Britain looks at austerity budget plan

LONDON, June 22 (UPI) -- British Chancellor of the Exchequer George Osborne outlined an austerity budget package that called for a sales tax increase from 17 percent to 20 percent.

Osborne called the budget proposal "tough but fair," the British Broadcasting Corp. reported Tuesday.

The budget includes a wage freeze for public employees earning over $25,000 per year, while those earning less would see a flat raise of $301 per year for the next two years.

The budget would cut family tax credits and introduce a new tax on banks and mortgage lenders starting January 2011 that is expected to raise $2.4 billion per year.

Government departments would have their budgets cut 25 percent through 2014, with the exception of health and international development, the BBC said.

Osborne said he based his budget on economic growth of 2.6 percent a year through 2011, less than the 3.25 percent estimate used by former Chancellor Alistair Darling.

The aim, he said, is to eliminate Britain's budget deficit within five years.

The budget also allows 880,000 additional low-wage earners to avoid taxes, by raising personal tax allowances.