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Darling will put tax rises on hold

Treasury select committee member Labour MP Andy Love predicts that Chancellor Alistair Darling will delay any tax increases in his Budget next week due to the recession.

Love, who is Labour MP for Edmonton, says Darling is likely to say the recession will last longer than he predicted in the pre-Budget report last November. As a result, Love says changes to the tax regime such as introducing a 45 per cent income tax rate are likely to be delayed.

He says: “The last thing you want is to put up taxes during a recession. Everything will depend on what Darling’s econ-omic forecast is but I think there is doubt as to whether 2010 will be a year when the Government can increase taxes, taking money out of the economy when it is still struggling.”

Love says the Budget is likely to focus on revising the economic forecast rather than detailed policy changes although he predicts that the Government may take a more lenient approach to company pen- sion scheme deficits by extending the 10-year time period which employers have to plug their deficits.

Love says the Chancellor will face a conundrum when it comes to whether or not to introduce savings incentives.

He says: “I do not think the Government is likely to want to try and make any radical changes to savings products. We are in this terrible dilemma where the Government and the Bank of England keep talking about wanting people to save but we also want people to spend to keep the economy going.”

Conservative Shadow pensions minister Nigel Waterson predicts that savers will be given a boost in the Budget and hopes that the Government will increase the personal tax allowance for pensioners by £2,000 and scrap the basic-rate tax on savings income.

Waterson says: “I hope they indicate they are finally going to do something about deregulating defined-benefit schemes and examine the compulsory annuitisation rule, which should be suspended.

“I do not think that there are going to be any surprises as the Chancellor has got limited room for manoeuvre. The Government has wasted so much money on the VAT cut, which has had very little effect. They should heed the governor of the Bank of England and not commit to further amounts of huge public spending.”

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