Pre-budget report: Alistair Darling offers respite to vulnerable

The chancellor today promised to support vulnerable people through “an unprecedented global crisis” by raising benefits for pensioners, low-income families and parents of disabled children.

Alistair Darling used his pre-budget report to announce rises next April in the state pension, from £90.70 a week to £95.25, and pension credits, from £124 per week to £130 for single people, and £189 to £198 a week for couples.

He also brought forward previously announced increases in child benefit, from £18.80 to £20 a week, to January 2009 instead of April. A pledge to increase the child element of the child tax credit – currently £2,085 – to £2,235 in April 2010 will be brought forward to April 2009.

Winter fuel payment

Support for older people struggling with big increases in energy bills includes an additional £60 one-off payment, paid in January, which comes on top of the existing £10 ‘Christmas bonus’. Parents of disabled children will receive a £70 one-off payment.

Meanwhile an estimated 60,000 low-income households will receive help to insulate their homes through the Warm Front scheme, with an additional £100m.

The temporary income tax rebate of £120 for people on low to moderate incomes will be made permanent, with the rate increasing to £145 in April. This will benefit 22m taxpayers, according to the chancellor.

Tax increases

In an effort to reduce borrowing over the long-term, national insurance contributions will rise by 0.5% from April 2011, from the current 11% standard rate and 1% rate for higher incomes. However, people earning less than £20,000 will be exempt from the increase.

Income tax will also rise in April 2011, with the creation of a 45% tax rate on incomes of over £150,000, while those on £140,000 or more will lose their personal tax allowance.

The changes are contingent on Labour winning the next election, due in 2009 or 2010.

Supporting jobs

In an effort to support employment, £3bn of capital spending projects, including social housing, scheduled for 2010-11 will be brought forward to this year.

As unemployment rises to nearly 1.9m – the highest level in 16 years – Darling said he would fund measures worth £1.3bn designed to help people back to work, led by JobCentre Plus.

Advice schemes in finding new jobs will be expanded for those facing redundancy, while a national employment partnership involving 20 of the country’s largest employers will aim to fill vacancies quickly and improve work-related training.

“These will be essential to prevent a temporary job loss turning into permanent unemployment,” Darling said.

Repossession

People struggling with mortgage payments will be given three months’ grace before lenders initiate repossession proceedings, while free debt advice projects will be rolled out across the country with £15m in funding. Greater support will be given to homeowners on low incomes through the mortgage rescue scheme.

Darling also promised to lead European efforts to strengthen compensation arrangements in the banking system, following the collapse last month of a number of Icelandic banks, in which English councils had almost £1bn invested.

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