Budget 2009: Darling to carry on spending as high earners are hit

CHANCELLOR Alistair Darling pledged to carry on spending to drive the economy out of recession in the Budget, but will pay for it by clobbering the high earner, with those making £150,000 a year, being hit by a new 50% tax rate.

He promised to invest in fast-track businesses involved in low carbon, smart manufacturing and communications, while confirming plans to help the nation’s beleaguered automotive sector with a £2,000 car scrappage scheme.

Mr Darling’s second Budget laid bare the worrying state of the public finances. Borrowing he said would  hit £175bn this year, and would be a record £173bn next year.

He said the UK economy will shrink by 3.5% – the worst in modern times, but he stuck to his prediction that growth will return later this year, with a forecast of 1.25% growth next year rising to 3.5% in 2011.

In what was seen as a landmark day for Labour, which is trailing in the polls, Mr Darling also promised help for victims of the downturn, with a £1bn package for training or work schemes for the under 25s and more cash to create 54,000 six form places.

He also revealed £1bn in funding to help fight climate change, £2.5bn to help businesses invest in high-tech jobs and £500m to revive mothballed housing projects.

He also announced a £750 million strategic investment fund which he said would help to unblock as much as £50 billion in new business investment this year, including £10 billion in the communication sector. 

Tom Elliott, partner Horwath Clark Whitehill, Manchester said: “The Chancellor has delivered an upbeat, positive speech which included optimistic forecasts for both the timing and rate of the recovery.

“In doing so, he has managed to avoid introducing significant tax rises by relying on anticipated increased tax revenues from the growth of the economy. The Chancellor declared an intention to ‘invest and grow’ the country out of the recession.

“This will be achieved by a combination of targeted Government investment into high-growth technology industries and short-term incentives to encourage all businesses to invest. 

“The success of the Budget announcement relies on the accuracy of Alistair Darling’s forecasting and based on his recent track record, this is not exactly free from doubt!”