Alistair Darling took over as Chancellor in June 2007 when Gordon Brown finally moved into the job he had been angling for over many years – Prime Minister. It was not Darling’s first experience of the Treasury – he had been Chief Secretary in the first year of the Blair government after ten months in the shadow role.
Darling was seen as a “safe pair of hands”, having previous ministerial experience at the Department for Transport, cleaning up the fallout from Railtrack’s failure, and at the Department for Trade and Industry. He was Secretary of State for Work & Pensions between July 1998 and May 2002 before moving to Transport. His term as Chancellor ran for just under three years (June 2007 to May 2010), which meant he took the full force of the 2007/08 financial crisis: the run on Northern Rock started three months after Darling entered 11 Downing Street.
His background was in law and he was called to the Scottish Bar in 1984 before entering Parliament in 1987. His first Budget was in March 2008, but many of the 2008/09 measures had been announced (and re-announced) by his predecessor or merged into Darling’s 2007 Autumn Statement.
What he did
His first Budget:
- The transferable IHT nil rate band had been announced in the previous October and was widely seen as an attempt to spike the Conservatives’ guns. At the time, George Osborne (as Shadow Chancellor) was suggesting the IHT threshold should be £1m, a move that is said to be why Gordon Brown did not call a snap election that autumn.
- The abolition of the 10% band for earnings and a 2% cut in the basic rate, both of which had been revealed in Brown’s 2007 Budget, were confirmed by Mr Darling. However, the 10% rate abolition met a groundswell of criticism about its effects on the lowest paid and by May, Darling was forced to take action. He increased the personal allowance by £600 to compensate low earners for the loss, adding nearly £3bn to government borrowing.
- Capital gains tax was reformed, with indexation and taper relief both scrapped in favour of a single rate of 18%. Entrepreneurs’ relief, with a cumulative lifetime allowance of £1m and an effective tax rate of 10% replaced business taper relief.
- The start of what has proved to be a long series of measures aimed at non-doms began with the £30,000 annual charge for remittance basis to apply after at least seven years UK residence out of the last nine.
- An increase in alcohol duties of 6% above inflation resulted in a Facebook campaign that saw Mr Darling barred from many pubs, starting with his Edinburgh constituency.
His second Budget:
- In his November 2008 Pre-Budget Report, Darling cut the standard rate of VAT by 2.5% to 15% until the end of 2009. This was a costly measure (over 12bn in lost revenue), aimed at countering the impact of the financial crisis.
- A financial crisis focussed meeting of the G20 and the timing of Easter meant that the 2009 Budget did not take place until 22 April.
- A 50% top rate of income tax was announced for 2010/11, for those with incomes of over £150,000.
- The phasing out of the personal allowance for those with incomes of over £100,000 was announced, to take effect from 2010/11.
- The high income excess relief charge for pension contributions was announced, to take effect from April 2011. It aimed to taper tax relief on pension contributions down to basic rate for those with income of over £150,000, with basic rate applying at £180,000 and over. There was much criticism of the complexity and, in the end, Mr Darling’s successor, George Osborne scrapped the idea before it could take effect, preferring to reduce the annual allowance to £50,000. However, slightly under five years later Mr Osborne announced his own complex variant of tapering, based on the annual allowance rather than the rate of relief.
- The lifetime and annual pension allowances were frozen up to 2015/16 at the 2010/ 11 levels (£1.8m and £255,000 respectively). Once again, Mr Osborne had other ideas…
- The company car value cap of £80,000 was scrapped, with effect from 2011/12.
- The ISA allowance was increased from £7,200 to £10,000, but just to complicate matters, only those aged over 50 benefitted from the increase in 2009/10: youngsters had to wait until 2010/11.
- The car scrappage scheme was introduced, giving £2,000 to anyone replacing a ten year old car they had owned for more than 12 months with a new vehicle. The main beneficiaries proved to be Korean motor manufacturers.
His third Budget:
- By the time of Darling’s third Budget in March 2010, the election date had been set for 6 May.The Budget was therefore largely one of his if-we-win proposals, most of which were subsequently co-opted by George Osborne.
- The IHT nil-rate band was frozen at £325,000 for five years to 2015. It has since been frozen for another six years, to April 2021.
- The annual investment allowance was doubled to £100,000. This was the first of many tweaks that saw the allowance rise to as high as £500,000 and fall to as low as £25,000.
- A temporary increase in the SDLT threshold to £250,000 was introduced for first time buyers. At the other end of the scale, the top rate of SDLT rose (again) to 5% for residential properties valued above £1m from April 2011.
- The minimum holding of ‘eligible shares’ in a VCT was increased from 30% of qualifying holdings to 70%.
Mr Darling’s term as Chancellor was defined by the financial crisis, but was bookended by Gordon Brown. It was Brown’s promotion from Chancellor to Prime Minister which gave Alistair Darling the role and Brown’s failure to win the 2010 election which ended Darling’s term as Chancellor.