Alistair Darling – Fiscal White Knight?…

Another month, another year, another pre-budget report and once again another massive kick in the teeth from the government. Yes today Mr Darling, the White Knight of Labour’s fiscal Camelot, set out his policy to bring Britain and the government back from the brink of disaster. In a slightly dull and boring manner Mr Darling read out a whole raft of new policies and increases that knocked tax-payers sideways and sent corporate banks scurrying off to their accountants.

In his report the White Knight announced a 1.5% increase to child and disability benefit, a 2.5% increase to the state pension, and a series of investments schemes ranging from a boiler scrappage scheme to training and education programmes for the under 24’s. Overall, Mr Darling proposes to raise Britain’s budgetary spending by an estimated £31bn in the next financial year.

But we must always remember that ‘whatever the chancellor giveth, he also taketh away’. In his statement to the Commons, Mr Darling proposed to raise the National Insurance level by 0.5% as of April 2011, to discontinue the current stamp holiday on various types of property, to introduce a 50p tax on landlines for broadband improvements and to reinstate the 17.5% VAT rate as of the 1st of Jan 2010. As well as these measures of taxation, Fiscal Ali intends to introduce a one off 50% tax on all bankers bonuses valued at over £25,000 which will apply to all banking institutions up until April 2010.

The BBC’s Robert Peston highlighted an interesting point yesterday, as he points out in his blog “even if banks were to defer bonus payments till 6 April, the exchequer would still receive a lot of extra revenue – because that’s when the top rate of income tax rises from 40% to 50%.” Peston’s source in the financial sector also goes on to suggest that some banks may stash money in their savings accounts and rebuild their balance sheets, rather than pay out bonuses which will get taxed at 50%.