When are we going to repay this new borrowing, Mr Osborne?

All recessions are painful but excessive borrowing by us all and the recent banking collapse (and rescue) have threatened to turn the nation’s financial wound septic.

Consumers are in a bind: stagnant wages, higher taxes, the highest inflation since 1991, low returns on savings and of course the spending cuts.

Osborne’s got his own headaches to deal with too - weak growth (just 1.7% estimate for 2011) and tax receipts, increasing welfare payments and yet more borrowing (£142 billion expected for 2010/11). New borrowing is targeted to be reduced to £26 billion by 2015/16 - when will we repay all of this new debt?

Is there any good news? Yes, manufacturing and exports are doing well plus the world as a whole is still willing to buy our debt (government gilts) ie: they trust UK plc to get it right. Business borrowing costs are relatively low, too.

What did the chancellor suggest he can do? In essence, to encourage growth where possible and to stay the course. The cupboard is pretty bare so there are few reserves to call upon to assist this. Corporate tax rates are to fall by 2% and more in future years to increase the UK’s competitiveness for multinationals. Small businesses should benefit from an increase in the Enterprise Investment Scheme tax relief. Some ‘esoteric’ tax avoidance loopholes are being tightened.

He did deliver in his promise to raise personal allowances (by £1000 in 2011/12 tax year to £7,475) to take perhaps half a million people out of paying tax altogether. There was the introduction of some 21 new Enterprise Zone Schemes, to help the regions, as a successor to the very successful schemes of the 1980s.

Most other changes were fairly cosmetic but nonetheless very welcome, including a reduction in fuel duty in exchange for a windfall tax on oil companies. A 10% reduction in Inheritance Tax rates for those giving at least 10% of their estates to charity could give a £330 million boost to the charitable sector. Help for 10,000 first time buyers and an extension of the help to mortgage payers in trouble is also good news. 40,000 new apprenticeships too, which is important as we are likely to face higher European style structural unemployment rates.

There was also announcements to attempt to simplify our complicated personal tax systems. At some stage the state pension will be simplified to a single tier - remember the state retirement age for men and women is going up to 66 by 2020, and maybe adjusted to 68 later on, so keep saving!

As Christians, we want a just society yet allow people, especially the emerging generations, to be able to fulfil their potential. Our nation has to learn the painful lesson of ‘spending less than we earn’ and to work out the difference between ‘needs and wants’. There is maybe another message to take from a financial squeeze - endeavour to keep your finances straight forward and beware of greed.




Aidan Vaughan is the chair of Association of Christian Financial Advisers, the UK network of Christian financial advisers and related professionals. It aims to be the voice of Christian financial advice and champions best practice in the UK www.christianfinancialadvisers.org.uk