Budget Day

By Rowan Williams
  • – Budget: welfare cuts slowed, 40p tax rate raised
  • – 48 hours for new Greek bailout deal
  • – Shares suspended as China market tumble continues


Chancellor George Osborne will slow the pace of government welfare funding cuts in his presentation of the Budget on Wednesday. It is believed that the cuts, which had been planned over two years, will now take place over three years. In his Budget – the first by a Conservative government since 1996 – Osborne is also expected to cut billions in working tax credits, while raising the 40 percent (40p) tax threshold from £42,385. The latter move is expected to appeal to middle income families. Osborne is also expected to scrap maintenance grants for poorer university students, converting grants into loans, a move likely to increase the debt burden on such students. Other expected measures include raising the inheritance tax threshold to £1 million for married couples, allowing local councils to relax Sunday trading laws, a reduction in the cap on benefits payments to £23,000 in London, and making housing association tenants nationwide earning over £30,000 pay up to the market rent. The Chancellor announces his budget at 12:30 BST.

Greece has 48 hours to strike a new bailout deal with international creditors, European leaders decided on Tuesday evening. Failure to strike a deal would mean a banking collapse, a humanitarian emergency and an exit from the European single currency (Grexit). One third of Greeks already live below the poverty line. Creditors have demanded that Greece present details of fresh austerity measures to obtain bailout funding; otherwise, leaders of all 28 EU member nations are to meet on Sunday to discuss how best to contain the fallout of a Greek financial collapse. In an address to the EU parliament on Wednesday, Greek Prime Minister Alexis Tsipras called for the EU to fight against the division of its member nations. Tsipras also expressed confidence that Greece would be able to meet its obligations over the next few days. For the first time, Tsipras acknowledged Greece’s partial responsibility in bringing about its economic crisis, but offered few details on a potential bailout deal.

An increasing number of firms on China’s stock market have had shares suspended, as China’s markets continued to tumble on Wednesday. The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index closed down 5.9 percent. Shares have been suspended in an attempt to escape the market rout, while China’s securities regulator has warned of a panic sentiment gripping investors. Approximately 1,300 firms have now had shares suspended, almost half of China’s main shares. Chinese authorities have said they will take further measures to stabilise the markets, following a first wave of measures taken on Saturday. Some observers have been critical of market intervention, claiming that it increases the panic already present in the market.

The Papers

Money and tax stories make the headlines on the day of the Chancellor’s Budget. The Daily Telegraph leads with news of Chancellor George Osborne’s plan “to cut 40p tax” rate. According to the paper, “Middle-earners could save £1,300 a year in budget windfall that will benefit 800,000 people”. The Times describes the plans as “Tax cuts for the middle classes”. The paper notes that Wednesday will mark the first Conservative government Budget “since 1996”, writing that the Budget aims to “ease austerity pain”. The Independent reports that poorer university students are “to lose maintenance grants” in Osborne’s new Budget. Instead, students from low-income backgrounds could be given “new loans to replace current cost-of-living allowance”. The Guardian leads with a report on “Corporate welfare: the £93bn handshake”. According to figures released today, each household in the UK gives “3,500 a year” to businesses in grants, subsidies and tax breaks. Recipient firms include some “that pay no corporation tax”. The Financial Times leads with news that further Chinese groups are suspending trading of their shares “amid steep market falls”. The number of firms halting trading has climbed to 940, the paper reports, while commodities markets are “also under pressure”.

British Media on China

On China’s stock market: China’s falling stock market received wide attention from UK media outlets on Wednesday. The BBC reports that despite government measures, which appear to have been “motivated by the fear of a knock-on effect on the real economy”, “confidence continues to evaporate”. The Guardian reports that the markets “shrugged off” attempts at stabilisation. A large number of companies suspended their shares because “they had used their own stock as collateral for loans”, the paper writes. The Independent asks “What really lies behind” the turmoil in the markets, writing that “an army of leveraged small local investors” flooding the market in 2014 caused the market boom. The Daily Telegraph features a piece by Bloomberg, writing that a market fall “may erode consumer confidence”.

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