Shadow Chancellor Criticises 'Tax Bombshell Budget'

Chancellor Alistair Darling's pre-budget report represents "the greatest failure of public policy for a generation", according to the Conservatives.

Shadow Chancellor George Osborne criticised Labour for taking a "reckless" gamble with the UK's finances, and added the VAT cuts announced would see the country facing "huge risks" and a "trillion-pound" public debt.

Yesterday, Mr Darling unveiled radical plans to slash VAT from 17.5% to 15% for 13 months. The cut will put a predicted £12.5bn into the pockets of UK consumers.

Alistair Darling urged retailers to pass on the Value Added Tax savings to customers as quickly as possible.

This move will be offset by increased taxes on alcohol, cigarettes and prices at the petrol pumps, Mr Darling told MPs.

The Chancellor insisted the UK economy was in a "position of relative strength compared to the past". However, these claims were greeted with cries of derision from opposition MPs.

In a scathing response, the Shadow Chancellor described the report as a "Tax Bombshell Budget", and stressed a debt of £1 trillion was "the bill for Labour's decade of irresponsibility".

He added: "It is confirmation of the time-old truth that, in the end, all Labour chancellors run out of money and all Labour governments bring this country to the verge of bankruptcy."

Questioned on BBC radio 4's Today programme, Mr Osborne said making the banks pass on the interest rate cut to firms was more important than a temporary VAT reduction.

He also said that he would help families by freezing council tax - paid for by savings within government.

He said: "I think there was a big intake of breath by the nation when they realised what the bill for the last 10 years is and that we are all saddled with a truly huge debt."

Speaking to Today, Mr Darling denied that the New Labour project - which ruled out raising income tax for high earners - was dead, saying: "All governments, including the New Labour government of the last 10 years, redistribute money by definition."

He added: "People earning less than £40,000 won't be paying more. The burden really is falling on people on higher incomes.

"What matters more to people at the moment is are we prepared to help them and their businesses and the country as a whole get through this difficult period.

"Or do we simply say we are not prepared to do that and let the recession take its course?"

See: VAT Slashed In Pre-Budget Report

(JM)