24/11/2008

VAT Slashed In Pre-Budget Report

Drinkers, smokers and drivers will fill the 'economic void' expected to be created by today's widely anticipated 2% VAT reduction - through increased taxation, it has been announced.

Presenting his pre-Budget report to the House of Commons, the Chancellor unveiled radical plans to slash VAT from 17.5% to 15% for 13 months. The cut will put a predicted £12.5bn into the pockets of UK consumers.

Alistair Darling urged retailers to pass on the Value Added Tax savings to customers as quickly as possible.

This move will be offset by increased taxes on alcohol, cigarettes and prices at the petrol pumps, Mr Darling told MPs.

Income tax will be raised for those earning more than £150,000 per annum, representing a 45% tax rate, as anticipated.

All National Insurance contributions will rise by 0.5% from 2011, the Chancellor said.

The temporary £120 allowance for people who lost out as a result of ending the 10% income tax rate will be made permanent, with the amount rising to £145.
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Government borrowing is set to rise this year to £78bn, almost double that for 2007.

Next year this will climb to £118bn, before starting to gradually come down.

Aid to stimulate smaller enterprises was also unveiled, with £1bn for a temporary Small Business Finance Scheme.

One hundred million pounds will be released to improve home energy efficiency, Mr Darling said.

Fifteen million pounds has also been pledged for the provision of debt advice across the UK.

The Chancellor suggested repossessions should be the "last resort" for mortgage lenders, adding that three months grace should be given to struggling homeowners.

Mr Darling promised a detailed scheme to boost UK mortgage supply by spring next year.

Vehicle excise duty will now be phased in, with a maximum increase of £5 next year.

The Tories reaffirmed their position on the Mr Darling's steps, claiming nation debt will rise to £1 trillion, which, according to Shadow Chancellor George Osborne, will create an "unexploded tax bombshell".

(PR/JM)

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