The Summer Budget

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The Summer Budget

This week the Chancellor announced his Summer Budget, which was George Osborne’s seventh budget and the first Conservative one since 1996.
The deficit will be cut at the same pace as the last parliament, which will result in a budget surplus of £10bn occurring in 2019-2020, a year later than expected. Borrowing is projected to fall from £69.5m to £43.1bn.
In terms of public expenditure, there is to be £37bn of additional spending cuts by 2020. This includes, a £20bn reduction in departmental budgets; £12bn of welfare cuts and £5bn from tax avoidance.
There has been a reformation of the Non-Domicile tax status, which has been a feature of the UK tax system since 1914, these reforms will result in individuals who have lived in the UK for the past 20 years paying the same level of tax as other UK citizens. This will take place after April 2017, and is expected to raise £1.5bn.
There will be a new National Living Wage of £7.20 an hour for over 25’s, coming into force after April 2016, which will increase above inflation to £9 an hour by 2020.
For students, maintenance grants will be replaced with loans. Cash support for new students will increase by £766 to £8,200 a year. A new maintenance loan will replace student grants, to which these loans will be paid back only when graduates are earning above £21,000 a year.
Those in the public sector will continue to have a 1% pay rise for the next four years.
Within this budget there have been reforms to the welfare system. These include the capping of Child Tax Credit to families only with 2 children born from April 2017; the household benefit cap will be reduced to £20,000, or £23,000 in London. For social housing, tenants on higher incomes (over £30,000 outside London, £40,000 within) will be required to pay market rate rents. 18-21 year olds who are receiving Universal Credit will have to apply for an apprenticeship, gain work based skills or go on a work placement 6 months after the start of their claim. There has also been a freeze on working age benefits.

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