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Tories attack 'reckless' Darling Tories attack 'reckless' Darling
(about 1 hour later)
The Conservatives have accused Chancellor Alistair Darling of taking a "reckless" gamble with the UK's finances in his pre-Budget report.The Conservatives have accused Chancellor Alistair Darling of taking a "reckless" gamble with the UK's finances in his pre-Budget report.
Shadow chancellor George Osborne said the country faced "huge risks" and a "trillion-pound" public debt.Shadow chancellor George Osborne said the country faced "huge risks" and a "trillion-pound" public debt.
The government says many people will gain from next week's VAT cut and that it will act as a boost to spending.The government says many people will gain from next week's VAT cut and that it will act as a boost to spending.
Mr Darling told the BBC he was not prepared simply to "let the recession take its course".Mr Darling told the BBC he was not prepared simply to "let the recession take its course".
'Intake of breath' Income tax
In his report, the chancellor unveiled plans for record borrowing.In his report, the chancellor unveiled plans for record borrowing.
He said VAT would be cut from 17.5% to 15% from next Monday for 13 months, to encourage spending.He said VAT would be cut from 17.5% to 15% from next Monday for 13 months, to encourage spending.
To pay for that in future years Mr Darling 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. There would also be a sharp slowdown in public spending growth.To pay for that in future years Mr Darling 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. There would also be a sharp slowdown in public spending growth.
The Conservatives are demanding a full parliamentary debate on the measures in the pre-Budget report.The Conservatives are demanding a full parliamentary debate on the measures in the pre-Budget report.
They argue that, given its importance, it deserves the same level of scrutiny as a full Budget.They argue that, given its importance, it deserves the same level of scrutiny as a full Budget.
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." Mr Osborne told BBC Radio 4's Today programme that making banks pass on interest rate cuts to firms was more important than a temporary VAT reduction.
He said: "I think you could directly insure - for a premium to protect the taxpayers' interest - lending from banks to businesses to get credit flowing, to keep people in work, to stop businesses folding.
"These measures would do far more than a 2.5% cut in VAT - a temporary cut which would be paid for later with massive tax rises coming down the track."
'Intake of breath'
Mr Osborne added that he would help families by freezing council tax - paid for by savings within government.
He said: "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 [the government] are taking a huge risk with the public finances."He also said: "They [the government] 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. Mr Osborne added: "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." People earning less than £40,000 won't be paying more. The burden really is falling on people on higher incomes Alistair Darling
Lending "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."
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, but the government argues 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. Mr Darling is gambling that an increase in borrowing will diminish the downturn.
Mr Osborne said making banks pass on interest rate cuts to firms was more important than a temporary VAT reduction. 'Prepared to help'
He denied that the New Labour project - which ruled out raising income tax for high earners - was dead.
Mr Darling told Today: "All governments, including the New Labour government of the last 10 years, redistribute money by definition."
He said: "People earning less than £40,000 won't be paying more. The burden really is falling on people on higher incomes."
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 budgetKEY 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
He added: "We can directly ensure lending from banks to businesses. These measures would do far more than a 2.5% cut in VAT." Mr Darling added: "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.
Mr Osborne said: "There's a difference between reckless lending and no lending at all, which is happening at the moment."
The government is gambling that an increase in borrowing will diminish the downturn.
Mr Darling denied that the New Labour project - which ruled out raising income tax for high earners - was dead.
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.
"Or do we simply say we are not prepared to do that and let the recession take its course?""Or do we simply say we are not prepared to do that and let the recession take its course?"
On Monday, the chancellor outlined plans to double the national debt.On Monday, the chancellor outlined plans to double the national debt.
Borrowing was 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, he said.Borrowing was 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, he said.
Alcohol and tobacco
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.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.
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.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.
Liberal Democrat Treasury spokesman Vince Cable said the measures did not go far enough and that he doubted that the VAT cut - which will cost £12.5bn - would be sufficient to give the economy a boost.Liberal Democrat Treasury spokesman Vince Cable said the measures did not go far enough and that 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. He said the government "had to do something", but added: "Our criticism is about the way they did it.
He told the BBC the build-up to the pre-Budget report had given people the idea there would be temporary tax cuts to be financed "by very wealthy people". "We think the tax cuts should have been concentrated on low-paid workers, people on low, middle incomes, cutting their income tax on a permanent basis and financing it from the top end of the scale."
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."