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Coalition Government: What does it mean for you?

Coalition Government: What does it mean for you?

Category: Economy

Updated: 14/05/2010
First Published: 13/05/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

How will the Lib-Con coalition Government affect you and your money? explains how this new Government will shape the economic, tax, pensions and business landscapes over the coming five years.


The Liberal Democrats have agreed that efforts to cut the huge national deficit should begin immediately, not from the outset of the 2011/12 financial year, as it had originally argued.

In a document released by the two parties it says 'the main burden of deficit reduction (will be) borne by reduced spending rather than increased taxes.' It is, therefore, likely that savings will be made from public sector job cuts as well as planned efficiency savings that both parties agreed were possible in the run up to the election.

It is estimated that £6 billion can be saved from measures implemented in the current tax year.

The parties have agreed that the UK will not join or prepare to join the euro in the next five years.


The measures to save £6 billion have allowed the planned employer National Insurance (NI) contribution rise of 1% to be dropped, the Government says.

However, employee NI contributions will still rise, although low earners will be placated by the announcement that the higher personal allowance cap of £10,000 is to be phased in, although there is not yet a timetable of when this will come into effect.

Tax credits to households with a combined wage of £50,000 will be stopped, while the reach of the Child Trust Fund is likely to be scaled down to families earning just £16,000, and could yet be abolished altogether.

Plans to allow married couples to combine their personal allowances are to be voted on, but it is likely the Liberal Democrats will abstain, having argued against the measures.

Capital gains tax looks set to rise from 18% to as high as 40%, while Tory plans to cut Inheritance Tax have been canned.


The Government has pledged to restore the link between earnings and pensions. Rises in the state pension will be linked to whatever is higher from the percentage rise in average earnings, inflation or 2.5%.

Public sector pensions will be scaled back, but those who have already built up their pot will not be affected. The retirement age could be raised by a year to 66 for men by as soon as 2016, and 2020 for women, while pensioners will no longer be required to use their pension pot to buy an annuity at 75, allowing them to keep their money.


The parties have pledged to make a flow of 'viable credit' available to small and medium sized businesses, a move judged to be 'essential for supporting growth.' Proposals will include the consideration of lending targets for nationalised banks and a major loan guarantee scheme.

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