Yesterday, Tories were nervously expecting Labour to steal a tax-cutting march. What Darling finally announced is complex, irrelevant and unaffordable. The main economic effect of the flagship VAT policy will be felt by the big spenders who spend more on goods that attract the full rate. But of course, the massive movements in the updated borrowing forecasts (previously shown by Dizzy to be systematically optimistic) are the most shocking element of the PBR as shown below.
Clearly the 45% tax rate and 0.5% NI rises aren't going to plug the gap. You might reasonably ask where the other future tax rises were in Darling's announcement. They are missing because the government is banking on spending cuts and efficiency savings the likes of which they have never achieved in the past... The message is clear - we're in the shit and our grandchildren will be paying for it.