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Darling raises National Insurance Darling raises National Insurance
(about 1 hour later)
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.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, the chancellor also announced a bank bonus tax and a home boiler scrappage 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 said he wanted to promote growth without "wrecking" recovery.He said he wanted to promote growth without "wrecking" recovery.
But the Tories accused him of having "ducked" crucial decisions to get public finances back on track.But the Tories accused him of having "ducked" crucial decisions to get public finances back on track.
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 said "fairness" was the cornerstone of his plans, telling MPs: "Those on modest incomes are protected. Those on middle incomes will pay more depending on their earnings. The biggest burden will fall on those with the broadest shoulders."
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 class="" href="/2/hi/business/8395966.stm">Economic challenges for the parties class="" href="/2/hi/uk_news/politics/8403127.stm">LIVE: In text and video class="" href="/2/hi/uk_news/politics/8403636.stm">At-a-glance: The key points And in a foretaste of the looming general election battle, he said the choice was between going for growth or putting the recovery at risk - a choice between "two competing visions".
He said the economy would shrink by 4.75% in 2009 compared with his Budget estimate in April of 3.5% Spending cuts
But he was also forced to admit that the recession in the UK had been worse than he predicted last year.
He said the economy would shrink by 4.75% in 2009 compared with his Budget estimate in April of 3.5%.
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 LIVE: In text and video At-a-glance: The key points
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 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 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.
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. In his speech lasting just over 50 minutes Mr Darling also unveiled a series of belt-tightening measures including a cap on public sector pay rises of 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.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.And he identified saving of £5bn in five areas, including cuts to government IT and outsourcing prisons.
'Tax on jobs'
He also unveiled a one-off tax on bank bonuses over £25,000, which he said would raise £0.5bn.He also unveiled a one-off tax on bank bonuses over £25,000, which he said would raise £0.5bn.
The National Insurance announcement comes on top of plans unveiled in last year's pre-Budget report to increase the tax by 0.5% 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.
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 herePRE-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 the changes would raise £3bn a year.
Mr Darling said tackling unemployment, which he said would continue to rise for some time, would remain a top priority for the government. The move was immediately attacked by the CBI as an "extra tax on jobs" which would harm the UK's recovery.
In his speech, Mr Darling told MPs unemployment would continue to rise for some time, but stressed tackling it would remain the government's top priority.
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.
The minimum number of hours those over 65 need to work to receive Working Tax Credit is also to be reduced.
'Bingo and boilers'
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%.
Mr Darling also unveiled an extension of free school meals to more primary school children from low income families in England - and earned a cheer from Labour MP by announcing a crackdown on tax avoidance and evasion including the use of offshore tax havens.
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.
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The minimum number of hours those over 65 need to work to receive Working Tax Credit is also to be reduced. He also announced a freeze in the £325,000 inheritance tax allowance.
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%. 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. Shadow chancellor George Osborne attacked the credibility of Labour's figures, telling MPs: "They have lost all moral authority to govern today."
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. "Every family in the country is going to be forced to pay for years for this prime minister's mistakes."
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. He added: "No one will ever believe a word they say on the economy again."
Lib Dem treasury spokesman Vincent Cable said it was clear from Mr Darling's statement that the UK's economic position was "still very grave".
He said: "What we needed was a national economic plan and what we have got is an election manifesto."
He told MPs he welcomed "small" initiatives such as help for young people and environmental issues but joked: "This is a good Budget for bingo and boilers."
He said the government had been "over-dependent for its revenues on the fickle fortunes of the banking industry".