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Emergency Budget sees a 2.5% increase in VAT

Today, the new coalition Government announced their first budget that has set the tone for the next five years of economic governance within the UK, leading with a 2.5 per cent increase in VAT.

This comes at a time when the UK’s structural deficit looks to be the highest of all the 27 European states – a fact highlighted by the rating agency Fitch, who have stated that: ‘The rise in public debt ratios [in the UK] since 2008 is faster than for any other ‘AAA’-rated sovereign.’

The impact upon university funding still remains unclear, and will do so until the Government releases its spending review on 20 October, as well as Lord Browne’s report in the autumn; however, Chancellor of the Exchequer, George Osborne has suggested that there could be cuts of up to 25 per cent of its expenditure, including education.

This comes in a year where universities have already seen tightening fiscal procedures. More specifically, the University of Birmingham has seen a 1.2% cut and a freeze in the pay of some of the higher-paid civil servants- including the Vice-Chancellor.

For many students, the impact upon the finances will wait until the changes in VAT come into place on 4 January 2011. VAT has received the most attention, although alcohol and tobacco duties will not rise, and the proposed rise in cider tax has been scrapped.

However, the changes will see a net increase of 2.1 per cent in the prices of products, which was announced in the House of Commons with was met with great antipathy from the opposition benches – changes that will impact day-to-day student life.

The Liberal Democrat’s policy of increasing the lowest band of income tax made its mark in the budget as agreed during coalition talks. This ensured that those who earn less than £10,000 would not be obliged to contribute any earnings to the state.

Further internal issues could ensue within the coalition during the autumn months when tuition fees will inevitably be brought into question – as one of the landmark Lib-Dem policies was to scrap fees entirely.

Other changes included an increase a freeze in public sector pay, child benefits, and council tax; cuts for housing benefits, disability living allowance and an increase in Capital Gains Tax. There was also the introduction of a Bank levy.

What did you think of the Chancellor’s first Budget? How will the new measures affect you? Share your views below…

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