Page last updated at 14:57 GMT, Thursday, 25 March 2010

Parties draw economy battle lines on day after Budget

Alistair Darling
The Tories accused Mr Darling of stealing their policies

Shadow chancellor George Osborne has attacked Labour's "empty" Budget and lack of "vision" as the election battle lines are drawn up around the economy.

Mr Osborne told the BBC: "Where is the leadership to get this economy moving?"

But Chancellor Alistair Darling said Labour's policies were "bearing fruit" and said Tory spending cut plans "risk tipping" the UK back into recession.

The Liberal Democrats say Labour and the Tories are both "in denial" about the scale of spending cuts needed.


Mr Osborne said the Conservatives would set out further details of how they would cut Britain's deficit at a faster rate than Labour before the general election, adding that they would place more emphasis on spending cuts than tax rises.

"I am going to try and get rid of this enormous debt by getting rid of wasteful government spending, not taxing hard-working people," he told GMTV.

The comments came as Mr Darling, Mr Osborne and Lib Dem treasury spokesman Vince Cable toured television and radio stations to give their verdicts on Wednesday's Budget.

'Stealth tax'

In his Budget speech, Mr Darling said Labour had been "right about the recovery" and urged voters not to put it at risk by deserting the party.

A raid on the rich with the theft of Conservative ideas in a highly political Budget
The Times

But Mr Osborne claimed 30 million workers were facing an effective tax rise due to the freeze on personal allowances.

He said the details, contained in official documents, were a new "stealth tax" and Mr Darling had "said nothing about the biggest tax rise in the Budget" in his speech.

Mr Darling said that tax thresholds are linked to the inflation rate the previous September. At the time inflation was negative so "in theory these allowances should have been cut... now that would have been daft... so I froze them".

If the Conservatives win power at the election they have said they would introduce an "emergency" Budget within 50 days, which would overturn many of Mr Darling's policies.

But asked if the Tories would reverse the freeze on personal allowances, Mr Osborne said: "I wouldn't be able to because it is going to happen before the general election."

He said the Labour measure he was "working hardest to avoid" was a 0.5% increase in National Insurance announced in the pre-Budget report, which is due to come into effect next year.

Stamp duty

The government revealed on Wednesday the amount individual departments will contribute to the £11bn in spending cuts announced in the pre-Budget report, with the Department of Health bearing the brunt of "efficiency savings" with a pledge to reduce NHS spending by £4.35bn over three years.

But Lib Dem health spokesman Norman Lamb said the government's figures were "a fantasy" as there was "no mechanism for achieving these objectives" - something denied by Alistair Darling.

Mr Lamb told BBC Radio 4's The World at One the Lib Dems would achieve real savings by "attacking the massively over-bloated bureaucracy that still controls much of the NHS".

The Institute for Fiscal Studies, an independent think tank, said the record of past governments suggested it should not be assumed any party could deliver the amount of savings talked about.

It said key questions about the deficit reduction plan remained "unanswered" after a Budget which it said "trod water" on key issues but generally "did no harm" to the public finances.

It now estimates spending on public services and administration will have to fall by a total of £46bn, in real terms, by 2014-5 to meet government objectives - equivalent to an average 3.1% drop each year.

Mr Darling has postponed the major decisions on spending cuts until after the election, warning in his Budget speech that the 2011 spending review would be the "toughest in decades".

"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"

But he said that to cut spending now, as the Tories want, would jeopardise the economic recovery, which was in its "infancy".

Britain's budget deficit remains at a record high but it is £11bn lower than the £178bn forecast by Mr Darling in his pre-Budget report thanks to better than expected tax receipts over the past three months.

Mr Darling resisted the temptation to throw the money at pre-election giveaways, opting instead for a series of relatively modest measures mostly paid for by savings elsewhere.

He suspended stamp duty on homes sales below £250,000 for two years for first time buyers - already a Tory policy - but said it would be paid for by an increase to 5% of the rate on £1m home sales, which drew cheers from Labour MPs.

But Lib Dem Treasury spokesman Vince Cable, who has outlined £15bn in potential spending cuts, said that although the stamp duty cut would help a small number of people get on the property ladder "it doesn't create a single affordable home".

Cider tax

Mr Darling also unveiled a series of measures aimed at boosting business and helping the young unemployed and a one-off £270m fund to create 20,000 extra university places.


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Next month's scheduled increase in petrol duties will be phased in over two years and he confirmed planned rises in duty on beer, wine and spirits and tobacco.

He also announced a 10% tax hike on strong cider to tackle binge drinking, despite calling a similar Conservative policy a "gimmick" in 2008.

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

The Budget received a mixed response in the papers with the Daily Telegraph calling it a "Tax raid on middle class" and The Times saying it "combined a raid on the rich with the theft of Conservative ideas in a highly political Budget".

The Guardian said Mr Darling had "spurned the chance" of a pre-election giveaway by putting his "personal stamp" on a package designed to cement recovery.

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Mail Online UK Darling finally comes clean on cuts: Chancellor vows to slash spending more than Thatcher - 34 mins ago
Observer Darling: we will cut deeper than Thatcher - 2 hrs ago
Times Online Streetwise: After the Budget - 8 hrs ago Budget Draws Election Lines - 17 hrs ago
The EconomistBagehot: With a whimper - 17 hrs ago
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