In his final Budget earlier this year, Gordon Brown announced a series of changes to the tax system which will come into effect from April 2008. Now that Brown has moved to Number Ten, it is unlikely that Darling will seek to undo any of these.

And with the economy looking less healthy now than it did when Brown made his last set of forecasts in March of this year, Darling may struggle to deliver any particularly eye-catching initiatives. Economic growth forecasts are likely to be revised downwards.

Darling’s woes are, of course, further compounded by shadow chancellor George Osborne’s pledges on inheritance tax, stamp-duty thresholds and non-domicile tax status, all of which helped to secure the Conservatives an opinion poll bounce.

With a general election now ruled out of the equation, there may be less immediate pressure on Darling to produce a killer package to match the Tory commitments. But he will still be expected by Labour backbenchers to come up with something substantial.

In his March budget, Gordon Brown said current spending (on items such as social security benefits and the salaries of public sector workers) would grow by an average of 1.9% a year in real terms (that is, over and above inflation) between now and 2011.

He said net investment spending (on schools and hospitals, for example) would rise to 2.25% of national income – the equivalent of a 3.7% real terms rise in net investment over the next three years.

At the same time, the Treasury is forecasting that the economy will grow by 2.4% in real terms. The implication is that both current spending and total public spending will grow less rapidly – so that public spending shrinks as a proportion of total national income.

With some departmental spending levels already set – education is to get 2.2% extra in real terms and defence 1.5% - the biggest outstanding decision is how to distribute what remains between the NHS and the rest.

In his earlier report on the NHS, Gordon Brown’s expert adviser, Derek Wanless, called for an increase in spending of 4.4% on healthcare.

It is unlikely that Alistair Darling will deliver this when he unveils his plans this afternoon. However, he may well come up with a relatively generous 3% to 3.5% - in part to help tackle NHS pay problems.

While overseas aid is also likely to receive a good award to honour long-standing Labour commitments, this will mean tight settlements for other parts of the public sector.

With members of the main local government union, Unison, now balloting for industrial action over pay, and unrest among civil servants, the government may be in for a tough time between now and the general election.

We will be reporting the highlights of the announcements later today. Here, however, are some links that you might find useful

Resources on XpertHR (subscription required)
Budget 2007: key announcements
Pre-Budget Report 2006: higher growth, taxes and borrowing

Gordon Brown delivers 2006 Pre-Budget Report (video on the BBC)

What the papers say...
The national press are forecasting announcements on an end to tax breaks for private equity investors, and a review of inheritance tax. Here is a series of links to their special reports on the Pre-Budget Report.