ALISTAIR Darling stepped up his war on banks and the wealthy yesterday, but he refused to announce a raft of gimmicky pre-election giveaways.
Delivering what is likely to be his last Budget, he continued to clobber the better-off by unveiling a new top rate of stamp duty.
Amid cheers from the Labour backbenches, Darling said he would hike stamp duty from four to five per cent on homes over £1m from April next year.
He will use the proceeds to help fund a two-year increase in the stamp duty threshold for first-time buyers, doubling it from £125,000 to £250,000 from today.
And the chancellor said he would freeze the inheritance tax threshold at its current level of £350,000 for a further four years, as he sought to paint a dividing line between Labour and the Tories, who have said they will scrap the levy on estates worth under £1m.
Many higher earners have already been hit by Labour’s tax on bank bonuses – a move that has raised the Treasury £2bn – and are bracing themselves for more to come.
From 6 April, those earning more than £150,000 will be hit by the new 50p top rate of tax, while everyone earning over £100,000 will see their personal allowance tapered away.
“From next month, the UK will rank second only to Italy in the G20 countries in terms of tax unattractiveness for a high earner,” said PricewaterhouseCoopers partner Sean Drury.
Darling offered no apology for squeezing the pips of Britain’s wealth creators, boasting that the top five per cent of earners had shouldered 60 per cent of tax rises since the start of the recession.
But despite the chancellor’s focus on the wealthy, he froze all personal tax allowances at £6,475.
Meanwhile, the banking industry expressed unease at the creation of a new quango with legal powers to force banks to lend to individual businesses. The new “credit adjudication service” is being set up to let firms who feel they have been denied credit unfairly to appeal their bank’s decision.
And the chancellor unveiled new lending targets for part-nationalised RBS and Lloyds Banking Group, telling them to lend an extra £90bn to businesses this year.
With a wary eye on jittery financial markets, Darling resisted pressure from Gordon Brown to use lower-than-expected annual borrowing to fund a series of headline-grabbing pre-election giveaways.
And he stuck by his forecasts of growth between 1-1.5 per cent this year, but slightly lowered his expectations for next year to between 3-3.5 per cent. That brings his expectations into line with the Bank of England’s, although independent economists still think he is being overly-optimistic.
The Treasury will borrow £167bn this year, undershooting Darling’s forecasts by £11bn. But this still amounts to a post-war high of 12 per cent of GDP, while national debt will hit £1.4 trillion – £56,000 per household – by 2014
Darling did unveil a handful of business-friendly measures, including a higher level of capital gains tax relief for entrepreneurs; a doubling of the annual investment allowance; and a reduction in business rates.