Wednesday, March 24, 2010

Britain’s Chancellor of the Exchequer, Alistair Darling, today unveiled the country’s final annual budget before the general election. The biggest announcements included abolishing stamp duty on homes under £250,000 for first-time buyers, whilst increasing it to 5% on homes over £1 million. In his statement to the House of Commons, the Chancellor claimed that the Labour government had made the right calls in countering the global recession, but warned that introducing cuts too early would jeopardise the recovery.

Opposition leader David Cameron attacked the Budget, saying that the headline stamp duty plans were stolen from his own Conservative party. He criticised the amount of government debt, expected to be £167 billion this year, pointing out that it was more than every previous Labour government’s borrowing added together. Cameron continued his call for spending cuts to decrease the deficit, saying it was time for a “radical change of direction”. Darling however maintains that it is too soon.

“I know there are some demanding immediate cuts to public spending,” said the Chancellor to the Commons. “I believe such a policy would be both wrong and dangerous. To start cutting now risks derailing the recovery – which is already bringing down borrowing more rapidly than expected.” This year’s expected government debt is less than the £178 billion that was forecast in December 2009’s pre-Budget report.

There will be an estimated 2.2% real terms rise in government spending this year, and several spending announcements were made. However Darling warned that cuts will follow after 2011, and could be “the toughest for decades”. The Conservatives have said that if they win the upcoming election, they will introduce an “emergency Budget” less than 50 days after taking office.

Among the plans announced by the Chancellor today are a green investment bank to support renewable energy and low-carbon industries. This will have £2 billion, half raised by sale of government assets, including the Channel Tunnel Rail Link, and half raised from private investment. Royal Bank of Scotland and Lloyds will also have to provide loans worth £94 billion to businesses, with small and medium sized companies receiving at least half of this. These companies will also have access to a new credit adjudicator to oversee banks’ decisions on loans.

There will be a sharp rise of 10% in tax on cider, with wine, beer and spirit duties rising at 2% above inflation as planned. These changes will occur from midnight on Sunday, and tax on alcohol is set to increase a further 2% for two years from 2013. The previously scheduled increase in fuel duty will still happen, but will now be staggered over a longer period.

Other changes include a freeze of the threshold for inheritance tax for the next four-years, whilst higher winter fuel payments for pensioners will be maintained for another year.