Page last updated at 18:48 GMT, Wednesday, 24 March 2010

Budget 2010: Darling draws election battle lines


Chancellor Alistair Darling sets out the Budget

Chancellor Alistair Darling has set the stage for the general election with a Budget warning to voters not to put the recovery at risk by deserting Labour.

He cut stamp duty for first-time home buyers - but unveiled a series of tax increases for the better-off.

Mr Darling said Labour had been "right about the recovery" and cut by £11bn this year's forecast £178bn deficit.

The Tories said Labour had made a "complete mess" of the economy and had "done nothing to clear it up".

Tory leader David Cameron accused Mr Darling of stealing Tory policies on stamp duty and an extra tax on strong cider.

Force state banks to lend more
Crackdown on tax evasion
Tax hike on strong cider
Bank accounts for all citizens
Green investment fund

And, taunting Gordon Brown, he said: "The biggest risk to the recovery is five more years of this prime minister."

Lib Dem leader Nick Clegg said both the chancellor and David Cameron were "in denial" about the scale of spending cuts needed and dismissed the budget as "a political dodge not an economic plan".

"This isn't the preface to a new government but a footnote to 13 years of failure," he added.

BBC Economics Editor Stephanie Flanders summed up Mr Darling's message as "it's bad, but not as bad as we thought - and not nearly as bad as it would have been under the Conservatives".

Setting out the battle lines for the forthcoming election campaign, Mr Darling said: "The choice before the country now is whether to support those whose policies will suffocate our recovery and put our future at risk.

"Or support a government which has been right about the recession, right about the recovery, and is right about supporting the people and business of this country to build a prosperous future."

Mr Darling said stamp duty on homes sales up to £250,000 would be suspended for two years for first time buyers, paid for by an increase to 5% of the rate on £1m homes.

This unfair fuel tax is another example of an uncaring, out of touch government.
Elfin Llwyd
Plaid Cymru

The chancellor also unveiled a series of other measures aimed at clawing back tax from high earners - likely to go down well with Labour MPs fighting an election next month.

He said he was freezing the inheritance tax threshold for another four years, in order to help pay for the costs of care for older people.

He also announced the end of some personal tax allowances on those earning more than £150,000 and a cut in tax relief on pensions for those with incomes above £130,000 a year.

He confirmed the government would stick to a 2.2% real terms rise on spending this year but warned spending cuts after 2011 would be the "toughest for decades".


But to cut earlier, as the Conservatives were demanding, would be both wrong and "dangerous" and would risk derailing the recovery, he said.

"The task now is to bring down borrowing in a way which does not damage the recovery or the frontline services on which people depend," he said.

"The chancellor has moved the goalposts"
"The theme's clear - help for the many versus help for the few"
"The stamp duty cut is even cheaper than I thought"

"The challenge now is how we invest as a country to support the industries of the future and allow the talent of the British people to flourish."

Mr Darling provoked roars of approval from Labour MPs when he announced a crackdown on tax evasion through new agreements with the governments of Dominica, Grenada and Belize - home of Tory "non dom" donor Lord Ashcroft.

The Treasury is insisting all of the new spending measures are fully funded from existing budgets and not paid for by the £11bn less than expected borrowing.

The stamp duty cut will cost the Treasury £230m in 2010-11 and £290m in 2011-12 to be funded by the introduction of a new higher stamp duty band of 5% on properties costing more than £1m from April next year.

Mr Darling said he would stagger next month's scheduled increase in fuel duties - with the tax rising by a just a penny in April with another penny in October and the final instalment of 0.76p in January next year.

But the most expensive measure in the Budget is a £600m pledge to increase the winter fuel allowance for pensioners for another year.


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Duty on beer, wine and spirits will increase as planned from midnight on Sunday, including 10% on cider, with further increases to come on high strength cider. Alcohol duties will also increase by 2% above inflation for two further years from 2013.

Tobacco duty will increase from today by 1% above inflation and then increase by 2% in real terms each year until 2014.

In a series of measures aimed at boosting business, Mr Darling said business rates will be cut for one year from October, meaning a tax reduction for over 500,000 firms in England, and said state-owned banks would be forced to lend more.

He extended a six month job or training guarantee for under 24-year-olds to March 2012, and announced a one-off £270m fund to create 20,000 extra university places.

Mr Darling said that stronger than expected tax receipts meant that government borrowing would be £167bn this year - £11bn down on the £178bn he predicted in the pre-Budget report in December.

'Right calls'

He said that the deficit would continue to fall faster than previously forecast - dropping to £74bn in 2014-15, down £8bn on his earlier prediction.

The chancellor said he was standing by his forecast that the economy would grow by 1 to 1.5% this year although he slightly downgraded his prediction for next year to 3 to 3.5% compared to the 3.5% in the pre-Budget report. His forecast for the following years is unchanged.

He also revealed that the £2bn proceeds of a bank bonus tax was more than three times what the Treasury forecast in his pre-Budget report.

David Cameron: "The only new ideas in British politics are coming from this side of the House."

And he unveiled a guarantee to give everyone a basic bank account, giving up to a million more people access to bank accounts over the next five years.

Some of the more controversial measures in the Budget may not make it into law before polling day, which could be just six weeks away.

But the planned cut in stamp duty would probably stay in place whoever wins the election, as it is similar to existing Tory policy.

He also outlined plans to boost future economic growth, with billions invested in digital jobs, broadband for all, high-speed rail and biotech industries, using money from existing budgets.

Civil servant strike

If the Conservatives win the election they will produce an "emergency Budget" within 50 days of taking office which could reverse many of Mr Darling's measures.

The chancellor did not unveil any new tax increases, with the new 50% top rate of income tax expected to come into force from April and thresholds frozen.

Giving its reaction to the Budget, the SNP said Mr Darling should have scrapped the fuel duty increase altogether, adding: "The Labour government have shown they would rather save face with the City than support Scotland's communities."

Plaid Cymru's leader at Westminster, Elfyn Llwyd, said: "This unfair fuel tax is another example of an uncaring, out of touch government."

Business groups broadly welcomed the measures aimed at boosting enterprise.

CBI director general Richard Lambert said: "This was a clever, political budget. However, anxiety remains on how the deficit is going to be paid down, and the growth forecasts for 2011 and beyond are still on the optimistic side."

Derek Simpson, joint leader of the Unite trade union, said: "The last Budget before the election shows leadership and responsibility during difficult times."

Lord Pearson, leader of the UK Independence Party, said: "The three old discredited parties who are debating our economy have once again avoided the elephant in the room, in any discussion about our economy which is of course the cost of our European Union membership."

Green Party leader Caroline Lucas welcomed Mr Darling's plan for a "green investment bank" but said overall the Budget was "a wasted opportunity to seriously put fairness at the heart of the agenda".

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