UK's new Chancellor sets out his ‘unavoidable' Budget

A new tax on bank assets, a freeze in payments to the Queen, and a
hike in sales tax are hardly the trappings of an easy first budget for
a young Treasury minister.

Yet these were some of the tough measures announced by Mr George
Osborne, Britain's youngest Chancellor, in over a century, as he
pledged to dramatically reduce the nation's deficit, which is now the
second highest in the whole of Europe.

Summing up his measures as "tough but fair", Mr Osborne declared it to
be an "unavoidable" budget, needed to restore confidence in the
economy.

There were few surprises in Mr Osborne's budget, though the most
significant of all announcements was the confirmation that as of next
year, both British banks and banks with the UK operations would face a
levy on their balance sheets – in agreement with France and Germany.

This could generate as much as £2 billion of annual revenues,
estimated Mr Osborne, brushing aside criticisms that it was not
reasonable or fair to introduce it before the rest of the world. The
news received a cautious welcome from the British Banker's
Association.

"We know this is a difficult budget for everyone," it said, adding the
caveat that the levies "must not prevent the industry in the UK from
being able to compete. It is essential that the international banks do
not find themselves taxed multiple times for the same thing."

As if to demonstrate that everyone – absolutely everyone – would be
sharing the burden, Mr Osborne also announced that the so-called Civil
list – received by the Queen from Parliament for her public duties and
currently £7.9 million – will be frozen for the next 30 years.

As of midnight – the highest rate tax payers will see a 10 per cent
increase on their capital gains from the sale of assets such as second
homes or shares to 28 per cent, added Mr Osborne.

However, top earners were far from the only targeted, with child
benefit payments frozen, and a two-year pay freeze for public sector
workers, while the sales – or value-added tax on most consumer goods
will rise to 20 per cent from 17.5 per cent.

One of the few winners were businesses – which will see the current
rate of corporate tax of 28 per cent fall to 24 per cent over the next
four years, while small businesses will also see a small drop in
levies.

Such measures would show that Britain was ready "open for business,"
declared Mr Osborne. The measures announced so far won't be the last
this year – at the end of October, the results of a spending review
will identify even more ways to cut government spending.

Despite heavy criticism and warnings from opposition politicians as
well as economists that fiscal tightening could hamper the economic
recovery, Mr Osborne has gone ahead with the deep deficit cuts, amid
fears that its scale could undermine confidence in the UK. The
severity of Britain's fiscal troubles have recently been highlighted
by ratings agencies Standard & Poor's and Fitch, triggering concerns
that the nation's sovereign ratings could be cut