Chancellor increases tax burden by £2bn by 2010

In his first speech as Chancellor of the Exchequer Alistair Darling has revealed a widening hole in the public finances of between £5-7bn over the next few years.

The overall tax burden will rise by £1.9bn by 2010 with the largest proportion coming from an increase in fuel duty and road tax. (See our Budget landing page.)

Government’s inflation target to remain at 2% increasing the pressure on the Bank of England to maintain the current level of interest rates.

With the pressure on the central bank to maintain interest rates the value of Stirling rose during the Chancellor’s speech.

Budget at a glance

• The biofuels duty differential to be replaced by the Renewable Fuels Transport Obligation raising £550m for the Treasury in 2010-11
  
• The return of a new fuel tax escalator from 2010 with the half pence per litre rise in tax each year, over inflation.
  
• UK economy growth forecast cut to 2%
  
• £43bn budget deficit next year – up £7bn
  
• 11p increase on the price of the pack of cigarettes from 1800hrs on Wednesday, 12 March
  
• Beer up by 4p a pint, wine 14p a bottle, spirits 55p a bottle and cider 3p a litre from Sunday, 16 March
  
• Duties on alcohol will go up by 2% above inflation for next four years
  
• Winter fuel allowance will go up from £200 to £250 for the over 60s and from £300 to £400 for the over 80s (for one year only)
  
• From 2009, major reform of the vehicle excise duty. For new cars from 2010, the lowest polluting cars will pay no road tax in the first year. Higher polluting cars will pay more

Countryside Alliance chief executive Simon Hart said the budget does little for those in rural areas: “A week after the government’s own rural adviser, Stuart Burgess of the Commission for Rural Communities, reported to the Prime Minister on the appalling rate of poverty in the countryside, this is not a budget of joined-up thinking from government.

“Hiking already high taxes will have an adverse effect on rural communities who have poor public transport services and therefore rely heavily on private car use.

“The government should recognise that many low-income families may soon be stranded, unable to afford to run a car.

Rural economy

“Green measures are either right or wrong, and leaving the planned rise to November is only delaying a measure that will seriously affect the rural economy.

“Many of our members tell us that they are faced with long round trips to visit their GP or dentist, because local services have already closed. Making those journeys even more expensive just increases the unfairness.

“Rural people are not after special favours, but they deserve a level playing field, and the Chancellor must create a tax policy that addresses the problem of poverty in the countryside, not compounds them.”

More to follow…

• See our Budget landing page.