Chancellor Alistair Darling has been outlining his plans to cut VAT for 13 months but take borrowing to record levels, in his pre-Budget report. Here is some reaction from politicians, business leaders and others.
GEORGE OSBORNE, SHADOW CHANCELLOR
He's giving £20bn in giveaways and taking back £40bn in higher taxes, including the major rise in National Insurance, a tax on the jobs and incomes of middle Britain. It is confirmation of the time old truth that all Labour chancellors run out of money and all Labour governments bring this country to the verge of bankruptcy. Stability has gone out of the window, prudence is dead, Labour has done it again.
VINCE CABLE, LIB DEM TREASURY SPOKESMAN
This is not a normal pre-Budget statement, this is a national economic emergency and what is required alongside radical cuts in interest rates, radical action on bank lending is a serious tax cut concentrating on the low-paid. What I fail to see is how the economy gets a major stimulus from for example a £5 cut in a £220 imported flat screen television or a 50p cut in a £25 restaurant bill. Surely it would be much more sensible to put money directly in the pockets of low-paid workers by cutting their income tax?
STEWART HOSIE, SNP's TREASURY SPOKESMAN
We welcome the VAT cut, the VED [vehicle excise duty] changes, but question why on earth he wants to put petrol up at this point? On help for businesses, can we welcome the flexibilities introduced and the one-year deferral on the small companies' corporation tax rate, while noticing no change on the standard rate or on income tax paid by the smallest businesses who don't pay corporation tax.
YVETTE COOPER, CHIEF SECRETARY TO THE TREASURY
What we are doing is making it easier for people to go out and spend before Christmas, putting money into the economy really, putting money into the hands of people who are going shopping before Christmas but also over the course of the year for an average household this works out at about £270 that people will save, because of the VAT cut.
KEN CLARKE, CONSERVATIVE FORMER CHANCELLOR
Having set out the past state of the public finances, now rapidly deteriorating as recession hits us, [Alistair Darling] should have told the prime minister that £20bn worth of additional fiscal stimulus was not affordable ... Is not this reckless gamble running the risk that it will eventually be worse still and the recovery long and painful?
DAVE PRENTIS, UNISON
Brown and Darling have shown their strength, courage and determination to face the economic challenge head on. Their extensive experience has kept them in tune with what the country and business needs, in keen contrast to the Tories, who seem more like rabbits caught in headlights, bereft of ideas or solutions. These measures will boost confidence and stop the recession sliding into depression.
DAVID FROST, BRITISH CHAMBERS OF COMMERCE
There are a few good announcements in there like deferment of the small business rate of corporation tax, allowing businesses to spread out the payment of their tax bill, and the new business finance scheme. The proposal to increase National Insurance contributions is wrong. At the very time when the economy should be coming out of the recession, businesses will face an extra tax on employing people. This is not the way to reduce unemployment.
RICHARD LAMBERT, CBI
The chancellor's growth forecasts depend on his success in stimulating consumer spending and otherwise look optimistic. On them also depends his forecasts for the budget deficit. It will be a long, hard haul to meet his deficit targets and given this, we would have hoped for an even greater emphasis on efficiency and potential savings. We are disappointed with the absence of a clearer framework of new fiscal rules.
DEREK SIMPSON, UNITE UNION
The report gives Britain a reason to be optimistic this Christmas and beyond. This is a welcome warm-up exercise after 30 years of inaction and neo-liberal economics. Gordon Brown has thrown off the shackles of new Labour to reveal the real Labour.
MERVYN KOHLER, HELP THE AGED
If this pre-Budget report represents a bleak picture of the UK economy, it delivers a truly skin-flint package for the UK's older citizens.
ALAN RITCHIE, UCATT CONSTRUCTION UNION
The additional £3bn of capital spending is to be widely welcomed. Construction workers have borne the brunt of the economic downturn. By increasing infrastructure projects and building new social housing out of work construction workers will return to the jobs market and confidence will begin to return to the sector.
STEVEN ALAMBRITIS, FEDERATION OF SMALL BUSINESSES
We're very pleased the chancellor has picked up on some of the ideas we've been putting to him, in particular a £1bn small business finance scheme.
ROBERT CHOTE, INSTITUTE OF FISCAL STUDIES
It's not clear whether those are enough in terms of a tax increase, and whether that spending cut, or that slower spending growth, can really be delivered. It may be that whoever's in government after the next election may have to deliver more even on the spending side or on the tax side, or both, in order to reduce borrowing and debt further.