Coverage of Alistair Darling's second Pre-Budget Report as Chancellor began around two days ago as excerpts of his plans were leaked to the media. Finally, however, we know the full extent of the government's recovery plans.
The Pre-Budget Report comes at a time of the economy heading into recession, bank lending freeezing up and house prices falling. The Chancellor said he has come up with a package of measures to "support businesses, families and the economy", although it obviously remains to be seen whether he has done enough as he does not expect recovery until 2010.
Here we highlight the main points of his speech.
The economy
- Economic growth forecast for 2008 of 0.75%.
- Economic growth forecast for 2009 of between -0.75% and -1.25%; 2010 between 1.5% and 2%.
- Inflation expected to continue to fall - following fall from 5.2% to 4.5% in October 2008. Will reach 0.5% by end of 2009.
Public spending
- Increase borrowing "to reduce the impact and the length of the recession" - £20billion fiscal stimulus between now and April 2010.
- Borrowing significantly higher than forecast due to lower tax revenues. Forecast for 2008 is £78bn; for 2009 £118bn - but the government will be borrowing only to invest.
- £26.5bn of savings have been made in public services spending. But will find a further £5bn of efficiency savings in 2010/11.
- Will increase spending by an average 1.2% in real terms in each year.
- £3bn spending brought forward from 2010/11 to this year.
Taxes and benefits
- "To deliver a much needed extra injection of spending into the economy", will cut VAT from 17.5% to 15% to end of 2009, starting on Monday 1 December 2008. Asked for retailers to pass on this reduction as soon as possible.
- Increase in tobacco duty from 6pm this evening; alcohol duty to increase from 1 December 2008.
- Temporary tax cut to compensate those affected by the removal of the 10p tax rate to be permanent.
- From April 2011, increase national insurance contributions for employers and employees. Raise starting point for NI to be in line with income tax.
- From April 2011, new 45% rate of income tax on income above £150,000 - affecting the top 1% of incomes.
- Child tax credit increase from April 2009 brought forward from April 2010.
- Increase in child benefit to £20 a week from April 2009 moved forward to January 2009.
- Increase in pension credit from April 2009. Pensioner bonus of £60 paid in January 2009.
Main documents published by the Treasury
Pre-Budget Report 2008 index on the Treasury website
Pre-Budget Report 2008 in full
Resources on XpertHR
Includes data on recruitment and labour market, business confidence, pay awards, average earnings, inflation, labour disputes, unemployment and working hours.
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