The pre-Budget plan outlines begin

Chancellor Alistair Darling has begun to outline this year’s pre-Budget report, which is expected to include details of tax cuts in order to help fight the current recession.

It is expected that tax will be cut from the current 17.5% to 15%, paid for by 45% tax rate on earnings over £150,000 and a large increase in borrowing.

In his speech, which he began by saying that Britain faced “exceptional” economic circumstances, and that he wants to take “fair and responsible” steps to protect and support businesses and people to help with the future problems our economy will face, the Chancellor also said that he wants to ensure that the slowdown will be as shallow and short as possible.

He added that the current financial issues were a global crisis, but the World Bank and other institutions are confident that the global economy would recover strongly and even double in size over the next couple of decades.

Mr Darling’s primary aim is to get consumer spending figures up again in order to save businesses from going under. However, in order to achieve this, he has to borrow a record amount in order to pay for it.

The Pre-Budget plan outline is expected to give an impression of how the money could be paid back in the future through a combination of slowing growth, government spending and tax increases.

If all goes as it is currently expected, this could be the biggest shake-up of Labour’s economic policy since the party came into power in 1997.

The top rate of 45% will not come into effect until after the next general election however, which means that Labour will not be breaking its 2005 manifesto commitment on raising income tax.

On the other hand, the cut in VAT is expected to come into effect in the next few days, in time for the beginning of the major Christmas shopping period.

The BBCs Political Editor, Nick Robinson, has said that it’s a “defining moment” in British Politics. This is due to the fact that Labour is practically tearing up its previous economic policy and that this will probably determine the outcome of the next general election.

“Extraordinary times call for extraordinary measures”, were the words of Prime Minister Gordon Brown as he tried to justify the planned changes. He also said that in order to stop Britain entering into a long lasting recession, the government had to inject money into our economy.

According to the Prime Minister: “To fail to act now would not only be a failure of economic policy but a failure of leadership. Doing too little too late would mean more damage and more deterioration.”

Conservative party leader, David Cameron, has also stated at the CBI conference, that he was “sceptical” of the new measures that Labour are planning on bringing in. He also says that he believes this could hold back further interest rate cuts and warns that temporary tax cuts now could lead to permanent tax rises at a later date.

He said: “They might be talking about tax giveaways but everybody knows that they’re throwing money at us now, to take away at a later date.”

He also claimed that his party would freeze council tax, allow companies six months to pay their VAT bills, cut the tax rate for small businesses and introduce tax breaks for job creation, along with other measures.

Vince Cable, treasury spokesman for the Liberal Democrats, said that tax cuts were needed but he has warned that the government will have to make clear how they are going to pay back the amount they are borrowing.

He said: “By itself an increased tax rate on those earning over £150,000 would only raise negligible amounts of additional revenue.”