DRIVERS, drinkers and high-earners are the victims of what has been termed the gloomiest Budget since the Second World War, as Chancellor Alistair Darling set out measures he claimed would help young job-seekers and pensioners.
In a move that will anger motorists, he announced a surprise 2p hike per litre of fuel from September. The autumn rise comes on top of a 1.8p rise that came into effect this month.
Mr Darling insisted that, despite the economic downturn, the government would pursue its policy of redistribution, as he outlined plans to help the elderly whose pensions had been hammered by low interest rates, and the jobless.
He then broke a Labour manifesto commitment by imposing a new rate of income tax: 50 per cent for those on £150,000 or more. "Even in this time of global economic difficulty, we are determined to continue building a fairer society," he said.
Although the revenue raised will be outstripped by massive borrowing, the Chancellor set out how his policies would help the less fortunate.
The under-25s who are out of work for a year or more were promised a job, training or paid work experience. Mr Darling said the government was determined not to return to the days when a whole generation of young people found themselves "abandoned to a future on the scrapheap".
Child tax credits would go up by £20, with additional help for children with disabilities.
Reflecting the soaring unemployment figures, he also unveiled plans for higher statutory redundancy pay, which will go up from £350 to £380 a week.
Mr Darling also offered help to pensioners with "modest" savings, who have been hit by the record low interest rates.
He unveiled plans to increase the capital disregard limit on Pension Credit from £6,000 to £10,000 from November, which will allow pensioners to have more in savings before their level of help is reduced. The decision will see the 5.5 million pensioner households with savings of less than £10,000 gain an extra £4 a week on average.
Grandparents who are under retirement age, but who care for grandchildren will have their efforts counted against their entitlement to a basic state pension.
The winter fuel allowance will be maintained at the higher level of £250 for over-60s and £400 for over-80s for another year.
Other eye-catching measures included a 2 per cent above inflation rise on alcohol duty. According to the Treasury, the rise, effective from midnight last night, put 1p on a pint of beer or cider, 4p on a bottle of wine and 13p on a bottle of spirits. An angry Scotch Whisky Association said the rise was a blow to the industry "at the worst possible time".
Smokers were hit by a rise of 7p on 20 cigarettes.
As well as the new 50 per cent top tax for those taking home more than £150,000 a year, workers will also see their personal tax allowance reduced by £1 for every £2 earned over £100,000.
This would equate to an annual rise in tax of £2,790 for anyone earning £113,950 – or £233 extra a month, according to Grant Thornton accountants.
Opposition parties warned that more pain was to come for basic-rate taxpayers, as the hikes on high-earners could offset only a tiny proportion of the ballooning national debt, forecast to reach nearly 80 per cent of national income by 2013.
There was also a warning on the impact of scrapping pensions relief for higher earnings.
Marcus Hurd, head of corporate solutions at Aon Consulting, said the measure was likely to backfire and lead to a drop in revenue for the Treasury.
"The legislation could fail to generate any tax revenues, as those earning above £150,000 can circumvent this through salary sacrifice," he explained. "If this were to happen, the government would also lose out on National Insurance contributions."
There was help for the beleaguered car manufacturing industry. Mr Darling confirmed a heavily trailed scrappage programme, which would pay owners of cars more than ten years old up to £2,000 towards the purchase of a new car.
In other measures, the government is pledging £1 billion to boost the housing market, including an extension on tax exemptions for house purchases at the lower end of the market. For businesses, it is extending the timeframe to allow loss-making companies to reclaim taxes for the past three years, and doubling the main capital allowance rate to 40 per cent to encourage firms to bring forward investment programmes.
The announcement that will have the biggest impact will be the fuel price rise for motorists.
On top of the 2p per litre rise in September, drivers will face a 1 per cent above inflation rise in April for the following four years.
This will generate £3.6 billion in extra taxes for the Treasury over the next three years – £660 million more than Mr Darling's 50 per cent tax rate for people earning more than £150,000 a year.
