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Darling unveils 50% top tax rate Tax rise as UK debt hits record
(about 2 hours later)
Alistair Darling has announced a new top tax rate of 50% for those earning more than £150,000 from next April. Alistair Darling has said the UK will have to borrow a record £175bn as he admitted the economy faces its worst year since the Second World War.
The chancellor unveiled the measure after delivering a stark Budget report on the state of the UK economy. The chancellor tore up a key New Labour election pledge by unveiling a new 50% top tax rate for those on £150,000.
He said debt would hit a record £175bn this year and the economy shrink 3.5% - its worst performance since 1945. He also cut future spending plans in a Budget which added 2p on fuel, 1p on a pint of beer and 7p on cigarettes.
But he is gambling on a swift recovery and unveiled measures including a £2,000 "car scrappage" scheme aimed at kick starting industry. The package would steer the UK through to recovery, he said. The Tories said the economy was in an "utter mess".
He is predicting the economy will start to grow again at the end of this year. Leader David Cameron said not enough had been done to get spending under control and "Britain simply cannot afford another five years of Labour".
But Conservative leader David Cameron said his speech revealed the "utter mess" the prime minister had made of the economy. The Budget received a cool reception in the City with the pound down - and the Confederation of British Industry said it did not set out a "credible and rigorous" path to recovery.
KEY POINTS 50% tax rate for earnings over £150,000Growth forecast revised downBorrowing increased£15bn 'efficiency savings'Clawing back tax relief on top earners' pension £2bn help for young unemployed£1bn to boost housing marketCar scrapping scheme Watch live: Video and text At-a-glance: Budget 2009KEY POINTS 50% tax rate for earnings over £150,000Growth forecast revised downBorrowing increased£15bn 'efficiency savings'Clawing back tax relief on top earners' pension £2bn help for young unemployed£1bn to boost housing marketCar scrapping scheme Watch live: Video and text At-a-glance: Budget 2009
He added that Mr Darling had not done enough to get spending under control and "Britain simply cannot afford another five years of Labour".
Liberal Democrat leader Nick Clegg described the Budget as a "mish mash of recycled announcements from a government skilled in raising false hopes and incompetent at delivering real help".Liberal Democrat leader Nick Clegg described the Budget as a "mish mash of recycled announcements from a government skilled in raising false hopes and incompetent at delivering real help".
The new top rate of tax is a change of plan from the pre-Budget report last year in which Mr Darling had proposed a new tax rate of 45%.The new top rate of tax is a change of plan from the pre-Budget report last year in which Mr Darling had proposed a new tax rate of 45%.
It is also being brought in a year earlier than planned "to pay for additional support for people now".It is also being brought in a year earlier than planned "to pay for additional support for people now".
BBC Political Editor Nick Robinson said Labour had ditched its manifesto pledge not to raise income tax before the next election in an effort to "wrongfoot" its opponents and cheer its core supporters.BBC Political Editor Nick Robinson said Labour had ditched its manifesto pledge not to raise income tax before the next election in an effort to "wrongfoot" its opponents and cheer its core supporters.
It also wanted to raise money, "although the Institute of Fiscal Studies has questioned whether increasing the top tax rate will raise much".It also wanted to raise money, "although the Institute of Fiscal Studies has questioned whether increasing the top tax rate will raise much".
In other Budget measures, petrol duty will increase by 2p per litre in September and then by 1p a litre above inflation each April for the next four years.In other Budget measures, petrol duty will increase by 2p per litre in September and then by 1p a litre above inflation each April for the next four years.
Alcohol duties will go up by 2% - about 1p a pint - from midnight. There will be an increase in tobacco duty of 2% from 6pm - adding about 7p to a packet of 20 cigarettes. Mr Darling said these measures will raise more than £6bn by 2012.Alcohol duties will go up by 2% - about 1p a pint - from midnight. There will be an increase in tobacco duty of 2% from 6pm - adding about 7p to a packet of 20 cigarettes. Mr Darling said these measures will raise more than £6bn by 2012.
