The borrowing figures announced by Alistair Darling in today's Budget are horrendous --£175bn in the current year, £173bn next --adding up to £703bn over the next five years. It could be even worse if his optimistic growth forecasts do not come good. But the borrowing splurge had been pretty well trailed in advance and so it is the Chancellor's tax rises that will make tomorrow's headlines.
In particular, his 50p top rate on earnings above £150,000 -- the top 1 per cent of taxpayers, who will also see tax relief on their pension contributions pared back. The 50p rate will take effect next April, a year earlier than the 45p rate announced last November, which is now superceded.
Ministers believe the strategy will be "fair and popular" since the vast majority of taxpayers will not be affected. They deny the 50p top rate marks the end of New Labour since it will affect "the few, not the many."
The Tories would not reverse the 50p top rate if they win the general election -- likely in April or May next year, just after the tax hike takes effect. They know that Labour would portray them as the "party of the rich" if they did. Instead, the Tories will turn Labour's argument on its head. They will pledge to try to halt the 0.5 per cent national insurance rise for employers and employees due to take effect in 2011. Darling, who announced them last November, was strangely silent about them today. They affect people on about £20,000 a year. So David Cameron can also fight the election on a promise to help "the many, not the few." A very long election campaign has just begun.