Smash and grab raid, says Hague

The Chancellor's Speech

In his first big speech as Tory leader, William Hagueaccused the Chancellor of a "smash and grab raid" on pension funds and breaking Labour election promises not to raise tax.

The instant Budget reaction is one of the most difficult speeches of the parliamentary year for the leader of the Opposition. For Mr Hague it was also one in which he could hardly carp about the state of the economy. "Rarely, if ever, has a government had such cause to be grateful to its predecessor," he said. "We have bequeathed to this Government the strongest set of economic circumstances within the lifetime of my generation."

But Mr Hague maintained: "It is a tax-raising Budget which breaks the central promise on which Labour fought the last election, which flies in the face of the assertion of the Prime Minister that no increases would be needed at all.

"Boxed in by the commitments he made [not to raise income tax] the Chancellor has had to grub around for taxes which he believes nobody will notice or understand."

Mr Hague, and later the Liberal Democrats' leader Paddy Ashdown, focused on the impact of the windfall tax and changes in Advance Corporation Tax on pension funds. The Budget was a "double whammy" for pensioners, the Tory leader said. "It is a smash and grab raid on pension funds in this country and it is a cynical betrayal of the millions of people who have built up pensions and now see them devalued."

Pension funds, worth more than pounds 650bn, would be hit by the changes to ACT - "one of the most complicated taxes known to man", he told the House. The Chancellor had chosen a strategy "which halves the blame for him but doubles the pain for everyone else".

As for the windfall tax, it would not be paid by the "so-called fat cats" and stripe-shirted speculators who got out long ago, but by ordinary families through their gas and electricity bills and through shares and pensions.

Pensioners should be compensated for any increase in their fuel bills as a result of the tax, he added.

Paddy Ashdown claimed a windfall tax intended to raise pounds 5bn would cost the average person in a pension fund about pounds 80 a year. The Liberal Democrats profoundly disagreed with the tax, he said. It was retrospective, arbitrary and unfair. The way to deal with excess profits was "through regulation and not expropriation".

Though his party had supported the Government's programme in the Queen's Speech, it would vote against the Budget because the extra money promised for health and education would not be available until next year, when hospitals and schools needed it now.

While Mr Ashdown mocked the "brass neck" of the Tories for criticising somebody else for raising taxes, he also criticised Labour for a failure to rebuild trust in the politics of taxation. Having ruled out income tax raises for the sake of press headlines, the Chancellor had picked on half-hidden taxes which would hit the ordinary taxpayer.