No VAT rise in store and no second Budget says Darling

Published on Sunday 21 March 2010 21:56

ALISTAIR Darling yesterday insisted Labour would not hold a second Budget should it win the general election and ruled out a rise in VAT, dismissing Conservative claims that this week's Budget would be "window dressing".

Despite better-than-expected tax and borrowing figures, the Chancellor has ruled out a pre-election "giveaway" and said the public wants a "sensible and workmanlike" Budget on Wednesday.

He is expected to push some extra cash into stimulating business investment and helping the unemployed, but use the rest of the extra leeway to help pay the UK's record deficit. He said that a rise in VAT was "not on the table".

Mr Darling warned Tory plans to introduce a bank levy without international support pose "a hell of a risk" to City jobs.

He will use the Budget to detail the government's support for such a measure if a deal can be struck to introduce it globally.

But David Cameron on Saturday vowed to press ahead unilaterally if necessary, to recoup money for taxpayers and protect them from future shocks.

The Conservatives said there was already sufficient evidence of an emerging consensus, so they are prepared to commit now in an effort to gain an agreement.

Shadow chief Treasury secretary Philip Hammond defended the change of stance, saying: "It has become clear that this is now going to happen – the US is going to introduce a banking levy, Sweden has already done so, the consensus is growing – and at some point you have to make a decision to take some leadership.

"We discussed it internally and decided that the moment had come when we needed to move into a leadership position and say that we will definitely do this in order to give a boost to the global consensus that is building."

Mr Darling said he had agreed with other finance ministers to work on a global scheme to ensure banks "make their contribution to society generally".

"But the important thing to remember with this industry is that yes, it has had its traumas, and yes, there has been some ridiculous things that have happened.

"This in an industry though that employs more than a million people in this country and it is taking a hell of a risk, the Tory approach."

The government does not need a levy, he said, to get back taxpayer bailout cash as that would come from selling shares when banks returned to profit.

Mr Hammond said that if the UK had to act before America, the levy would be set at a "significant lower rate" that would not be "a major impediment to the competitiveness of British banks".

The Tories believe faster action is needed and would hold an emergency Budget within 50 days of taking office, at which they have not ruled out tax rises.

Mr Hammond said: "I hope Alistair Darling will set out a Budget which is prudent, a Budget for growth in Britain. But the real issue is whether Alistair Darling's Budget counts for much.

"We all know that even if Labour were to win the election, Alistair Darling would not be the chancellor. We don't know whether Labour would hold another budget after the election so this may just be a piece of window dressing we get on Wednesday."

Meanwhile Mr Brown will set out plans today for broadband in every home in the UK in a move he claims could slash billions from public service costs.

Unions have complained that thousands of public sector workers would be made jobless and personal data put at risk given the state's poor security record in recent years.