Budget 2015: Osborne offers country 'new
contract'
9 July 2015 UK Politics
Chancellor George Osborne has rejected criticism of his
Budget insisting it offers the country a "new contract".
He said businesses will have to pay higher wages but will
pay lower taxes in return - while workers will get higher pay
but fewer benefits.
This created a "new centre" in British politics and was a "fair
deal" for all, he told BBC Radio 4's Today programme.
Labour has attacked the Budget for being too hard on the
poor and called the National Living Wage a "con".
Mr Osborne unveiled the National Living Wage in a surprise
announcement at the end of his Budget speech on
Wednesday. Paid to over-25s, it will start at £7.20 and rise to
£9 an hour by 2020.
But the £4.5bn cut to tax credits, part of a £12bn package of
welfare cuts announced on Wednesday, will kick in next
April, leading Labour to accuse Mr Osborne of "pulling the
rug from under" many poor families.
'Free ride'
Tax credits were introduced in 2003 by Gordon Brown to
top-up the wages of low paid workers but Mr Osborne said
their cost had ballooned to an unsustainable £30bn a year
and he wanted to make businesses give their workers a pay
rise instead. He will also make firms fund more
apprenticeships through a new levy.
The chancellor said there were some "really great British
companies" but others that "frankly have taken a free ride" by
not training their own workforce and using the training that
others have provided.
He said Britain has a "welfare system that is unsustainable"
and that we "can't have a welfare system that just grows and
grows and grows".
He said his aim was to create a welfare system that was "fair
to those who need it and fair to those who pay for it".
The living wage will give a pay rise to six million workers but
is expected to cost 60,000 jobs, according to the Office for
Budget Responsibility.
But Mr Osborne said other measures in his Budget would
help create a million more jobs.
Analysis by Political Editor Nick Robinson
George Osborne's stated aim was to create what he called a
"new settlement". That's politician's code for re-writing the
rules of politics to suit your side.
So it is that he did something rather surprising - slowing and
softening spending and welfare cuts now having promised
faster and deeper cuts in the run up to the election.
More from Nick
Robert Peston's full analysis
Budget reaction in quotes
"What I'm offering is a new contract with the country," Mr
Osborne told Today.
"What we're saying to business is pay higher wages but you
get lower taxes, what we're saying to people is you get a
bigger pay cheque but there will be a less generous benefits
system.
"What we're saying to the country is we're going to spend
less but we're going to live within our means. And that is the
new settlement, I think it's the new centre of British politics."
Working tax credits, which top up the wages of four million
low paid workers, will be squeezed by £4.5bn, with about
half a million people losing them altogether.
Shadow Chancellor Chris Leslie said: "Don't underestimate
how important those tax credits have been for many, many
people who will be waking up this morning and, I think, left
reeling by the massive reduction to their quality of life that
will come because of the nature of this set of decisions."
Other Budget measures included:
An increase in the inheritance tax threshold to £1m for
married couples by 2017
A new levy on big businesses to help to fund three
million more apprenticeships
Working-age benefits to be frozen for four years -
including tax credits and local housing allowance, but
excluding maternity pay and disability benefits
Maintenance grants for students - paid to students with
family incomes below £42,000 - to be scrapped and
converted into loans from 2016/17
Scrapping housing benefit for under-21s
Corporation tax cut to 18% by 2020
Restrictions on tax breaks for "buy-to-let" landlords
A commitment to meeting the Nato target of spending
2% of national income on defence
Fuel duties frozen for the remainder of this year
New car tax bands with a standard charge of £140 - and
new cars will not need MOTs for the first four years,
rather than three
A fresh clampdown on public sector pay, which will be
limited to 1% a year for the next four years
Pensions tax annual allowance to be tapered away to a
minimum of £10,000 from next year
Confirmed that the BBC has agreed to absorb the £650m
cost of providing free television licences for over-75s
The Treasury confirmed the living wage would apply to both
the public and private sectors.
The Local Government Association said it welcomed the
move, but warned it would add a "potential upward pressure"
to council budgets and said it expected local authorities to
be compensated.
Labour leadership contender Yvette Cooper, who claimed
women would be hit harder than men by the measures in the
Budget, said the new rate should "certainly not" be called a
living wage.
Shadow health secretary Andy Burnham - who is also
bidding to become Labour leader - said he would have paid
the rate to all workers, accusing the government of "age
discrimination in pay".
Labour leadership contender Liz Kendall said the National
Living Wage was a "con", while the fourth MP vying for the
job, Jeremy Corbyn, said it was the "same narrative of
cutting taxation for the very richest, making life worse for the
very poorest and selling off state assets to pay for it" the
Tories had pursued 20 years ago.
Business groups gave a mixed reaction to the National
Living Wage pledge, with the Institute of Directors saying it
was "time for companies to increase pay" but the CBI said
the government was taking "a big gamble" on wage
increases that industry might not be able to deliver.
The Living Wage Foundation director Rhys Moore said the
proposed £9 rate was a "massive victory" for campaigners,
but that it was "effectively a higher national minimum wage
and not a living wage", due to the different ways the two
rates are calculated.
The TUC welcomed the announcement but said Mr Osborne
was "giving with one hand taking with the other" and
"massive cuts in support for working people will hit families
with children hardest".
How will you be affected by the chancellor's summer
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8 July 2015
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