That would help pay for a real terms boost in pensioners' income - including new pension recognition for grandparents who care for their grandchildren - and help for savers with ISAs.That would help pay for a real terms boost in pensioners' income - including new pension recognition for grandparents who care for their grandchildren - and help for savers with ISAs.
JobsJobs
There will also be more help to get people back into work quickly and support businesses and homeowners facing problems.There will also be more help to get people back into work quickly and support businesses and homeowners facing problems.
Everyone under the age of 25 out of work for 12 months or more will be offered a job or a place on a training scheme. In addition, the government will create or support up to 250,000 jobs in deprived areas.Everyone under the age of 25 out of work for 12 months or more will be offered a job or a place on a training scheme. In addition, the government will create or support up to 250,000 jobs in deprived areas.
BUDGET 2009 Complete Budget report [2.59MB] Most computers will open this document automatically, but you may need Adobe Reader Download the reader hereBUDGET 2009 Complete Budget report [2.59MB] Most computers will open this document automatically, but you may need Adobe Reader Download the reader here
Mr Darling also announced an expansion of sixth form and further education places.Mr Darling also announced an expansion of sixth form and further education places.
In his speech, Mr Darling confirmed the worst year for the economy since the Second World War with a 3.5% decline in 2009 - far worse than his pre-Budget forecasts.In his speech, Mr Darling confirmed the worst year for the economy since the Second World War with a 3.5% decline in 2009 - far worse than his pre-Budget forecasts.
Public borrowing will also soar to record levels as the Treasury wrestles with a toxic combination of falling tax receipts, higher spending and the cost of bank bail-outs.Public borrowing will also soar to record levels as the Treasury wrestles with a toxic combination of falling tax receipts, higher spending and the cost of bank bail-outs.
Stamp dutyStamp duty
But he made clear his plans depended on a rapid economic bounce-back - with a forecast of 1.25% growth next year rising to 3.5% in 2011.But he made clear his plans depended on a rapid economic bounce-back - with a forecast of 1.25% growth next year rising to 3.5% in 2011.
And he admitted that the economy would first face of period of deepening deflation with the Retail Price Index falling to a low of minus 3% by September.And he admitted that the economy would first face of period of deepening deflation with the Retail Price Index falling to a low of minus 3% by September.
The chancellor is also squeezing public spending in the future by saying it will grow by only 0.7% per year from 2011 - a lower growth rate than when Mrs Thatcher was in power.
Despite this the public finances will only balance by 2018 - two years later than previously forecast.
There was grim news on the jobs front ahead of the Budget, with unemployment figures showing the number of people looking for work has reached 2.1 million - its highest level since Labour came to power in 1997.There was grim news on the jobs front ahead of the Budget, with unemployment figures showing the number of people looking for work has reached 2.1 million - its highest level since Labour came to power in 1997.
Meanwhile, official figures showed that public borrowing soared to a record £90bn in the last financial year - almost 6.2% of national income and far higher than the £78bn prediction made by Mr Darling in his pre-Budget report last November.Meanwhile, official figures showed that public borrowing soared to a record £90bn in the last financial year - almost 6.2% of national income and far higher than the £78bn prediction made by Mr Darling in his pre-Budget report last November.
Mr Darling is expected to plug part of the gap in the public finances with £15bn of "efficiency" cuts from 2010 - after the next election - provoking anger from public service unions. Mr Darling said part of the gap in the public finances would be plugged by £15bn of "efficiency" cuts from 2010 - after the next election - provoking anger from public service unions.
He also announced he was extending the Stamp Duty holiday on properties sold for less than £175,000 until the end of the year as part of a £1bn package aimed at boosting house sales and building.He also announced he was extending the Stamp Duty holiday on properties sold for less than £175,000 until the end of the year as part of a £1bn package aimed at boosting house sales and building.
The government claimed Scotland would get an extra £104m from the Budget but the SNP said it would mean "a real terms cut in Scottish spending" of £500m that would cost 9,000 jobs.
The Welsh Assembly Government says it is facing a cut of more than £400m in its funding for next year as a result of the Budget. Opposition parties have called it "a huge blow" and warned that it will have have a major impact on frontline services.
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