Alistair Darling: Labour will 'rob the rich' to pay for Britain's recovery... from a budget deficit that will top £175 billion


Alistair Darling on the Andrew Marr show this morning on BBC1

Alistair Darling warned today that the better-off would have to shoulder more of the cost of economic recovery amid reports he was ready to impose a windfall tax on bankers' bonuses.

Ahead of his Pre-Budget Report on Wednesday, the Chancellor sidestepped questions about the suggested one-off levy and the reversal of plans to raise the inheritance tax threshold.

But he said: 'I think people will understand that as we come through a difficult period like this... that we would expect the broadest shoulders to bear the greatest burden.'

He indicated there would be no back-tracking on the new higher rate of income tax, of 50p on earnings of more than £150,000, to be introduced from next April.

And, referring to inheritance tax, he went on: 'It wouldn't be right to be giving further tax breaks to people at the very top.'

On the prospect of a windfall tax, he said he did not want to damage the financial services industry, which employed more than one million people across the UK.

Speaking to BBC1's Andrew Marr Show, Mr Darling added: 'With all matters of tax - whether it's individuals, whether it's companies - you've got to be fair, you've got to be reasonable.

'You've also got to have an eye on what the long-term result of all this might be.'

Shadow chancellor George Osborne, interviewed earlier, said he would not rule out a windfall tax on bankers' bonuses, which are expected to hit £6 billion this year.

Mr Darling warned that there would be painful measures in the PBR resulting from 'much tighter' public spending as the Government tries to bring down the massive budget deficit.

He declined to confirm reports about the scale of cuts, but reaffirmed his commitment to halve the deficit within four years.

'I do think it's necessary for me on Wednesday to announce areas where we will cut spending or not spend as much as we were,' he said.

He singled out the new NHS IT system as an example of one Government programme that did not need to go ahead in the current economic climate.

Cutting senior civil servant positions and moving jobs into the regions could also feature.


Shadow chancellor George Osborne also refused to rule out a windfall tax

'On Wednesday I will set out what I think we need to do. That will involve some very difficult choices,' he said.

'It will mean making public spending much tighter.'

But he attacked the Tories' demands for borrowing to be reduced still more quickly than the Government plans, insisting that such a strategy would put the recovery at risk.

'David Cameron is wrong when he calls for going further with a faster and far greater reduction,' he said.

'I think that would seriously damage our prospects in the future.'

The Chancellor said there would be 'moderate growth' next year as the economy emerges from the recession.

'In many ways the choice we have now is how we ensure we get long term sustainable growth in the future,' he said.

He promised to 'lay the foundations that will enable us to move from next year to stronger growth in the future'.

The annual budget deficit is expected to top £175 billion this year, caused by plummeting tax receipts alongside sustained public spending.

Mr Osborne said said he would prefer reforms to ensure banks pay tax on future profits over a windfall tax now.

'I think the place to start is by looking at the losses,' he told BBC1's Andrew Marr show.

'The banks at the moment are going to be able to accumulate their losses and against that write off future tax - in other words, even though they will be making money they won't be paying tax.

'And I don't think that is acceptable given the help that we have provided. So my message is clear - when the banks start making profits again they should start paying taxes again.'

On the wider economy, Mr Osborne said he could not rule out tax rises but called for measures to restrain Government spending.

The Tories would protect NHS and international development spending but the rest of Whitehall would face 'very difficult choices', he told the programme, because it is currently 'woefully inefficient'.

'This is not the situation we would wish upon the country,' Mr Osborne said.

'This is not the economic inheritance that I thought I would be enjoying if we won the election some years ago, but it is the reality.

'This country is virtually bust. If you look around the world, people are looking to Britain and saying, 'Should they keep their credit rating, can we rely on them as a place to invest'.

'And they are raising some very serious questions - if we don't deal with those debts then we are not going to have the sustainable recovery and the jobs that this country so desperately needs at the moment.'

Liberal Democrat Treasury spokesman Vince Cable said a tax on bank profits would be more effective than a levy on bonuses.


Gordon Brown sought to defuse tensions seen emerging between state-rescued lender Royal Bank of Scotland and the British government over planned cuts to bankers' bonuses

'There is a complete lack of clarity at the heart of the Labour and Tory approaches to the banks,' he said.

'The simple and correct approach, since many banks are returning to high levels of profitability, is for banks to pay for the taxpayer guarantee that they currently enjoy.

'A 10% levy on bank profits would raise around £2 billion in current conditions and would go to paying down the deficit.

'This is a much more effective solution than a one-off levy and recognises the debt that the banks owe to the taxpayer.'

Amid the row over planned bonuses at Royal Bank of Scotland, Mr Darling said the Government would not be 'held to ransom'.

'We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what's going on,' he said.

But he acknowledged also that there had to be 'sufficient incentives' to ensure RBS got back onto a 'proper footing' and off the Government's books.

'What you can't do though is have bonuses that are wholly unreasonable and are not related in any way to improved performance,' he added. 'It is a fine judgment.'

Asked about a windfall tax, Mr Darling stressed that the banks already paid fees for their taxpayer support and that the Treasury would recoup costs when they were sold on.

'In the meantime, we've got to make sure that all taxation is fair,' he said, but added that the country needed a healthy financial services industry.

'I don't want to end up in a situation where we actually damage an industry that we need.'

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