CHANCELLOR'S STRATEGY:BRITISH CHANCELLOR of the exchequer Alistair Darling, who presented his final budget yesterday before the May general election, has announced stamp duty cuts for first-time buyers and new measures to triple bank lending to businesses.
The British government will cut £11 billion in spending in the coming year, but claimed that most of it could be done without cutting frontline services, bar the closure of a dozen courts and some other measures.
Mr Darling was able to avoid major tax increases on budget day by his decision late last year to announce that those earning more than £150,000 a year will pay a 50p tax rate from next month, along with national insurance reform and curbs on large pension contributions.
However, he said that tax allowances for those earning more than £100,000 will be gradually cut, while inheritance tax thresholds will be frozen for four years – a move which will affect tens of thousands.
But he did, as had been expected by some, raise the 18 per cent capital gains tax rate, which will encourage high-earners to divert income into capital gains to avoid the higher income tax rate.
Mr Darling’s ability to put a positive gloss on the treasury’s condition has been aided by lower than expected borrowing, which will finish for the year to April at £166 billion – the UK’s worst-ever result, but still better than the £188 billion originally predicted.
Some 15,000 civil servants will be decentralised out of London over the next five years, while the civil service as a whole will be cut by a third in the longer-term, the chancellor told the House of Commons.
He offered first-time buyers purchasing homes worth less than £250,000 a two-year reprieve from stamp duty, but this will be paid for by a 5 per cent rate on £1 million homes – a measure the Conservatives indicated last night they will not reverse, if elected.
However, Mr Darling’s contention that much of the work in dealing with the deficit can be achieved through economic growth, and rising tax receipts on the back of that, has been strongly questioned in many quarters.
British borrowing in the year from April will be £163 billion, he predicted, while it will fall to £131 billion the following year. By 2014/15, it will have fallen to £74 billion, Mr Darling claimed. “Should the economy do better we will be able to do more to reduce the deficit.”
While he has cut his growth prediction for the coming year in line with Bank of England estimates, Mr Darling insists that growth will be 3 per cent or more on average over the four-year period – sharply ahead of the predictions of the business community.
The spending cuts programme produced by government departments after Mr Darling’s speech has been sharply criticised for lacking detail and putting too much faith in a belief that savings can come from “efficiencies” and not cuts in services.
A fuel price increase due next month will be staggered over the next nine months. Cigarettes will be 15p more expensive. Wine goes up by 10p a bottle and spirits by 36p a bottle.
Cider will rise by 5p a litre for standard brews, and by more for higher-strength brands.
