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Alistair Darling put Labour on election footing with a highly political Budget that turned the screw on the rich and the banks, and gave the state a central pump-priming role in securing the recovery.

The chancellor’s speech on Wednesday was broadly fiscally neutral, offering some relief to markets which had feared Mr Darling might stage a pre-election giveaway. But the chancellor declined to spell out how a future Labour government would cut spending to cut the record peacetime deficit.

Sticking to his promise to deliver a “workmanlike” Budget that offered some stability after two years of fiscal chaos, Mr Darling tried to present a cut in borrowing from the predicted £178bn to £167bn this year as a dose of good news.

“The recovery has begun, unemployment is falling and borrowing is better than expected,” he said.

But David Cameron, the Conservative leader, said it was an “empty” statement, bereft of new ideas. The City expects the Tories to win the expected May 6 election and to hold the “real” spring Budget within 50 days of taking office.

However, Mr Darling made it clear that Labour would not go down without a fight, using the Budget to define the terms of the party’s election campaign and to stir the party’s activists for the battle ahead.

He said he had made the “right calls” during the downturn and that Labour’s interventionist approach would now be deployed to bolster the recovery with the creation of a £2.5bn fund to boost small business and promote innovation.

Mr Darling promised to cut stamp duty for first time home buyers – a Conservative policy – but won Labour cheers by announcing it would be partly funded by increasing to 5 per cent the stamp duty on sales of homes worth more than £1m.

Labour now has a raft of policies aimed at the rich, including the new 50p top rate of tax and curbs on pension tax breaks for the wealthy.

The banks were warned that there would be “no return to business as usual”. They face a new international “systemic risk” tax, and a new quango to arbitrate in disputes when small companies are refused loans.

The chancellor’s growth forecasts were little changed from December’s pre-Budget report with modest growth expected this year and rapid growth of over 3 per cent in 2011 and 2012 - much more optimistic than most independent forecasters.

But it was the lack of detail on spending cuts that irked economists the most. Mr Darling highlighted £19bn of tax increases which will be in place by 2013-14 and £9bn of concrete spending cuts, leaving another £37bn to be spelt out after the election.

The chancellor did provide more detail over where he believes £20bn of savings by 2012/13 that have already been announced will come from.

These include £5bn of genuine cuts to programmes such as some regeneration spending. But they also include £8bn of efficiency savings, including £555m to be saved from reducing sickness absence in the NHS. “How are they going to do that?” asked Vince Cable, Liberal Democrat treasury spokesman.

Meanwhile, a cider revolt was fermenting as lovers of the tipple took to Facebook, Twitter and other social network sites to vent their fury at Mr Darling’s decision to hike cider duty by 10 per cent above inflation.

Copyright The Financial Times Limited 2017. All rights reserved.

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