Key measures unravelling, says Osborne

Key measures unravelling, says Osborne

George Osborne will today use an emergency Commons statement to pile pressure on Alistair Darling with claims that the pre-budget report will lead to increases in council tax and will saddle below average earners with increased taxes.

Buoyed by the decision of the Commons Speaker, Michael Martin, to grant the first ever emergency debate on a pre-budget report, the shadow chancellor will tell MPs today that the government's response to the recession is unravelling.

In a brief Commons appearance yesterday, which led the Speaker to grant today's emergency statement, Osborne said: "The news that the government is set to borrow more than any government in history, and that the national debt will double to £1tn, has shocked the entire country.

"[Ministers] are running away from the argument because they are losing that argument."

Advertisement starts

---

---

Advertisement ends

The shadow chancellor, who has faced criticism on the Tory right for failing to deliver a coherent response to the recession, believes the PBR marks a seminal moment in what he hopes will be the decline of Labour.

He hopes that it will mark the moment when voters decide that the economy has moved from a global financial crisis, where Gordon Brown has performed well, to a full-blown domestic recession that will lead to job losses and painful tax rises to pay for record government borrowing.

The Tories will focus much of today's debate on the tax increases that will be introduced to fund government borrowing that is expected to rise to £512bn over the next five years. Osborne will highlight new research, which shows that council tax will have to rise next year in the wake of the borrowing.

He will also say that two key fiscal measures in the PBR are unravelling, pointing to an analysis of the government's plans by the Institute for Fiscal Studies which says that:

• The 2.5% cut in VAT, one of the main elements of the government's fiscal stimulus to kick-start the economy, will apply to less than half of consumer spending because 55% of goods are subject to full VAT rate and alcohol and tobacco are exempted from the plan.

• The new 45% rate of income tax, which will apply to people earning over £150,000, will raise "approximately nothing", the IFS said, because people will emigrate or disguise their income as capital gains.

Osborne also said the IFS had endorsed his claim that the tax changes would leave people earning more than £20,000 worse off when the half-point increase in national insurance is introduced in 2011. The IFS offered only a partial endorsement of the Tories in this area, but Osborne said: "Now it is clear that millions of people on modest incomes in middle Britain will be hit by Labour's permanent tax rises."

Senior Tories believe a key element in the PBR - the assumption that growth will pick up towards the end of next year - is "for the birds".

guardian.co.uk © Guardian Newspapers Limited 2008