UK economy in hock | Banking Direct

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UK economy in hock

Chancellor Alistair Darling has put the UK economy in to hock with his £118 billion spend now pay later gamble to beat the recession.

As predicted, he ripped up Labour’s financial rulebook and has bet all the country’s money for years to come on a toss of a coin to boost the economy now.

Whatever happens, the pain will come later as the government winning the next election in 2011 will pick up the tab by having to repay massive debts by raising taxes.

The Chancellor has admitted that everyone earning more than £40,000 will feel the pinch later – alienating millions of middle ground voters and top earners.

The real question is has he done enough now with yesterday’s 2.5% cut in VAT, income tax cuts, more child benefits for families and a one-off payment to pensioners?

The VAT cut, due to take effect next Monday, gives everyone a miserly £2.50 saving in every £100 spent.

Accountants KPMG have calculated the effects the changes will have on the pound in your pocket:

If you earn £110,000 a year you will have an extra £118.80 to spend next year and £215.58 the following year. That’s a paltry £2.28 a week going up to £4.15

For those on £50,000 a year, the extra income tots up to £343.30 next year and £240.08 for the year after. That’s £6.60 extra a week falling to £4.16.

Big earners taking £150,000 or more a year also picks up £343.30 extra next year but are £2246.70 worse off after that. That’s the same £6.60 a week increase as lower earners next year but a massive £43.20 a week drop comes on the back of the good times.

Both the Tories and Liberal Democrats have slammed Darling’s action as irresponsible and a ‘tax time bomb’ for the next decade.