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Chancellor of the Exchequer Alistair Darling 300
TAXES will rise and 5m public-sector workers face a real-terms pay cut, after a “mini-Budget” that promises many years of pain ahead – whoever wins the election.
Chancellor Alistair Darling announced a 1% hike in National Insurance contributions in 18 months’ time for employers, employees and the self-employed– double the expected increase.
It will leave anyone earning £25,000 around £130-a-year worse off.
And he slapped a 1% cap on pay deals for teachers, doctors, nurses, police officers, civil servants and council workers for two years from 2011, a rise that will be more than wiped out by inflation.
The Conservatives immediately branded the pre-Budget report (PBR) a “catastrophe”, while the unions swiftly warned of industrial action from low- paid staff who felt “betrayed”.
As expected, Mr Darling hit high- rolling bankers with a one-off 50% “supertax” on bonuses above £25,000 – but there was precious little other good news for gloomy Labour MPs.
Furthermore, not all of the pain is delayed until after the election, expected next May. With VAT rising back to 17.5% in January, there will be New Year increases at the petrol pumps and in the shops.
The Chancellor did announce free school meals for 500,000 poorer families, small spending rises on schools, hospitals and policing and that state pensions will rise by £2.40 – or 2.5% – next April.
And there was a surprise pledge to extend the electrification of the Liverpool-Manchester rail line, an upgrade now stretching to Preston.
But the Tories described the pension rise as a “con”, because the funding for it was simply brought forward from April, 2011.
Mr Darling was also forced to admit the recession had been much deeper than he had predicted. Output is now expected to plunge by 4.75% this year, instead of 3.5%.
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