In his first budget, Chancellor Darling hit the working class and middle class with big hikes in alcohol, tobacco and vehicle taxes while giving away millions to business.
He announced hikes of 4p on a pint of beer, 3p on cider, 14p on wine, 55p on spirits, 11p on a packet of 20 cigarettes, 4p on five cigars and higher first year rate of road tax for most polluting cars.
With oil prices hitting $110 a barrel, Darling postponed a planned 2p rise in fuel duty for six months from April to October.
But funding will be set aside for road-pricing proposals and fuel duty will rise by 0.5p per litre in real terms in 2010.
He announced plans for legislation to force supermarkets to charge for plastic bags.
Opening his speech to the House of Commons, Darling said his budget is ‘about equipping Britain for the times ahead’.
He warned: ‘We have seen significant disruption across many credit markets: with a number of them barely functioning at all.
‘And since the turn of the year, global stock markets have also been affected. This poses a major risk to the world economy.’
He forecast UK economic growth of between 1.75 and 2.25 per cent in 2008.
Darling claimed that ‘the discipline we have shown on pay in the public sector will support the Bank of England in maintaining low and stable inflation.’
On public spending, he said: ‘Our projection for net borrowing at £36 billion is £1.4 billion lower than forecast at the time of the Pre-Budget Report.’
He confirmed he will continue with a cut in the main rate of income tax from 22 to 20 pence in the pound.
He said ‘borrowing next year will rise to £43 billion, some 2.9 per cent of national income.’
Announcing more support for the military, he said: ‘The Defence Budget has seen the longest period of increased spending in a generation.
‘This year we again expect to spend over £2 billion more supporting our troops on the front line. Including around £900 million on military equipment.’
Moving on to Labour’s attack on the unemployed and disabled, he said: ‘From April 2010 all long-term recipients of incapacity benefit will attend work capability assessments.’
He revealed: ‘Over the last year public sector employment has fallen.’
He said: ‘All (government) departments have now published plans which will deliver another £30 billion in savings each year from 2010/11.’
He continued ‘and we will examine all major spending areas to identify where further reform could be made’.
There will be a ‘contract’ for families ‘to make a commitment to improve their situations where they can’.
‘From October 2009, we will change the rules for Housing and Council tax benefit so that parents are better off in work than on benefits.’
For business, Darling said that ‘from next month the main corporation tax rate falls again from 30 per cent to 28 per cent.’
For pensioners, winter fuel allowance will go up from £200 to £250 for the over 60s and from £300 to £400 for the over 80s.
TUC general secretary Brendan Barber said that it ‘is disappointing that the Chancellor did not announce a fresh start for the public sector’.
The Public and Commercial Services Union (PCS), general secretary Mark Serwotka added: ‘The budget was a missed opportunity by the government to reach out to civil and public servants in recognising that they are the victims of inflation and deserve fair pay.’
Unite the union joint general secretary Tony Woodley, said Darling had gone some way to tackling the issues of fuel poverty but he had missed an opportunity to levy a windfall tax on the excess energy company profits.
Construction union UCATT complained that the budget ‘has done nothing to curb the casualisation and insecurity plaguing construction workers and the construction industry’.
After attacking the two per cent pay cap, Dave Prentis, General Secretary of UNISON, added: ‘This is no time to be celebrating cuts in the public service workforce.’
NUT general secretary Steve Sinnott said: ‘I would have wanted Alistair Darling to commit himself to Gordon Brown’s pledge to raise spending on state education to private school levels. The government has not yet set a target date.’