Chancellor Alistair Darling announced £15bn public sector ‘efficiency savings’ and slave labour schemes for youth in yesterday’s Budget.
This came as the latest figures showed a huge 177,000 increase in unemployment, bringing the jobless total to 2.1 million, in the first three months of this year.
Darling said public sector borrowing will be a larger than expected £175bn this year and warned the economy will shrink by a massive 3.5 per cent.
But he pledged that ‘the budget deficit will be halved in the next four years’.
He said: ‘From 2010, as the economy starts to recover, and the measures announced in November and today take effect, borrowing will fall to £173bn, then £140bn, £118bn and £97bn.’
He announced a new top tax rate of 50 per cent for those earning more than £150,000 from next April, but corporate tax relief will be increased.
Fuel duty will increase by 2p per litre in September and then by 1p a litre above inflation each April for the next four years.
Alcohol duties went up by two per cent, about 5p a pint, from midnight, and tobacco duty was upped by two per cent from 6pm.
Announcing ‘more help to get people back into work quickly and help for businesses and homeowners’, he said that everyone under the age of 25 out of work for 12 months or more will be ‘offered’ a job or a place on a training scheme.
Meanwhile, official figures showed that public borrowing soared to a record £90bn in the last financial year, almost 6.2 per cent of GDP and far higher than the £78bn prediction made by Darling in his pre-Budget report last November.
Darling also announced he was extending the Stamp Duty holiday on properties sold for less than £175,000 until the end of the year, as part of a £1bn package aimed at boosting house sales and building.
In his Budget speech, Darling said ‘we will work to protect financial services’.
Hinting at more public sector pay cuts, he claimed: ‘Inflation has come down which means people’s income will go further.’
He warned that ‘there are no quick fixes. No overnight solutions’ to the capitalist crisis.
He said: ‘The UK economy contracted by 1.6 per cent in the last quarter of 2008.’
However, he claimed that ‘the British economy is diverse, flexible and resilient – which is why we can be confident in recovery.’
Admitting ‘it is not in any government’s power to prevent all job losses,’ he said ‘there will be additional support for people who have been out of work for 12 months through the Flexible New Deal.’
Announcing more help for businesses, he said: ‘I will double the main capital allowance rate to 40 per cent. It will mean enhanced tax relief to support investment of £50 billion this year.’
He extended ‘help which allows loss-making companies to reclaim taxes on profits made in the last three years.’
He also announced additional targeted support for companies’ cash-flow, with a top-up trade credit insurance scheme.
Darling said: ‘In order to help the car industry and retail trade, I can announce that a scrappage scheme will be implemented next month.
‘It will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars over ten years old. It will be a time-limited scheme until March 2010.’
The government has set itself a central goal of realising up to £16 billion of property and other asset sales in the three years from 2011-12.
He also announced Child Tax Credit will increase by £20, an increase in statutory redundancy pay from £350 to £380 a week, and an increase in the basic state pension of ‘at least 2.5 per cent’.