'Growth, jobs and fairness' to shape pre-Budget Report

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Indy Politics

"Growth, jobs and fairness" will be the key elements of today's pre-Budget Report, Chancellor Alistair Darling told a special meeting of Cabinet today.

Mr Darling briefed senior colleagues at 10 Downing Street just hours ahead of the last PBR before the general election, in which he is widely expected to announce a one-off "supertax" on bankers' bonuses.

Gordon Brown told the meeting that the important issues for the PBR were "rebuilding the economy, cutting the deficit and protecting the frontline", the Prime Minister's spokesman told reporters.

Mr Brown's spokesman declined to discuss the contents of the PBR when he briefed journalists on this morning's hour-long meeting.

But it is expected that Mr Darling will unveil a series of measures designed to raise revenue as he admits that the Government's finances are in even worse condition than previously thought.

It is thought the Chancellor will confirm that economic performance has been worse than thought this year and public borrowing will rise even higher than the previous estimate of £175 billion.

And he will set out more details on how he intends to meet the commitment in the Government's Fiscal Responsibility Bill of halving the record deficit within four years.

The centrepiece of the package will be the widely-leaked proposals for a one-off windfall tax on banks' bonus pools, intended to recoup some of the billions of pounds spent shoring up the financial system.

Personal allowances are expected to be frozen, bringing thousands more into the higher rate of tax, and some analysts believe that he could signal future rises in VAT.

A scheduled increase in the inheritance tax threshold from £325,000 to £350,000 is also likely to be postponed. That move would be politically resonant, given Mr Brown's claim that Tory plans for IHT cuts have been drawn up "on the playing fields of Eton".

Employer, employee and self-employed National Insurance contributions of 0.5 percentage points scheduled for April 2011 could be brought forward to 2010.

But Mr Darling may have better news for green taxpayers, with experts predicting tax rebates on electric cars, home wind turbines and solar panels.

And reports suggest he may unveil a household boiler scrappage scheme modelled on the car scrappage incentive, which has been credited with shoring up the UK auto industry.

Conservative leader David Cameron said he feared Mr Darling would deliver a "pre-election report" rather than a Pre-Budget Report.

Mr Cameron told Sky News: "The central fact of this Pre-Budget Report is the massive size of our deficit. it is the biggest in our peacetime history... It is the budget deficit that this Government's incompetence has given us.

"We need to see early action about tackling it, but if all you have is promises about the future, then you are not dealing with the big, dark cloud hanging over our economy.

"This ought to be a day of reckoning, but I fear it will be a pre-election report, not a Pre-Budget Report."

Speculation that Mr Darling would protect funding for hospitals, schools and police - thereby increasing the pressure for cuts in other areas of state spending - was fuelled by Lord Mandelson today.

The Business Secretary acknowledged that measures in the PBR would not be "painless", but said Mr Darling had put together a "carefully balanced" package which "keeps us firmly on the road to recovery" from the recession.

"He has got to make clear we are going to prioritise and protect our frontline public services, like schools and hospitals and police, but he has also got to set out how, in coming years, public spending will be squeezed, because we have got to bring down borrowing, we have got to narrow the deficit," Lord Mandelson told GMTV.

"So it is not going to be painless what the Chancellor announces this afternoon, but nor is it going to be reckless."

Lord Mandelson said nobody wanted to drive bankers away from the City of London.

"They are important for our economy, they are important in the tax revenues they generate for the Exchequer but, on the other hand, we are seeing, in some respects, a return to the short-term bonus culture that got us into so much trouble in the past," he said.

"Therefore, I think it is reasonable for the Chancellor to deliver a message to the banks."

Shadow business secretary Kenneth Clarke said that an attack on bankers' bonuses would be a distraction from the real problems of the economy.

Mr Clarke told Sky News: "It's all tinsel really - because they will pay themselves in other ways.

"It's just the sort of stuff that Gordon and Peter (Mandelson) have insisted the Chancellor - who they didn't want to be Chancellor - put in."