The Budget sounded the last death knell for New Labour, says Political Editor Jonathan Walker.
It looks like New Labour is finally dead and buried. Tony Blair’s vision off creating a slightly nicer version of the Conservative Party has finally been abandoned.
There was a real sense of squeezing the rich when Alistair Darling delivered his Budget to the House of Commons.
He proudly announced that 60 per cent of the tax increases introduced by Labour since the banking crisis began had been paid by the top five per cent of earners.
What Mr Darling didn’t tell MPs – although it was included in the documents published on the Treasury website – was that he also froze income tax allowances for people even on modest earnings.
By failing to raising the allowance in line with inflation, he effectively cut it. It means he increased the amount of tax ordinary workers pay.
At one point, he also highlighted Labour’s shift from away from the free market approach endorsed by Tony Blair, saying: “We will not go back to the interventionism of the past. But nor can we return to the hands-off approach of the free marketeers.”
But there was one tax which won’t just hurt the rich – the 10 per cent increase on cider.
This caused a lot of anger on the Lib Dem benches, where there was a shout of “outrageous!”. The Lib Dems have a lot of MPs in the South-west, where the scrumpy tax might hit particularly hard. However, there was more to come. Once Mr Darling sat down, it emerged that super-strong ciders (they tend to have “white” in the same) will go up by a whacking £2 a bottle.
This, then, was a bad Budget for the very rich and the very poor, as both millionaires and full-time tramps will find themselves paying more tax.
He also pledged to get tough with the banks, and pointed out that the Government’s tax on bank bonuses, imposed last year, had raised £2 billion – twice as much as expected.
This may be welcome news for those who hate bankers, but it actually suggests the bonus tax has been a failure.
The tax was originally presented as a way of preventing the banks handing out ridiculous bonuses to their staff. What seems to have happened is that they carried on paying bonuses, and simply paid the tax as well.
These taxes, he said, would be used to help fund a £2.5 billion package to help business.
Employers will no doubt welcome this. But let’s not forget that extra taxes don’t reduce Britain’s debt. They simply stop it going up even faster.
According to Treasury documents published to accompany the Budget, Britain will borrow £166.5 billion this year.
This may be slightly less than expected, but it’s still a lot. And there are no immediate plans to pay it back.
Instead, the nation is set to borrow £163 billion in 2010-11, £131 billion in 2011-12, £110 billion in 2012-13, £89 billion in 2013-14 and £74 billion in 2014-15.
That’s £733.5 billion in five years.