The Chancellor yesterday threw his party’s manifesto out of the window as he announced that Labour is to impose a shock tax rise on high earners as the economy heads into record debt.
Alistair Darling revealed plans to push up income tax to 50p for anyone earning more than £150,000, to come into effect next April.
The surprise move came despite Labour’s manifesto pledge at the last election not to increase the basic or top rate of income tax.
But the Chancellor was forced to admit that borrowing had soared, with the Treasury expected to go £175 billion into the red this year.
Over the next five years, the Government will need to borrow £703 billion to balance the books, and debt will reach 79 per cent of GDP by 2013, the highest level since the Second World War.
Conservatives claimed the tax hike was a smokescreen to hide a series of increases which would hit modest earners – including a £5 billion increase in National Insurance, which will hit anyone earning £20,000 or more after the next election.
Conservative MP Andrew Mitchell said: “After 12 years of Labour Government, the economy is in the worst condition it has ever been.
“We are in such a terrible state that the Government is now planning to borrow £348 billion over the next 24 months.”
Ian Austin (Lab Dudley North), Minister for the West Midlands, said the Budget was designed to save jobs and help those facing redundancy.
He said “Every job that is lost is a tragedy for the employee and the family concerned and what they need is a government that is on their side providing all the advice and help with training they need to get another job as soon as they can.
“This Budget provides further support to ensure that those facing redundancy and those seeking employment are helped back into work as quickly and efficiently as possible.”
Mr Darling pledged an additional £1.7 billion over the next two years for employment services to help them respond to rising unemployment, including a guaranteed job or training place for 18-24 years olds who have been unemployed for 12 months.
There was also £600 million to stimulate the housing market in a bid to help construction firms.
And there was good news for colleges facing an uncertain future because of a financial crisis which has left expansion plans in limbo, as the Chancellor made £300 million in planned funding available a year early.
It means colleges with ambitious expansion plans, such as Bournville College which hopes to build an £84 million new campus on the site of the former Rover plant at Longbridge, may be able to press ahead after all.
Other tax increases included cutting pension tax relief for people earning more than £150,000. There will be an extra 2p on fuel, 1p on a pint of beer and 7p on cigarettes.
The Chancellor also plans to cut public spending, with £15 billion of “efficiency savings”.
Liberal Democrat leader Nick Clegg described the Budget as a “mish mash of recycled announcements from a government skilled in raising false hopes but incompetent in delivering practical help”.
He said: “The worst of times demands the best of Budgets.”