Darling hits back as he denies hiding tax hike

Alistair Darling today defended putting off difficult decisions about the deficit and denied hiding a tax hike for millions with his Budget speech.

The Tories have accused the Chancellor of concealing a tax rise for 30 million workers from a freezing of tax bands.

Opposition MPs and some economists have also claimed he failed to set out a credible strategy for cutting the nation's record debt.

Mr Darling accused the Tories of being "conspicuously silent" on their own plans for taxes and spending cuts.

He said: "If we took public spending away now we'd risk tipping the country back into recession. That is not a risk I'm willing to take."

On tax allowances, he claimed they were frozen because they were set at a time of negative inflation in September. He said increasing them as the Tories have suggested would cost £2 billion.

"If that really is their policy they need to say where the money is coming from," he told GMTV.

The Chancellor's budget drew up the battlelines for a general election expected on May 6 by squeezing the better off to fund help to new homebuyers, the elderly and the young unemployed.

In his final parliamentary set-piece before the country goes to the polls, he said he was determined those who did well in the good years "should now pay their fair share of tax".

However the Tories warned that tens of millions of ordinary workers would be hit by an effective tax increase with a freeze on personal allowances, despite a 3.7 per cent retail price inflation rate.

Shadow chancellor George Osborne attacked the freeze, contained in the detailed figures in the Budget "red book".

"Thirty million working people will be hit by this new Labour stealth tax. The Chancellor said nothing about the biggest tax rise in the Budget," he said.

"That tells you everything you need to know about Labour's cynical tricks and their priorities: the bill for Gordon Brown's economic mistakes is going to be paid by every working family."

The centrepiece of Mr Darling's statement was a two-year stamp duty holiday for first-time home-buyers on properties up to £250,000, paid for by a new permanent 5 per cent rate on homes over £1 million.

He said that lower-than-expected unemployment figures meant that he could extend the guarantee of a job or training place for all 18 to 24-year-olds for an additional 12 months to March 2012.

The inheritance tax threshold would be frozen at £350,000 for four years - the Tories plan to scrap the levy on estates over £1 million - to help pay for care for the elderly, he told MPs.

At the same time the Chancellor sought to reassure the markets of his commitment to tackling Britain's record deficit, with a further £9 billion in savings on top of £11 billion of efficiency measures by 2012-13 in December's Pre-Budget Report (PBR).

Whitehall departments announced their contributions towards the £11 billion savings - many of them previously announced - including £4.35 billion from the Department of Health and the NHS, £1.1 billion from the Children's Department and £700 million from the Ministry of Defence.

But the proposed savings - to come largely from back-office functions like IT, procurement, consultants and administration, or by cutting costs such as staff sickness and energy bills - were ridiculed by opposition politicians who said they were too vague to be credible.

The biggest cheer on the Labour benches came when Mr Darling announced a new clampdown on tax evasion, including an information-sharing agreement with Belize - the Central American tax haven where the "non-dom" Tory deputy chairman Lord Ashcroft reportedly has much of his fortune.

Experts suggested the arrangement - to be formalised at a signing ceremony with the High Commissioner for Belize this morning - would be of far more political than financial value to Labour.

Mr Osborne said Mr Darling was "not being straight with people" over the personal allowances row.

He told Sky News: "He has frozen the personal income tax allowance.

"That is an effective tax rise on 30 million working people, because when he said he was going to freeze it last autumn, inflation was negative. Now inflation is 3.7 per cent on the RPI.

"What that means, in effect, is a tax rise for millions of working people and, if you're someone on the basic rate, that's around £50 extra tax a year, if you're a couple, around £100 extra tax a year, and of course that's not including the National Insurance tax on people's incomes which is coming down the track."

Asked if he would have raised the personal allowances, Mr Osborne said: "I would have got to grips with the waste, the bloat, the excessive spending that got Britain into the problem it faces today.

"I would have set out a credible plan to deal with the debts, that would have protected our country's credit rating, kept interest rates lower for longer, and avoided the ever-increasing spiral of taxes which seem to come from this Government to working people."

Asked if he would raise taxes, including VAT, he said: "No Chancellor or Shadow Chancellor, including Alistair Darling or indeed Gordon Brown before him, would ever rule out tax rises in the future - that would be a totally irresponsible thing to do.

"What I am saying to you is telling you about my priorities and values, which are about trying to avoid tax rises on working people by dealing with bloated government waste that has caused this debt problem, that threatens higher interest rates, that costs jobs, and puts taxes up on working people."

He said his first priority was to avoid the National Insurance rise.

Asked when he would have his own Budget, if the Tories win the election and he is Chancellor, he said: "We'd have it within 50 days of the election."