Darling unveils £20bn tax cuts

Alistair Darling has announced a £20bn fiscal stimulus, a package of tax cuts and handouts equivalent to one per cent of GDP, between now and 2010 to help the British economy through the global downturn. As part of the package of measures unveiled in his pre-Budget report to the Commons this afternoon, the Chancellor also cut VAT from 17.5 per cent to 15 per cent for 13 months, in a bid to get consumers spending again. In addition the Chancellor confirmed that the top rate tax will rise to 45 per cent while all National Insurance contributions will go up 0.5 per cent from 2011.

Darling acknowledged that the economy is heading into recession, predicting that Britain will officially enter a recession in 2009. However he said that the slump would be "longer and deeper" without his cuts.

The Chancellor also slashed economic growth forecasts for next year, forecasting that the economy would only chalk up a growth of 0.75 per cent this year before shrinking by around minus one per cent in 2009.

He also said that the Government's books will not be balanced until 2015/16. Government borrowing will more than double to £78bn this year and £118bn next year, before starting to come down.

"If we did nothing we would have a deeper and longer recession that would cost the country more in the long term," Darling told MPs. "In these extraordinary circumstances allowing borrowing to rise is the right choice for the country."