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Budget 2010: Chancellor George Osborne to squeeze benefits

By Andrew Grice

George Osborne will lift 880,000 low-paid people out of the income tax net today as he unveils what he will call a “tough but fair” Budget that will squeeze state benefits and public sector pay and pensions.

In his emergency Budget, the Chancellor will promise to spread the pain fairly throughout society. He will publish figures showing that the top 10% on the income scale will pay proportionately more than the poorest.

Mr Osborne will raise the tax-free £6,475 personal allowance by £1,000 to £7,475, a first step to the Liberal Democrats' goal of raising the income tax threshold to £10,000. Nick Clegg will trumpet the move as evidence his party has shaped today's measures.

Although the Chancellor will announce tough Government spending limits for the next four years, he will pledge no further cuts in capital spending such as the school building programme. He will give companies an incentive to recruit by saying they will not have to pay national insurance for 650,000 low-paid workers.

In an email to Liberal Democrat members last night, Mr Clegg admitted it would be a “difficult” and “controversial” Budget and that Labour would claim his party had “sold out to go along with Conservative cuts”.

But he insisted: “This is one of the hardest things we will ever have to do, but I assure you, the alternative is worse: rising debts, higher interest rates, less growth and fewer opportunities.”

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