Budget 2010: Darling turns screw on the middle classes - Video and podcast

CHANCELLOR Alistair Darling turned the screw on the better off today as he set out the battle lines for the General Election.

MAIN POINTS

Stamp duty to be scrapped for first time buyers on homes up to 250,000

Five per cent levy for those buying homes worth 1m or more

Another 2.5bn stimulus package

Fuel duty rises staggered through until next January

Hikes on tobacco duty and on beer, wine and spirits

Economy growth forecast lowered for 2011 to 3-3.5%.

Inflation next year forecast to be back to 2%.

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He gave a helping hand to first time buyers, confirming that the threshold for stamp duty on home buying would double from 125,000 to 250,000 from midnight tonight.

But to cheers from Labour MPs he also announced that the move would be funded through an increase in stamp duty to 5% for residential property over 1 million from April next year.

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There was further bad news for higher earners - already facing a 50% tax rate on earnings over 150,000 - when Mr Darling announced the end of some personal allowances.

He said that for people with incomes over 100,000 a year - the top 2% - the value of their personal allowances would gradually be removed.

He also said tax relief on pensions will be restricted from next year, but again only for those with incomes above 130,000 a year.

Conservative leader David Cameron accused Mr Darling of stealing Tory policies on Stamp Duty and an extra tax on strong cider.

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He said: "The only new ideas in British politics are coming from this side of the House."

He went on: "Labour have made a complete mess of the British economy and they have done nothing to clear it up."

He added: "They have doubled the national debt and on these figures they are going to double it again."

And taunting Gordon Brown he said: "The biggest risk to the recovery is five more years of this Prime Minister."

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But the Tories faced an awkward moment when Mr Darling announced a deal to clamp down on tax avoidance in Belize, where Tory deputy chairman Lord Ashcroft, who has non-dom tax status, is based.

The announcements affecting the better off are likely to be seen as part of Labour's election strategy, with the Tories - still seen by some as the party of the privileged - being challenged to oppose the moves.

Justifying the measures, the Chancellor told MPs: "Looking across all the tax rises since the beginning of this global crisis, 60% of them will be paid for by the top 5% of earners.

"We have not raised these taxes out of dogma or ideology. We are determined to ensure our overall tax regime remains competitive.

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"But I believe those who have benefited the most from the strong growth in incomes in past years should now pay their fair share of tax."

There was limited good news for motorists, who are already facing soaring fuel costs.

Mr Darling said he would stagger next month's scheduled 3p per litre increase in fuel duties - with the tax rising by a just a penny in April with another penny in October and the final instalment in January next year.

There were no shocks in general for drinkers and smokers.

Duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also increase by 2% above inflation for two further years from 2013.

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Tobacco duty will increase from today by 1 per cent above inflation and then increase by 2 per cent in real terms each year until 2014.

But for cider drinkers Mr Darling announced a 10% duty rise above inflation from midnight on Sunday.

And he said that in September changes will be made to the definition of cider to ensure specific strong ciders are taxed more appropriately.

Mr Darling said that stronger than expected tax receipts meant that Government borrowing would be 167 billion this year - 11 billion down on the 178 billion he predicted in the Pre-Budget Report (PBR) in December.

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He said that the debt would continue to fall faster than previously forecast - dropping to 74 billion in 2014-15, down 8 billion on his earlier prediction.

The Chancellor said that he was standing by his forecast that the economy would grow by 1 to 1.5% this year although he slightly downgraded his prediction for next year to 3 to 3.5% compared to the 3.5% in the PBR.

Mr Darling set out plans to move 15,000 civil servants out of London as part of the efficiency savings the Government will need to achieve to manage down the debt.

He said he was ordering the part-nationalised banks, Lloyds and Royal Bank of Scotland, to extend an additional 94 billion in lending to businesses.

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The Chancellor announced a 2 billion "green" investment fund to finance projects such as wind farms and other renewable energy sources.

For younger workers - who have been particularly hard hit by rising unemployment - the Chancellor extended the guarantee of a job or training for every 18 to 24 year-old after six months out-of-work.

This was to run until March next year but Mr Darling said that because unemployment had been lower than forecast, the cost had been lower than expected.

He went on: "I have therefore decided to use the money saved to extend our guaranteed offer to young people until March 2012."

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He also confirmed a guarantee that everyone can have a basic bank account - a move designed to combat financial exclusion

He said the measure would mean, over the next five years, up to a million more people will have access to bank accounts.

The Chancellor said he was freezing the inheritance tax threshold for another four years, in order to help pay for the costs of care for older people.

He said it was one of a series of "tough choices" which he had made in order to protect the economic recovery, which remained in its infancy.

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"The task now is to bring down borrowing in a way which does not damage the recovery or the frontline services on which people depend," he said.

"The challenge now is how we invest as a country to support the industries of the future and allow the talent of the British people to flourish."