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Cameron and Clegg will jointly sell 'toughest budget for thirty years'

4 In an interview with The Times (£) the Prime Minister says that "Nick and I" will give a joint TV interview to sell George Osborne's emergency budget to the British people. Mr Cameron arrived at the Times interview late. He'd been in a meeting to discuss the budget with his Chancellor and also Mr Clegg. The Times quotes Mr Cameron's warm words about the spirit of co-operation within the Coalition:

“I pay tribute to the Liberal Democrats. I didn’t predict that we would come together and agree properly robust fiscal action but we have, and that’s all for the good.”

Behind-the-scenes it hasn't all been sweetness and light according to The Independent's Andy Grice. In his Saturday political column he notes pressure from Liberal Democrats to make greater use of tax rises to tackle borrowing. Mr Osborne is, however, sticking to his 80% spending cuts/ 20% tax increases ratio.

Mr Cameron's main message from his interview is to warn that the public sector will bear the brunt of the budget cuts. “There is no way of dealing with an 11% budget deficit just by hitting either the rich or the welfare scrounger,” he says. Adding: “We revere and want to stand up for people working in the public sector. They do an incredibly important job. There is no animus against people because they work in the public sector. It is just a question of how do we best deal with this budget deficit in a way that is fair.”

Research - published yesterday by Policy Exchange - showed that the average hourly pay of public sector workers is 30% greater than private sector workers.

The Daily Mail expects the emergency budget to include £30bn of tax rises and spending cuts. It lists the likely measures:

  • Higher duties on air travel that will increase the average cost of a family's summer holiday by £300.
  • Cuts and freezes to key benefits of £4billion-£5billion a year.
  • Higher CGT but with 'generous' exemptions for savers and entrepreneurs. The Adam Smith Institute warns today that CGT revenues might actually fall if rates are increased.
  • A possible 'small' VAT hike, which could be delayed until next year. In the same newspaper Peter Oborne speculates that VAT will almost certainly rise to 20%. Perhaps higher.
  • "Savage cuts to Labour's child tax credits, costing two million families as much as £545 a year."
  • "A doubling in tax on household insurance premiums to 10%."

The budget won't be all bad news. Cuts in corporation tax and higher income tax allowances are also expected.

The Financial Times reports that President Obama is very concerned at the extent to which Britain and other EU economies are abandoning Keynesian expansionism. In a letter to G20 leaders Mr Obama said the world must learn from the “consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession”.

Tim Montgomerie

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