The RAC said the increase in petrol and diesel prices was a "brutal blow for motorists".
AA president Edmund King said: "Drivers will be delighted that a scrappage scheme has been given the green light, but they will be furious that Mr Darling has landed a fuel duty bombshell to pay for it."
He went on: "In petrol alone, the UK consumes 64.5 million litres a day. A 2p rise in prices produces £1.3 million extra tax a day, or nearly £475 million over a year. So petrol sales alone will more than pay for scrappage."
the Liberal Democrats' Scotland spokesman, Alistair Carmichael, said: "It is also disappointing that this government is still not taking action on a fuel discount scheme for those in rural areas."
Sketch: Move over, Darling, at least the high Tory can get the doomed to smile IT WAS to be the most apocalyptic Budget for more than half a century. The catastrophic words turmoil, crisis, collapse were all set to go off like grenades. Alistair Darling, dubbed Mogadon Man for his boring delivery last year, was now the Grim Reaper. By the end of the his speech, the nation would be reaching for Prozac.
With a skittish inflection, the Chancellor spent nearly half of his 50-minute speech outlining the state of the world economy, the IMF forecasts and the G20 action, as MPs shuffled in their seats.
The ashen faces of Labour MPs and Gordon Brown's remaining special advisers said it all. Even Lord Mandelson, surveying the Commons scene from his lofty perch in the gallery above – he who told Britain to "cheer up" last week – looked like he wanted to throw himself off.
The mood of the House of Commons was edgy and depressed. MPs braced themselves for the latest onslaught of bad news. The Tories looked as worried as their Labour counterparts as they wondered whether the figures would be bad enough for them to try to throw the election.
Then came the statistics – like machine gun fire, they hit everyone in the guts and stuck in the craw. The Chancellor ran through them with the speed of a caller at a cattle auction.
And little wonder he did not want to dwell on them: the economy was set to contract by 3.5 per cent this year alone, he admitted, drawing gasps and whistles from both sides of the House.
But it was not all doom in the chamber. There were widespread guffaws and merriment when Mr Darling suggested the economy would recover by 2010 – yes, next year – to grow by 1.25 per cent.
Perhaps like the way Japan recovered after Nagasaki and Hiroshima, Britain too will rise from the ashes once it has been levelled to the ground.
The roars, cheers and jeers in the chamber on Budget day are usually deafening. Yesterday, the news was greeted with the deafening silence.
It fell to David Cameron, the Tory leader, to breathe life into the Commons corpse, managing the perfect balance between anger and swagger. If the Chancellor was the undertaker, DC was the comedian.
"The Chancellor told us about his scrappage scheme. Let me see if I can get this right. You take something ten years old, completely clapped out, it pumps out hot air, pollutes its surroundings – it is absolutely ripe for the knacker's yard. What a brilliant idea."
Poring over the figures, he said: "Let's turn to the IMF – he may have to."
He demolished the Chancellor's Budget forecasts with the confidence of an Old Etonian. Note to Ma and Pa: money well spent.
What was the point of another 14 months of the government of the "living dead", he asked, as MPs from the benches opposite blinked at him like zombies.
The only colour in the chamber came from the purple robes of the Bishop of Carlisle. The reason for his attendance was clear: he was in the Commons to read the damned their last rites.
BUDGET 2009: FULL COVERAGE•
Slideshow: The Budget in graphics•
Darling bounces UK deep into debt•
Britain to sink into £1 trillion debt hole next year•
Analysis: Chancellor's projections for growth a real gamble•
Swinney says cuts will lead to loss of 9,000 jobs•
Energy: Boost for North Sea fields is welcomed but detail needed•
Whisky: Few cheers as duty rise comes at the worst time, say whisky leaders•
Leader: Wait-and-see Budget shows lack of leadership•
Cartoon by Iain Green The full article contains 1597 words and appears in The Scotsman newspaper.
