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Darling raises National Insurance Darling raises National Insurance
(20 minutes later)
National Insurance will go up by a further 0.5p from 2011, Chancellor Alistair Darling has announced. National Insurance will go up by a further 0.5p from 2011 and public sector workers face a 1% pay squeeze, Alistair Darling has announced.
In his final pre-Budget report before a general election, Mr Darling announced a public sector pay freeze, bank bonus tax and a home boiler srappage scheme. In his final pre-Budget report before a general election, the chancellor also announced a bank bonus tax and a home boiler scrappage scheme.
He also announced an increase in the state pension and a package of measures to help the unemployed. He said he wanted to promote growth without "wrecking" recovery.
He said the choice facing the country was "between securing the recovery or wrecking it". But the Tories accused him of having "ducked" crucial decisions to get public finances back on track.
In last year's pre-Budget report, Mr Darling increased all National Insurance contributions by 0.5% for all employees and employers. His latest announcement comes on top of that. Mr Darling said the public faced a choice between "two competing visions" - but he was also forced to admit that the recession in the UK had been worse than he predicted last year.
Mr Darling was also forced to admit that the recession in the UK had been worse than he predicted last year.
KEY POINTS National Insurance up by a further 0.5% from April 2011Economy to shrink by worse than expected 4.75% this yearNew 50% tax on banker bonusesHousehold boiler scrappage scheme1p rise in corporation tax for small firms scrappedTax rebates for electric cars and wind turbinesBingo duty falls from 22% to 20%State pension to rise by 2.5% next yearMore help for young unemployed Economic challenges for the parties LIVE: In text and video At-a-glance: The key pointsKEY POINTS National Insurance up by a further 0.5% from April 2011Economy to shrink by worse than expected 4.75% this yearNew 50% tax on banker bonusesHousehold boiler scrappage scheme1p rise in corporation tax for small firms scrappedTax rebates for electric cars and wind turbinesBingo duty falls from 22% to 20%State pension to rise by 2.5% next yearMore help for young unemployed Economic challenges for the parties LIVE: In text and video At-a-glance: The key points
He said the economy would shrink by 4.75% in 2009 compared with his Budget estimate in April of 3.5%He said the economy would shrink by 4.75% in 2009 compared with his Budget estimate in April of 3.5%
And the public finances were also deeper in the red with a deficit of £178bn this year compared with the £175bn he had predicted.And the public finances were also deeper in the red with a deficit of £178bn this year compared with the £175bn he had predicted.
Mr Darling has been under pressure to show how Labour would halve the UK's budget deficit in four years.Mr Darling has been under pressure to show how Labour would halve the UK's budget deficit in four years.
He claimed government action to pump money into the economy had made a "real difference" to families and businesses. VAT will return to 17.5% on January 1 as planned, with no other changes in VAT, the chancellor confirmed. He said he could not spell out in detail where the spending axe might fall - because the spending review has been delayed until after a general election - but said frontline public services would be protected.
He said unemployment in the UK would keep rising for some time but said promoting employment remained a top priority for the government. But also unveiled a series of belt-tightening measures including a cap public sector pay rises to 1% for two years from 2011 - angering trade unions.
He said contributions from the state to the pensions of teachers, local government and health workers and civil servants would be capped, saving £1bn a year.
And he identified saving of £5bn in five areas, including cuts to government IT and outsourcing prisons.
He also unveiled a one-off tax on bank bonuses over £25,000, which he said would raise £0.5bn.
PRE-BUDGET REPORT DOCUMENTS Documents in full [3.87MB] Most computers will open this document automatically, but you may need Adobe Reader Download the reader here
The National Insurance announcement comes on top of plans unveiled in last year's pre-Budget report to increase the tax by 0.55 in April 2011, although the point at which National Insurance starts will be raised so that no-one earning less than £20,000 will pay it.
Mr Darling said tackling unemployment, which he said would continue to rise for some time, would remain a top priority for the government.
From next month, no-one under 24 needs to be unemployed for longer than six months - down from the current 12 months - before being guaranteed work or training.From next month, no-one under 24 needs to be unemployed for longer than six months - down from the current 12 months - before being guaranteed work or training.
Mr Darling also unveiled guarantees of a training or education place for every 16 and 17-year-old to be available to school-leavers again in September 2010.Mr Darling also unveiled guarantees of a training or education place for every 16 and 17-year-old to be available to school-leavers again in September 2010.
He also announced that a 1p increase in Corporation Tax for smaller companies is to be deferred, leaving the 2010 tax rate unchanged.He also announced that a 1p increase in Corporation Tax for smaller companies is to be deferred, leaving the 2010 tax rate unchanged.
GUIDE TO PRE-BUDGET REPORT Each year the chancellor delivers two reports to MPs, updating them on the state of the economy and planned fiscal changes.GUIDE TO PRE-BUDGET REPORT Each year the chancellor delivers two reports to MPs, updating them on the state of the economy and planned fiscal changes.
The pre-Budget report (PBR) takes place in the autumn with the Budget each spring.The pre-Budget report (PBR) takes place in the autumn with the Budget each spring.
This year's PBR will be Mr Darling's third since he became chancellor in June 2007 and, with an election imminent, his most important.This year's PBR will be Mr Darling's third since he became chancellor in June 2007 and, with an election imminent, his most important.
Nick Robinson's view Send us your commentsNick Robinson's view Send us your comments
The minimum number of hours those over 65 need to work to receive Working Tax Credit is also to be reduced.The minimum number of hours those over 65 need to work to receive Working Tax Credit is also to be reduced.
The basic state pension will rise by 2.5% in April, a real-terms increase of nearly 4%. From next year's Budget, Bingo Duty to be cut from 22% to 20%.The basic state pension will rise by 2.5% in April, a real-terms increase of nearly 4%. From next year's Budget, Bingo Duty to be cut from 22% to 20%.
Other green initiatives in the report included tax rebates for electric cars and wind turbines and a boiler scrappage scheme along the lines of the car scrappage scheme.Other green initiatives in the report included tax rebates for electric cars and wind turbines and a boiler scrappage scheme along the lines of the car scrappage scheme.
The chancellor's statement sets the tone for the economic debate in the run-up to the election - which must be held by next June.The chancellor's statement sets the tone for the economic debate in the run-up to the election - which must be held by next June.
The Lib Dems argue neither of the main parties are being honest about the spending challenges facing the next government and the extent of cuts that will be needed.The Lib Dems argue neither of the main parties are being honest about the spending challenges facing the next government and the extent of cuts that will be needed.