Darling puts on the squeeze amid grim forecast

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Indy Politics

The Chancellor Alistair Darling today slashed his forecast for economic growth as he warned that global financial turbulence posed a "major risk". He told MPs in his first Budget statement that Britain was "better placed than other economies" and put up prices of cigarettes and alcohol.

After admitting he was forced to slash his forecasts for economic growth and announcing a big increase in Government borrowing, he unveiled how the Budget will affect voters:

* TRANSPORT: Fuel duty rise scheduled for April will be postponed until October. From April 2010, no car tax will be paid in the first year on cars that emit less than 130 grammes per kilometre of CO2, with a higher first-year rate for the most polluting cars - which might also be subject to a new "showroom tax". The Chancellor brought road pricing a step closer, setting aside new funding to develop technology that could underpin a national system and inviting tenders to test the system with the results expected next year.

* FAMILIES: Rules for housing and council tax benefits to change from October 2009, so parents are better off in work than on benefit. A working family with one child on the lowest income will gain up to £17 a week, lifting 150,000 children out of poverty. From April 2009, child element of the child tax credit for families on low and middle income to increase by £50 a year above inflation. From April 2009, child benefit for the first child increased to £20 a week a year earlier than planned. A family with two children earning up to £28,000 a year will be £130 a year better off. The Government to invest £765 million next year and a further £950 million the following year, taking 250,000 more children out of poverty.

* DUTY: 11p increase on pack of 20 cigarettes. Beer up 4p a pint, 3p on a litre of cider, wine up 14p per bottle, spirits up 55p a bottle - 6% above inflation. Alcohol duties will increase by 2% above the rate of inflation in each of the next four years.

* ENVIRONMENT: He would legislate next year to impose a charge on disposable plastic bags unless the retailers took action to curb their use. Climate Change Committee to advise the Government on whether to establish a new target of reducing carbon emissions by 80% by 2050, up from 60%. The first carbon budgets to 2022 will be announced alongside the Budget next year. New non-domestic buildings to become zero-carbon from 2019. Revenue from plane duty will be increased by 10% because aircraft emissions are forecast to grow.

* HOUSING: £8bn for new affordable and social housing. Key workers such as teachers and nurses, and first time buyers, will be able to borrow money from new-shared equity schemes from April. Stamp duty on shared-ownership homes will not be required until buyers own 80% of the equity in their home. Review of public sector land has identified sites for 70,000 more homes. Mr Darling said he wanted to see more flexible and affordable long-term fixed rate mortgages for 10, 20 or even 25 years.

* SKILLS: Government to provide a capital fund of £12.5 million to encourage more women entrepreneurs. Extra £60 million over the next three years to provide new opportunities for workers to gain new skills, including additional apprenticeships.

* TAX: "As the House will know, the basic rate of income tax will fall by two pence in April." But Mr Darling added the Government will implement a transitional rate of 22%, to allow charities to continue to claim gift aid at the current rate. This would deliver £300 million worth of relief, he said.

* WINTER FUEL PAYMENT: This year's payment for over-60s to rise from £200 to £250 and for the over-80s from £300 to £400.

* AIRPORTS: New measures at Heathrow and other airports to speed up the time taken to get through immigration control, using biometric technology.

On the economy:

* GROWTH: forecast for 2008 is 1.75% - 2.25%, -compared with the 2% to 2.5% predicted at the time of the Pre-Budget Report last October. Forecast for 2009 cut to 2.25-2.75% from 2.5-3%.

* INFLATION will rise in the short term because of higher oil and food prices. The target remains 2%.

* BORROWING: this year had come in lower than expected at £36 billion but was set to rise to £43 billion next year - an increase of £4.6 billion on his Pre-Budget Report forecast. This represents 2.9 per cent of national income, falling to 2.5%, 2%, 1.6% and 1.3% by 2012/13. The cost of servicing the national debt is 5% of total public spending. He insisted he would still meet the "golden rule" of only borrowing to invest and delivering balanced budgets over the course of the economic cycle.

* MARKETS TURBULENCE: The credit crunch posed a major risk to the world economy. Britain was better placed than other economies to withstand the slowdown.

* PUBLIC SPENDING in the coming three years to grow by 2.2%. This year, the Government expects to spend £2bn more supporting troops on the frontline - including around £900 million on military equipment."

* NON-DOMS: "For those non-domiciled individuals or families who have chosen to make Britain their home, I believe that it is right and fair that they should, after seven years, pay a reasonable charge to maintain the right to be taxed differently from other UK residents." The new charge would be implemented from April, with no further changes to the regime for the rest of this Parliament or the next.

The reaction:

* CONSERVATIVES; David Cameron dismissed Mr Darling's claims that the UK was well-placed to weather the global financial storm. The Tory leader said: "As this country enters troubled times it could hardly be worse prepared." He said Mr Darling delivered the Budget "with all the excitement of someone reading out a telephone directory". The Government should help people when times were tough instead it "kicks them when they are down". Figures in the statement "tell the story of just how badly prepared we are for the downturn".

* LIBERAL DEMOCRATS: Nick Clegg said: "The Chancellor is the Prime Minister's creature, struggling to clear up the mess left by his boss under instructions from Number 10. What we have seen today is an act of political ventriloquism. I would like to compliment the Prime Minister, I watched him very closely, his lips barely moved all the while the Chancellor was speaking." Proposals would not get the Government "anywhere near meeting its 2010 child poverty target" and the Budget failed the environment.