Chancellor Alistair Darling gambled on business pulling the UK out of recession yesterday with a Budget of huge incentives for the industries of the future – and a 50% tax rate for top wage earners.
Duty rises on petrol, alcohol and tobacco were unveiled as he also targeted smokers, drinkers and motorists in his attempt to rebuild Britain’s battered finances.
Tory leader David Cameron accused Labour of making an “utter mess” of the economy, and the Liberal Democrats branded the Budget “a political supermarket sweep”.
The additional duty on spirits, beers and wines angered whisky producers. And tax concessions for the North Sea offshore industry were labelled a “token gesture” by opposition politicians.
Last night, a fresh row broke out between Holyrood and Westminster over the impact that public spending cuts will have in Scotland.
What Mr Darling labelled “a Budget for jobs” amounted to a huge mountain of debt.
He admitted government borrowing over the next five years will soar to a record of £703billion.
Mr Cameron accused the government of having written “a whole chapter” of history in red ink, and said ministers had allowed the country’s finances to get “completely out of control”.
Mr Darling pinned his hopes on a rapid recovery in the economy next year – but critics brushed these aside as “wishful thinking”.
He admitted public borrowing would soar to £175billion in the current year, or 12.4% of the UK’s annual economic output, with total net borrowing forecast to hit £696billion by 2012 to 2013, £240billion more than he predicted in November’s pre-Budget report.
The chancellor confirmed 2009 was the worst year for the economy since World War II – with output on course to fall 3.5% – but growth forecast at 1.25% next year.
But the International Monetary Fund said the UK will remain in recession next year and the economy will shrink nearly 0.5% more than Mr Darling forecast.
And the Confederation of British Industry said his figures look “too optimistic”.
Key measures in the Budget included:
£5billion efficiency savings in public services, rising to £9billion by 2012.
A new 50% top rate of income tax on earnings over £159,000 from next April.
Personal allowances tapered for those earning over £100,000 from 2011 and pension contribution relief curb-ed for those on £150,000.
Alcohol duties up 2% from midnight with a similar rise in tobacco duty.
A fuel duty rise of 2p per litre next September and 1p a litre more than inflation each April for the next four years.
And £1billion to be raised by closing tax loopholes.
Mr Darling also announced a £2,000 per car “scrappage” discount to encourage those with 10-year-old vehicles to buy new cars.
Giveaways included the continuation of the stamp duty holiday on properties sold for less than £175,000 until the end of the year, a £20 increase in the child element of tax credits, the state pension to go up in real terms, the winter fuel allowance for pensioners to continue and, in a move to help pensioners hit by low interest rates on savings, an increase in the amount they can own from £6,000 to £10,000 without affecting pension credit entitlement.
Mr Darling said current unemployment is running at 4.5% and promised £1.7billion for support services.
He offered a “guarantee” of a job or training place for everyone under the age of 25 out of work for a year, with the creation or support of 250,000 jobs at a cost of £250million on top of this year’s £260million and next year’s £400million.
Mr Cameron led a devastating attack on the Budget, insisting any claim that the government had made to economic competence was now “dead, over, finished”.
To huge cheers from Tory MPs, he said: “Today everyone can see what an utter mess this Labour government and this Labour prime minister have made of the British economy – the fastest rise in unemployment in our history, the worst recession since World War II, and the worst peacetime public finances ever known.”
Mr Cameron said the £348billion that Mr Darling planned to borrow over the next two years was more than had been borrowed by every government put together “since the Bank of England was first founded more than 300 years ago”.
Liberal Democrat leader Nick Clegg described the Budget as a “mish-mash of recycled announcements from a government skilled in raising false hopes but incompetent in delivering practical help”.
He added: “This Budget is a political supermarket sweep – a trolley full of rambling policies without a plan or any real likelihood the policies will be put into practice.
“The biggest disappointment is its failure to sort out Britain’s unfair tax system, to put money into people’s pockets to help them make it through this recession.”