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Tories demand pre-Budget debate Tories attack 'reckless' Darling
(30 minutes later)
The Conservatives are calling for a full parliamentary debate on the pre-Budget report as attention turns to how many people will gain or lose from it. The Conservatives have accused Chancellor Alistair Darling of taking a "reckless" gamble with the UK's finances in his pre-Budget report.
The Tories say Monday's statement was a Budget in all but name and needs every bit as much parliamentary scrutiny. Shadow chancellor George Osborne said the country faced "huge risks" and a "trillion-pound" public debt.
There is close to a consensus that many people will experience short-term gain from next week's cut in VAT. The government says many people will gain from next week's VAT cut and that it will act as a boost to spending.
But shadow chancellor George Osborne told the BBC the government was taking "huge risks" with public finances. But the Tories are demanding a full parliamentary debate on the measures in the pre-Budget report.
And the Tories argue more people will lose out under a National Insurance rise in 2011 than the government says. 'Intake of breath'
In his report, Chancellor Alistair Darling unveiled plans for record borrowing and VAT cuts to try to stave off a long recession. In his report, Chancellor Alistair Darling unveiled plans for record borrowing.
He said VAT would be cut from 17.5% to 15% from next Monday for 13 months, in an effort to boost spending. KEY POINTS VAT cut by 2.5 percentage points45% tax rate on earnings over £150,000 from 2011All National Insurance to go up by 0.5% from 2011Economy to shrink by up to 1.25% next yearBorrowing to hit record £118bnPublic spending growth cut to 1.2%Phased increase in vehicle excise duty£60 Christmas gift for pensioners class="" href="/1/hi/uk_politics/7746188.stm">At-a-glance: Pre-Budget report class="" href="/1/hi/uk_politics/7746912.stm">Analysis: A political budget He said VAT would be cut from 17.5% to 15% from next Monday for 13 months, to encourage spending.
But he also said that from 2011, National Insurance would rise by 0.5% and there would be a new 45% tax rate for earnings above £150,000. He also said that, from 2011, National Insurance would rise by 0.5% and there would be a new 45% tax rate for earnings above £150,000.
Mr Osborne told BBC Radio 4's Today programme: "I think there was a big intake of breath by the nation when they realised what the bill for the last 10 years is and that we are all saddled with a truly huge debt."
He also said: "They are taking a huge risk with the public finances."
Mr Osborne said: "I don't believe that the way through this recession is to tell people there is a massive tax bombshell coming down the track.
"I think that will have an effect on behaviour, it will make a recovery more difficult... We can see what a mess they have left this country in."
KEY POINTS VAT cut by 2.5 percentage points45% tax rate on earnings over £150,000 from 2011All National Insurance to go up by 0.5% from 2011Economy to shrink by up to 1.25% next yearBorrowing to hit record £118bnPublic spending growth cut to 1.2%Phased increase in vehicle excise duty£60 Christmas gift for pensioners At-a-glance: Pre-Budget reportAnalysis: A political budget
The Tories say people earning £20,000 and above will be worse off partly as a result of the National Insurance increase.The Tories say people earning £20,000 and above will be worse off partly as a result of the National Insurance increase.
The government says only those on incomes of £40,000 and above will lose out.The government says only those on incomes of £40,000 and above will lose out.
But Mr Osborne said the UK faced a "trillion-pound" public debt under Mr Darling's plans. Mr Osborne said making banks pass on interest rate cuts to firms was more important than a temporary VAT reduction.
He told BBC Radio 4's Today programme: "I think there was a big intake of breath by the nation when they realised what the cost of the last 10 years was and that we are all saddled with a truly huge debt." He added: "We can directly ensure lending from banks to businesses. These measures would do far more than a 2.5% cut in VAT."
He also said: "They are taking a huge risk with the public finances." Mr Osborne said: "There's a difference between reckless lending and no lending at all, which is happening at the moment."
Mr Darling told Labour backbenchers on Monday night that he agreed with Mr Osborne on one thing - that voters would now face a stark political choice at the next election. The government is gambling that an increase in borrowing will diminish the downturn.
The government is gambling that a huge increase in borrowing will diminish the downturn, but if it gets it wrong, it is Labour's election prospects, as much as the economy, that will suffer. Mr Darling denied that the New Labour project - which ruled out raising income tax for high earners - was dead.
The chancellor outlined plans to double the national debt - borrowing is set to reach £118bn by the end of 2009, before starting to come down - with the books not to be balanced again until 2015/16. We don't think it's going to work and we don't think it's affordable Phillip Hammond, shadow chief secretary to the Treasury PRE-BUDGET REPORT class="" href="http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/24_11_08_pbr_completereport.pdf">Report in full Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader. href="http://www.adobe.com/products/acrobat/readstep2.html">Download the reader here
Mr Darling also slashed economic growth forecasts for next year from 2.75% to between minus 0.75% and minus 1.25% - the biggest downward revision on record. He told Today: "What matters more to people at the moment is are we prepared to help them and their businesses and the country as a whole get through this difficult period.
The pre-Budget report also contained announcements of a duty rise on alcohol, tobacco and petrol duty, to cancel out the effect of the VAT reduction. "Or do we simply say we are not prepared to do that an let the recession take its course?"
Mr Osborne said that the rise in National Insurance contributions was a tax on the jobs and incomes of middle Britain and Mr Darling was trying to borrow his way out of debt. On Monday, the chancellor outlined plans to double the national debt - borrowing is set to reach £118bn by the end of 2009, before starting to come down - with the books not to be balanced again until 2015/16.
Speaking about the package of measures, the shadow chief secretary to the Treasury, Phillip Hammond, told the BBC: "We don't think it's going to work and we don't think it's affordable. Mr Darling also cut economic growth forecasts for next year from 2.75% to between minus 0.75% and minus 1.25% - the biggest downward revision on record.
"What we do know is that anybody on an income of £20,000 or more is going to pay for this reckless gamble through higher taxes after the general election throughout the next Parliament." PRE-BUDGET REPORT class="" href="http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/24_11_08_pbr_completereport.pdf">Report in full Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader. href="http://www.adobe.com/products/acrobat/readstep2.html">Download the reader here The pre-Budget report contained announcements of a duty rise on alcohol, tobacco and petrol duty, to cancel out the effect of the VAT reduction.
For the Liberal Democrats, Vince Cable said the measures did not go far enough and he doubted that the VAT cut - which will cost £12.5bn - would be sufficient to give the economy a boost.For the Liberal Democrats, Vince Cable said the measures did not go far enough and he doubted that the VAT cut - which will cost £12.5bn - would be sufficient to give the economy a boost.
"What I fail to see is how the economy gets a major stimulus for, for example, a £5 cut in a £220 imported flat screen television or a 50p cut in a £25 restaurant bill," he said."What I fail to see is how the economy gets a major stimulus for, for example, a £5 cut in a £220 imported flat screen television or a 50p cut in a £25 restaurant bill," he said.
He told the BBC the build-up to the pre-Budget report had given people the implication there would be temporary tax cuts to be financed "by very wealthy people".He told the BBC the build-up to the pre-Budget report had given people the implication there would be temporary tax cuts to be financed "by very wealthy people".
But he added: "The package is nothing of the kind. The people who are going to have to pay for this are people who pay National Insurance."But he added: "The package is nothing of the kind. The people who are going to have to pay for this are people who pay National Insurance."