Pre-Budget Report Brings NI Rise

National Insurance contributions are to be increased under the Government's pre-Budget report, which was published today.

Chancellor Alistair Darling said the 0.5p increase would come into effect from 2011.

He also announced an 1% pay squeeze for public sector workers.

Value Added Tax will return to 17.5% in January, following a 2.5% decrease imposed prior to last Christmas.

Bankers' bonuses were targeted in the report, the last budgetary outlay before next year's general election.

A one-off 50% tax will be introduced for bank bonuses of more than £25,000.

Mr Darling has frozen a mooted 1p rise in corporation taxes, and increased the basic state pension by 2.5% from next year.

He said the Chancery expects to see a return to economic growth at start of 2010, insisting Dubai shows just how fragile economies around the world still are.

The Chancellor said he wanted to promote growth without "wrecking" recovery.

Opposition politicians accused the government of having "ducked" crucial financial decisions.

Mr Darling (pictured) insisted his pre-Budget would protect those on low-incomes, with middle-earners paying more depending on their circumstance.

"The biggest burden will fall on those with the broadest shoulders," he said.

According to the Chancellor, the UK has been offered "two competing visions" entering the next election.

He said the choice was between going for growth or putting recovery at risk.

Mr Darling predicted the UK economy would shrink by 4.75% this year.

In April's Budget the Chancery had estimated this would stand at around 3.5%.

Public deficit estimations have also increased by £3bn. Mr Darling said government debt was now £178bn compared with the earlier predicted £175bn shortfall.

Despite being unable to say where the public spending axe would fall, Mr Darling indicated frontline services would be protected.

He proposed a freeze on annual public sector pay rises, which would remain at 1% for the next two years.

Mr Darling said £1bn would be saved by capping government pension contributions to local government workers, health care staff and other civil servants.

The 2010 corporation tax rate has remained unchanged.

Speaking in the Commons today, Shadow Chancellor George Osborne said Gordon Brown's administration "have lost all moral authority to govern".

"No one will ever believe a word they say on the economy again," said the Tory frontbencher.

Vince Cable, the Lib Dem financial spokesman, dismissed the report as an election manifesto, when a national economic plan was needed.

(PR/BMcC)