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Darling delivers 'stability' Budget
Alistair Darling has said his first Budget will ensure "stability now and in the future" as the global credit crunch bites on the economy.
The chancellor told MPs on Wednesday his annual statement on the public finances had at its heart "core values of fairness and opportunity" and would seek to "end child poverty in a generation".
Darling was speaking after the Bank of England on Tuesday put £10bn into the money markets as part of an international move to combat the global downturn.
He accepted that "Britain, with its central role in the world's financial system, is no exception" to the "world economic slowdown".
But he said the UK was "better placed than other economies to withstand" the turbulence.
Growth
While the Treasury downgraded its official growth forecast for 2008 and 2009 from that predicted last year, Darling reported: "The British economy will continue to grow through this year and beyond."
He estimated that growth this year would be between 1.75 and 2.25 per cent, down from his previous forecast of between two and 2.5 per cent.
However, the chancellor said this would rise to between 2.25 and 2.75 per cent in 2009, and further still in 2010.
Darling insisted that the government was meeting its borrowing rules on balancing the budget over the economic cycle and borrowing only to invest, although this excludes the government's liabilities on Northern Rock.
He also said that while inflation will exceed targets this year, it will return to the Treasury's two per cent target in 2009.
Fuel
The statement had been trailed as a "green Budget" that would help curb carbon emissions and reduce the impact on the environment.
As expected the chancellor threatened action on single-use plastic bags if retailers do not reduce their use.
However amid rising oil prices, a two pence rise in fuel duty due to come into force in April was postponed until October in order to ease the pressure on motorists and firms.
But fuel duty will now rise by half a pence in real terms from 2010 onwards.
And Darling announced plans for a zero rate of car tax in the first year for new, low emission cars but a higher first year rate on the most polluting cars.
On domestic energy, the Treasury has been trying to broker a deal with gas and electricity suppliers to lower prices for those on low incomes suffering from fuel poverty, such as the elderly and customers who use more expensive pre-payment meters.
And if a voluntary deal cannot be reached Darling warned that the government will legislate "as necessary".
To help the elderly with rising fuel costs and improve "fairness", Darling said he would this year raise the value of the winter fuel payment from £200 to £250 for the over-60s and £300 to £400 for the over-80s.
Spending
Darling said the Budget reaffirmed commitments made in last year's comprehensive spending review, and made an "assumption" that spending would continue to rise by 1.9 per cent a year after 2011, below the predicted growth rate of the economy but continuing to deliver real-terms increases.
A priority will be working towards the government goal of halving child poverty by 2010 and eliminating it by 2020.
With ministers admitting that the target is currently off-track, a further £765m in the coming year and then £950m the following year was proposed, to take 250,000 more children out of poverty.
Darling pledged to ensure "that parents are better off in work than on benefits" through housing and council tax benefit reforms.
The chancellor also said that he will increase child benefit to £20 per week for the oldest child from April 2009, a year earlier than planned.
And higher tax credits for lower and middle income families will be introduced.
In education, more cash was announced for failing inner-city schools with tougher targets on the number of schools achieving the minimum expected standards.
Darling confirmed that the successful London Challenge scheme will be extended to areas outside the capital beyond Manchester and the Black Country, where it has already been trialled.
Extra funds were also unveiled for defence, with £2bn more for the armed forces on the frontline in Iraq and Afghanistan.
And on housing he proposed more long-term fixed-rate mortgages, shared-equity deals and help for key public sector workers.
Tax
The chancellor reminded taxpayers of the forthcoming two per cent cut in the basic rate of income tax to 20 per cent in April, announced by Gordon Brown in his final Budget last year.
However following a consultation he said charities could still levy 'gift aid' at 22 per cent for the next three years.
But turning to his own poorly-received pre-Budget report tax plans, Darling offered few concessions on his aim to charge non-domiciled residents an annual £30,000 fee from April.
But in a bid to offer stability he said there will be no changes to this regime in this parliament or the next.
Neither will his capital gains tax reforms, bringing in a flat-rate 18 per cent, be delayed beyond next month, although the "entrepreneurs' relief" proposed in January will also be introduced, meaning less money will be raised from the move than previously thought.
The chancellor also targeted sin taxes as a way to raise revenue, with alcohol duty to rise by six per cent above the rate of inflation next week and two per cent in each of the next four years.
The cost of cigarettes will also go up by 11 pence for a packet of 20 and cigars by four pence on a packet of five.
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