The UK’s first full coalition government since the Second World War is set to introduce a series of new tax and business legislation.
The coalition agreement between the Conservatives and the Liberal Democrats has meant that both parties have had to trim their pre-election pledges as part of the power-sharing deal.
The new cabinet will include George Osborne as Chancellor, while the role of Business Secretary will go to Vince Cable, the Liberal Democrats’ Treasury spokesman.
Economic responsibility in the Cabinet means that Mr Osborne and the Treasury will oversee banking and financial regulation but that a special ministerial committee, including Mr Cable, will be established to shape banking policy.
The new government’s programme will involve an accelerated series of public spending cuts, totalling £6 billion for this year, in an attempt to reduce the UK’s budget deficit.
An emergency Budget will take place within 50 days.
That Budget is likely to see a number of compromises on both sides. The Conservatives will drop plans to raise the inheritance tax threshold to £1 million, while the Liberal Democrats have agreed to scrap their ‘mansion tax’ on properties worth £2 million or more.
Out also will go Labour’s planned 1 per cent increase in national insurance contributions.
Conservative proposals to raise employees’ national insurance contribution thresholds are to be dropped, but an increase in employers’ national insurance contribution thresholds will, however, go ahead.
Both parties appear ready to push up the income tax threshold, which currently stands at £6,475. There is to be a long-term policy of raising the income tax threshold to £10,000, graduated across a number of years.
A Conservative pledge to reduce the rate of large company corporation tax to 25 per cent may survive.
Capital gains tax on non-business assets will, at some stage, rise to a rate similar to that of income tax; exemptions will be made for entrepreneurial business activities.
Another Conservative manifesto commitment to make marriage a part of the tax relief system stays in place, although Liberal Democrat MPs will be allowed to abstain in the Commons vote on the measure.
The Liberal Democrats have managed to retain their policy of taxing planes rather than passengers, and there will probably be a move towards a new tax on banks.
The default retirement age is to be phased out, and a review will be held to establish the dates at which the state pension retirement age begins to rise to 66. There is a commitment that, in the case of men, this will not be before 2016 and, in the case of women, not before 2020.
The link between the basic state pension and earnings will be restored from April 2011 with a guarantee that pensions are raised by the higher of earnings, prices or 2.5 per cent, as proposed by the Liberal Democrats.
The government is investigating a national loan guarantee scheme aimed at ensuring smaller businesses enjoy easier access to credit and funding, a scheme that may replace the current Enterprise Finance Guarantee programme.
A referendum will be staged on the transfer of additional legislative powers to the EU.
The Liberal Democrats have promised not to push for an adoption of the euro for the length of the next Parliament, which will be set at a fixed five years.