Chancellor Darling yesterday handed more billions to business in his pre-budget report, while making it clear the working class will be expected to pay for massive government borrowing.
He stressed the government had made a ‘deliberate choice to support businesses through this crisis’.
Referring to the tens of thousands of jobs axed in the Civil Service, he announced ‘the government will now find an additional £5bn of efficiencies in 2010/11 for a total saving of £35bn over three years.’
He warned: ‘We know extra savings are achievable because independent reviewers have identified new efficiencies across public sector operations.
‘The efficiencies will come through lowering the cost of back office operations, better procurement, examining property holdings and asset sales.’
He continued: ‘But we will also ensure spending continues to rise from £584bn last year to £682bn in 2010/11.’
Introducing his new measures, Darling announced ‘that £3bn of capital spending will be brought forward from 2010/11 to this year and next.
‘The money will be used to: increase capacity in the motorway network, improve and build new social housing, renew primary and secondary schools, and invest in energy efficiency measures.’
He added: ‘I propose to cut VAT from 17.5 to 15 per cent until the end of next year. This VAT reduction will come into effect next Monday on December 1st.’
On income tax, Darling added that he is making permanent a £120 a year increase in income tax personal allowance for basic rate taxpayers, and to increase this to £145 a year in April.
He said: ‘I also intend to maintain the ceiling on tax relief given to people with pension funds up to £1.8m, until and including 2015/16.’
He warned: ‘The reduction in VAT lowers the amount of tax paid on tobacco, alcohol and petrol.
‘In addition, petrol prices have come down, by 7 pence a litre last month alone.
‘So I will offset the VAT reduction, by increasing all these duties by an amount which should keep the overall cost to consumers the same this year.’
He announced ‘an exemption for foreign dividends in 2009 for large and medium businesses, and improve our rules for taxing Controlled Foreign Companies.’
Also, ‘For 2009/10, empty commercial properties with a rateable value below £15,000, will be exempt from business rates.’
He said that Revenue and Customs ‘will enable firms facing difficulties to spread their tax on a timetable they can afford. This will cover VAT, corporation tax, income tax and national insurance. And not for six months but for as long as they need.’
He assured: ‘We are closely monitoring this commitment by banks to treat business customers fairly and decently.’
He continued: ‘We are also acting directly to improve access to finance.
‘First, we have agreed a £4 billion deal with the European Investment Bank to provide money to the banks to pass onto SMEs (Small and Medium-sized Enterprises).
‘I can report today that seven UK banks have already asked the EIB for this money. £1bn will be available to their customers by the end of the year.
‘Next, I can announce the government is also to offer credit through a temporary Small Business Finance Scheme.
‘This is worth another £1 billion to small businesses.’
He added: ‘From January, it will offer a temporary facility to support the availability of short-term working capital for smaller exporters.
‘This will mean yet another £1bn of support, to help ease the financing constraint faced by firms trading in current circumstances.’
He also announced: ‘I have decided to defer the increase in the small companies rate of corporation tax.’
He concluded: ‘This is a comprehensive package of support which business has been asking us to provide.
‘A package to support business, worth £1bn of tax cuts, £2bn in loan guarantees, along with £4bn of European money. A £7bn package of measures, real help.’
