Darling banks on the consumer

CHANCELLOR Alistair Darling plans to ramp up the national debt to £682bn to prevent the country sliding into a long, deep recession.

In his pre-Budget report – billed as the most important in a generation – Mr Darling outlined a raft of measures designed to maintain employment and pump cash into the economy.

He confirmed a 2.5% cut to VAT from December 1 until 2010 to drive consumer spending. The move is expected to cost the government £12.5bn.

And he unveiled a capital spending programme on major projects to renovate  the country’s infrastructure, increase the energy efficiency of housing and keep people in work. He also announced measures to cut tax for low earners and provide relief for those struggling with mortgage repayments.

He said the country’s debt as proportion of GDP will rise from 41% to a high of 57% in 2013 but insisted it was essential to “act now” and he was willing to do “whatever it takes”.

But Mr Darling also outlined several ways he would claw back government revenue, including a hike in income tax for the highest earners. From April 2011 those earning more than £150,000 will see tax rise from 40% to 45%.

Mr Darling said his report was taking place during a time of economic uncertainty not seen for a generation.

He said: “I want to take fair and and responsible steps to support business while putting the public finances on the right path for the future.

He added: “We must act now. We can choose to walk away and let the recession take its course – adapt a sink or swim attitude and let families go to the wall. Or we can support businesses and families by increasing borrowing to reduce the impact and length of the recession. I will do whatever it takes to support people through these difficult times.”

“Interest rates on their own are not enough to stimulate the economy so we need action now to boost economic activity that will help us emerge quicker and stronger from these difficult times.”