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The Chancellor also set out pre-election sweeteners for key voters, including a stamp duty cut for first-time buyers, funded by a tax increase on buyers of £1 million houses.
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In another move targeting the wealthiest, inheritance tax thresholds will also be frozen for three years, meaning inflation will push more people into higher brackets.
Tax allowances for the highest earners will also be restricted.
The Chancellor is seeking to set out the dividing lines between Labour and the Conservatives ahead of a General Election widely expected to be held on May 6th. However he immediately faced accusations that he had stolen some of his ideas from the Tories.
“The only ideas in British politics are coming on this side of the House,” David Cameron, the Conservative leader, said. “Once again they [the Government] have been caught taking the public for fools. Labour have made a complete mess of the British economy.”
Justifying his plans to target wealthier Britains, the Chancellor told MPs: “Looking across all the tax rises since the beginning of this global crisis, 60% of them will be paid for by the top 5% of earners.
“We have not raised these taxes out of dogma or ideology. We are determined to ensure our overall tax regime remains competitive.
“But I believe those who have benefited the most from the strong growth in incomes in past years should now pay their fair share of tax.”
The key measures announced in Mr Darling’s Budget were:
- A new 5 per cent stamp duty rate for houses worth over £1 million to fund an end to the levy on properties selling for less than 250,000
- 3p rise in fuel duty to be staged in; £100 million to repair local roads after winter damage and £285 million for motorways.
- Duty on beer, wine and spirits to rise 2%. Tax on cider increased by 10% above inflation from midnight on Sunday. Tobacco duty increases today by 1% above inflation this year, then 2%.
- £2 billion ‘green investment bank’ to fund environmentally friendly initiatives.
In a limited hand-out to voters, this year’s scheduled 3p rise in fuel duty will be staged, with petrol and diesel prices rising by a penny per litre in April, October and January.
The main focus of Mr Darling’s hour-long statement was curbing the Government’s vast borrowing programme, a subject seized upon by Mr Cameron.
“No one has yet thought of a question to which the answer is five more years of this Prime Minister, ” the Tory leader said.
“The biggest risk to the economy is five more years of this Prime Minister.
“We have gone from the top of the Premier League to the bottom of the Conference in 13 wasted years and we say ‘sack the manager’.”
Mr Darling had set out plans to borrow £178 billion this year and £175 billion next year. The scale of those deficits has left investors worried about Britain’s ability to pay off its debts.
Trying to reassure those investors, Mr Darling said he would direct £19 billion of extra tax revenues towards reducing borrowing.
He told MPs that tax revenues had been stronger than he expected, so he will borrow £167 billion this year and £163 billion in 2010/11.
Those deficits are still equal to more than 11 per cent of the entire economy, but the small reductions appeared to reassure City investors, and the interest rate the Government pays on its outstanding loans fell slightly.
The Government deficit will be £131 billion in 2011/12, then £110 billion in 2012/13, Mr Darling said. It will fall to £74 billion in 2014/15.
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Mr Darling cut his growth forecast for 2011 to between 3 per cent and 3.5 per cent, similar to that of the Bank of England. Previously, he had forecast growth of up to 3.75 per cent.
He left his other forecasts unchanged.
To raise more money, Mr Darling repeated long-standing promises to sell off Government assets including the Dartford Crossing and the Tote bookmaking agency.
There were also increased tax allowances for businesses to put pressure on the Tories, who have promised to abolish such tax breaks to fund a cut in corporation tax.
Mr Darling also warned that the next spending round will be the toughest for decades, signalling that Whitehall will face cuts.
The number of civil servants in London is to be reduced by one-third over the long term, with 15,000 posts relocated within the next five years.
And public pay awards will be capped at 1 per cent for the two years from 2011
On duty, cider drinkers are the hardest hit, facing a 10 per cent rise in duty from Sunday.
There will also be big rises in tax on tobacco.
source: telegraph.co.uk