Darling's budget 'for stability'

Chancellor Alistair Darling has delivering his first budget speech, postponing a 2p increase in petrol taxes until October and announcing charges on carrier bags.Taxes on tobacco and alcohol will increase above inflation.

James Goffin

Chancellor Alistair Darling has delivered his first budget speech, promising a budget for stability.

He has postponed the planned 2p rise in fuel duty until October, and confirmed the changes to income tax announced by Gordon Brown last year.

The basic rate of income tax will fall by 2p to 20p, but the 10p starting rate will be abolished.

There will be new laws to impose charges on carrier bags from 2009 if there is no voluntary arrangements he said, with funds raised going to environmental charities.

Road tax will be changed from 2010 with new bands, a new first-year rate free for low-emission cars.

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Tobacco taxes will rise, adding 11p to a packet of 20 cigarettes and 4p on five cigars.

Tax on alcohol will also rise by 6% over inflation with beer up 4p per pint, wine up 14p per bottle and spirits up 55p a bottle, with further rises promised for the future.

Mr Darling said the Government was committed to “turning welfare in to work and borrowing into wealth generation”, and said people claiming incapacity benefit would face work assessments in future.

On health spending, he said deaths from cancer had fallen by 10% since 1997 and promised long-term spending on public services would continue to increase.

The Government will spend an extra £200m to improve GCSE grades, including a five-year £30m project with the private sector to improve science teaching.

The Chancellor said that under the Tories the number of children living in poverty had doubled, but since 1997 the number of children in absolute poverty had halved and the number in relative poverty had dropped by 600,000.

He announced changes to income support and council tax benefit to make working families better off than those on benefit, worth around £17 a week.

Child benefit will rise by £11 for the first child from April 2009, and child tax credit will rise by £50 a year.

Housing rules would be changed to allow key workers like teachers and nurses to have easier access to shared equity schemes, and delaying stamp duty payments until those on the schemes own 80% of their property.

He said he would promote long-term fixed rate mortgages over 10 to 25 year terms.

The Commons heard that the UK was one of the few to meet its Kyoto emissions targets, and said “we need to do more, and the need to take action is urgent”.

He says the Government would consider cutting emission by 80% rather than the current 60%. Energy producers will be able to trade 100% of emissions allowances rather than the current 7%.

He said more than 1m would be employed in environmental industries.

Mr Darling announced new plans to support low-income families on pre-payment energy meters, and called for energy companies to invest three times the current £50m on “social tariffs” threatening legislation if necessary.

On savings he confirmed plans to increase the individual savings account annual limits to £7,200 for Maxi ISAs and £3,600 for Mini ISAs from April this year. He said there would be new incentives for low income families to save.

Corporation tax would be simplified he said, with the main rate falling to 28% as previous announced by Gordon Brown. There will be new rules on North Sea oil investment.

He also look at the feasibility of a target of 30% of Government spending going to small and medium-sized companies. There will be a £12.5m fund for women entrepreneurs.

He said over its lifetime the Government had doubled spending on overseas aid and made sustained improvements on defence spending, announcing £2bn spending on front line troops.

He paid tribute to service personnel in Iraq and Afghanistan.

The Chancellor said the British economy had been growing for more than a decade, the longest sustained growth in the country's history.

He predicts the economy will continue to grow despite global economic problems.

Moves to combat climate change and child poverty will not be sidelined by the financial challenges.

Mr Darling has told the Commons that Britain is the most stable economy in the G7 and has lower unemployment than Germany and Italy.

He said that average income in the UK is now second only to the United States.

The Chancellor said growth in the British economy will be faster than the US, Japan and the Euro area at between 1.75% and 2.25%, down from the previous 2-2.5 target.

“In the past inflation has overshadowed many Budgets. We have seen recent increases in world fuel and energy prices and the reforms we have made mean we can be confident of the inflation prospects,” he said.

“Inflation here will rise in the short term… but inflation is forecast to return to target in 2009.”

Energy prices have tripled since 2002 but overall inflation has remained lower he said.

Mr Darling said he will write to the Bank of England to re-confirm the Bank's 2% inflation target, and said the Government would still meet its “golden rule” on financing over the economic cycle.

Read the full speech

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