The Chancellor Alistair Darling was today forced to face up to the full extent of Britain's economic and budget deficit problems. As a result he maintained that he made a number of proposals with the objective of stimulating the economy and rebalancing the budget deficit. There had been a huge amount of speculation about what the Chancellor would announce but in reality there was little of substance within his speech and in my opinion no lasting plan for tackling the financial issues that the country is facing. Disappointingly it seemed that the Chancellor was more interested in setting a political agenda for the forthcoming election. However, it was great to hear about the deferral in the increase in corporation tax that was anticipated in April 2010, an extension in the time to pay arrangements for all businesses and it appears no changes to the rates of capital gains tax.
We will now consider the press releases and consultation documents that have been issued this afternoon to see what the detail contains but in case you have not yet been able to catch the main announcements coming out of the pre budget report we thought we would summarise them for you.
Economic Announcements
· The Chancellor expects UK GDP to fall by 4.75 % this year, to grow by between 1% and 1.5% next year and 3.5% in 2011 and 2012.
· The Chancellor defended his t imetable for cutting the budget deficit by half over the next four years is sensible. However he then admitted that this year's borrowing will be £3bn higher than expected i.e. £178bn rather than forecast £175bn. It will also be £3bn higher in 2010/11 than previously forecast at £176bn next year then £140bn, followed by £117bn, £96bn in 2013-14 and finally £82bn in 2014-15.
· Net debt as a share of GDP will hit 56 per cent this year and rise to 65 per cent next.
· Inflation is forecast to rise from the current level of 1.5% to around 3% early next year before falling back again.
Taxation Announcements
· The rate of VAT will return as planned to 17.5% from 15% in January 2010.
· The time to pay scheme allowing firms to spread tax payments will be extended for as long as needed.
· The planned increase in corporation tax for small companies to 22% is to be deferred until 2011, leaving the 2010 tax rate unchanged at 21%.
· The expected inheritance tax threshold will not be raised from £325,000 to £350,000 as previously planned and announced.
· A new 10p corporation tax rate will be introduced from income that arises from patents.
· All income tax allowances, income tax bands and rate are to be frozen for 2010/11.
· In April 2012, the point at which people start paying 40% income tax to be frozen again for a further one year, this will effect anyone earning more than £43,000.
· All employer, employee and self-employed rates of National Insurance will rise by a further 0.5% from April 2011 this is on top of the 0.5% increase already announced.
· The current stamp duty holiday will end next month.
· Bank bonuses above £25,000 will subject to a 50pc one-off tax payable by the bank rather than the individual.
· Some extension of the relief to enable further companies to claim the R&D tax relief.
· A further restriction on claiming higher rate relief on pension contributions where the individual earns more than £130,000 and the employer makes employer pension contributions.
· The complete withdrawal of all tax reliefs and benefits arising from those operating furnished holiday letting businesses not just the planned capital gains tax relief withdrawal from April 2010.
· From April 2010 there is to be an increase in the fuel benefit in kind for those provided with private fuel for use in company cars and vans.
· Special tax treatment and concessions for businesses which operate electric cars and vans.
· From 2012, the CO2 emissions thresholds for company car tax bands will be shifted down by 5g CO2 per km increasing company car tax.
Other Announcements and Measures to be Introduced
· There is to be a guaranteed place for every 16 and 17 year old in education or training to be available in 2010.
· Benefits linked to inflation, such as child benefit, will rise by 1.5% in April, although the state pension will increase by 2.5%.
· Government to offer financial support for 10,000 under-graduates from poor backgrounds to take up internships in industry and the professions.
· £5bn in savings to be created by cutting back in a number of areas such as IT projects, outsourcing and cutting residential care.
· From 2011, all public sector pay rises will be capped at 1 per cent.
· Senior civil service pay bill to be cut by up to £100 million over three years and any new government appointment over £150,000 and all bonuses over £50,000 to require Treasury approval. | 
