not start decreasing until 2017/18 now – two years later than originally planned.

The Chancellor told MPs: “This is a Budget that doesn't duck our nation's problems. It confronts them head on. It is a Budget for an aspiration nation.”

It was a “fiscally neutral” budget – not offering any unfunded tax giveaways. Osborne added that the deficit reduction plan was “on course…we will not waiver from it”.

Corporation tax has been cut to 20%, the petrol rise planned for the autumn has been scrapped and beer duty has been cut by 1p per pint. The flat rate state pension will be brought forward from 2017 to 2016.

The Help to Buy scheme will be extended, enabling 75,000 people to buy homes through lower deposits, shared equity loans and mortgage guarantees. A 1% public sector pay cap will be extended by another year until 2015/16.

Osborne also brought forward the introduction of £10,000 income tax threshold to 2014, and announced £2.5bn of spending on infrastructure, to be paid for by an additional squeeze on public spending.

The Bank of England Monetary Policy Committee has been given an updated broader remit, but retains its 2% inflation target.

Tax allowances have been announced for investment in shale gas.

Labour leader Ed Miliband said: “All he has to offer is just a more-of-the-same budget. Today the Chancellor joined Twitter. He could have got it all into 140 characters: Growth down, borrowing up, families hit, and millionaires laughing all the way to the bank. Hashtag downgraded chancellor.”

Green Party MP Caroline Lucas said it was “yet another Budget that treats the public with contempt, continuing to peddle the myth that our national debt and deficit increased due to excessive public spending rather than bank bailouts”.

Robert Chote, the chairman of the OBR, said the deficit had fallen from £160bn in 2009-10 to £120bn in 2011-12 as a result of the spending cuts: “Our central forecast shows the cyclically adjusted current budget in surplus by 0.8% of GDP in 2017-18 which means that we think the Government does have a better than 50% chance of meeting the mandate on current policy.”

Key details of the Budget were leaked before the Chancellor started his speech yesterday when the London Evening Standard tweeted a picture of its front cover, breaching a Treasury embargo. The journalist responsible has since been suspended.

(Image: AP Photo/Kirsty Wigglesworth)

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