In a bid to revive the UK economy and lead her out of the recession Alistair Darling has announced some radical changes to taxation in his pre-budget report. Essentially, Darling has outlined plans to increase public spending and increase borrowing a move that has caught the eye of many and criticised by the opposition.

Among the most significant changes consumers will be happy to know that VAT will be cut from its current 17.5% to 15%, the first time in 34 years. This initiative will cost the government an estimated £12 billion, which ultimately will have to be made up in years to come. However, in the short term this move is expected to boost confidence and encourage both individuals and businesses to start spending to take advantage of this discount.

We have already begun to see where Darling intends to make up some of the short fall from reducing VAT – the wealthy. The plan is in 2010 to increase income tax for anyone earning over £150,000 a year to 45%. This will leave around 300,000 living in the UK worse off. This initiative if implemented will be a radical change in direction for New Labour who till now has been reluctant to punish the wealthy.

Once again the devil is in the detail as the government announces increases in taxation once the recession is over to make up for all short falls that are likely to occur. So what will be the most interesting part of budget is not whether there will be cuts or even by how much but how will Britain deal with them once the turmoil is over.