The cuts announced in the June 2010 Budget will cost families £3,000 a year between 2011 and 2015, according to a new report from economy watchdog Capital Economics.
The June 2010 Budget outlined tax rises and savings cuts totalling £40bn, will erode 8% of average household incomes of £36,000, or a total of £3,000 per year, over the next 4 years, the report claims.
The report emphasises the need for sound financial planning in the coming 4-year period, particularly for home owners and those with first time buyers mortgages or other mortgage repayments to consider. As widespread job reductions are implemented, particularly in the NHS and other large public sector bodies, independent financial advice on reducing family outgoings, and on income-related personal insurance may be an essential element of navigating through the crisis.
The VAT increase to 20%, the freeze on public sector pay, and planned job cuts in the public sector will in themselves leave households £1,100 worse off in 2011, Capital Economics said.
Families were the particular target of the June 2010 budget, as the Government looked at ways of restraining cuts and sluicing funds into private sector employers in an attempt to preserve jobs. Although the budget contained overall tax rises of £8.2bn, households’ taxes rose by nearly £11bn to help pay for cuts in corporation tax, and the rise in the threshold for employers’ national insurance contributions, according to Capital Economics.
