Last week was of course the last pre-budget report before the May/June election in 2010; with both the government and Britain’s finances on the ropes, Alistair Darling, the Chancellor of the Exchequer, unleashed a series of new measures and taxes designed to help rescue Britain’s ailing balance sheet. In his report the Chancellor announced a series of tax rises including, an increase in National Insurance by 0.5%, the return of VAT to 17.5%, a 50p tax on all landlines and a one off 50% tax aimed at corporate banks and bonuses. With these new measures, and the recent savings of over £10bn announced by the prime minister, the government is expecting to halve the deficit by 2013.
Following on from the PBR and in continuing spirit of financial austerity, the government announced yesterday that over £900m worth of efficiency savings had been found within the MOD budget. However, instead of cutting this from defence budget, the government announced that money would be reallocated in a series of investments designed to help boost our efforts out in Afghanistan. So far the government has announced its intention to purchase a C17 transporter, a number of Reaper drones for surveillance, improved body armour and a further 22 Chinook helicopters, bringing the total fleet number up to 70.
However, as always this new expenditure has to come from somewhere and it seems like non-essential services will feel the brunt of the minister’s axe. In the review the government announced that the majority of £900m in savings will be recovered through a mixture of base closures, personnel cuts, squadron reductions and the temporary suspension of some aspects of military training. The £900m of savings is on top of the additional £280m for Husky and Jackal vehicles, and kit to tackle roadside bombs which was announced by the prime minister on Monday. The decision to switch and save on the defence budget comes after a torrid year in which the government has received numerous criticisms about its financial support of the war.
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