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At-a-glance: Pre-Budget report At-a-glance: Pre-Budget report
(about 4 hours later)
Here are the key points from Chancellor Alistair Darling's 2009 pre-Budget report:Here are the key points from Chancellor Alistair Darling's 2009 pre-Budget report:
ECONOMYECONOMY
The chancellor said UK GDP contracted by 0.5% in the three months to September and economic growth this year is forecast to be 0.75% - down from the 2.5% he predicted in March. He said GDP growth for 2009 forecast to be between -0.75% and -1.25%, with inflation forecast to come down sharply, reaching 0.5% by the end of next year. In 2010 growth is forecast at between 1.5% and 2% - Mr Darling said the economy would continue to recover after that. He told MPs the PBR represented a £20bn fiscal stimulus between now and April 2010, 1% of GDP. The chancellor said UK GDP contracted by 0.5% in the three months to September and economic growth this year is forecast to be 0.75% - down from the 2.5% he predicted in March. He slashed economic growth forecasts for 2009 from 2.75% to between minus 0.75% and minus 1.25%. Inflation is forecast to come down sharply, reaching 0.5% by the end of next year. In 2010 growth is forecast at between 1.5% and 2% - Mr Darling said the economy would continue to recover after that. He told MPs the PBR represented a £20bn fiscal stimulus between now and April 2010, 1% of GDP.
BORROWINGBORROWING
Borrowing would reach £78bn this year, £118bn next year - equivalent to 8% of GDP. Mr Darling said that was the "right choice for the country". He said borrowing would fall from 2010 to £105bn, then to £87bn, £70bn and then £54bn so by 2016 Britain would once again be borrowing only to invest. UK net debt as a share of GDP will be 41% this year, 48% next year, then 53% and 57% in subsequent years. Borrowing will be taken to record levels, reaching £78bn this year - up from the £43bn he predicted earlier this year - and up to £118bn next year - equivalent to 8% of GDP. Mr Darling said that was the "right choice for the country". He said borrowing would fall from 2010 to £105bn, then to £87bn, £70bn and then £54bn so by 2016 Britain would once again be borrowing only to invest. UK net debt as a share of GDP will be 41% this year, 48% next year, then 53% and 57% in subsequent years.
SPENDING £3bn capital spending is to be brought forward from 2010/11. The money will be used to increase motorway capacity, improve and build new social housing, renew primary and secondary schools and invest in energy efficiency measures. SPENDING £3bn capital spending is to be brought forward from 2010/11. The money will be used to increase motorway capacity, improve and build new social housing, renew primary and secondary schools and invest in energy efficiency measures. But there will be a sharp cut in the rate of growth in public spending, now expected to grow by 1.2% per year, a sharp decrease from the 1.8% previously planned. In addition, the government has pencilled in £5bn in efficiency savings by 2011.
VATVAT
VAT to be cut from 17.5% to 15% from next Monday for 13 months. The chancellor urges retailers to pass it on as soon as they can. Alcohol and tobacco prices will not fall as duty on them will be increased to match the VAT cut. VAT to be cut from 17.5% to 15% from 1 December 2008 until 31 December 2009. The chancellor urges retailers to pass it on as soon as they can. Alcohol and tobacco prices will not fall as duty on them will be increased to match the VAT cut.
INCOME TAXINCOME TAX
A new 45% higher income tax rate is proposed for earnings above £150,000 from April 2011. Mr Darling says it will impact on 1% of people. The £120 rebate for basic rate taxpayers, introduced in the wake of the 10p tax row, is made permanent and increased to £145 from April. Mr Darling says it will benefit 22 million households - an extra 500,000 - "not just this year but for good". From April 2011 all rates of National Insurance contributions to be increased by 0.5% for all employees and employers. The starting point is to be raised to that of income tax - Mr Darling says no-one on less than £20,000 will see their NI contributions increase. A new 45% higher income tax rate is proposed for earnings above £150,000 from April 2011. Mr Darling says it will impact on 1% of people. The £120 rebate for basic rate taxpayers, introduced in the wake of the 10p tax row, is made permanent and increased to £145 from April. Mr Darling says it will benefit 22 million households - an extra 500,000 - "not just this year but for good".
NATIONAL INSURANCE
From April 2011 all rates of National Insurance contributions are to be increased by 0.5% for all employees and employers. The starting point is to be raised to that of income tax - Mr Darling says no-one on less than £20,000 will see their NI contributions increase.
TAX CREDITS AND ALLOWANCESTAX CREDITS AND ALLOWANCES
The pension credit will be increased in April from £124 to £130 a week for individuals and from £189 to £198 for couples. State pensions to rise in line with highest rate of inflation - an increase of £4.55 a week for a single person. Pension and child benefit increases will take effect in January, three months early, and every pensioner gets a one-off payment of £60 from January while couples get £120. The pension credit will be increased in April from £124 to £130 a week for individuals and from £189 to £198 for couples. State pensions to rise in line with highest rate of inflation, from £90.70 to £95.25 for a single person. Pension and child benefit increases will take effect in January, three months early, and every pensioner gets a one-off payment of £60 from January while couples get £120.
FUEL AND VEHICLE EXCISE DUTYFUEL AND VEHICLE EXCISE DUTY
The differential first-year rates on new cars will go ahead in April 2010 - but controversial new rates for older cars will be phased in. Duty rates for all cars will only increase by maximum of £5 from next year. In 2010 the maximum rise will be limited to £30 per car, rather than £90. AIR PASSENGER DUTY The differential first-year rates on new cars will go ahead in April 2010 - but controversial new rates for older cars will be phased in. Duty rates for all cars will only increase by maximum of £5 from next year. In 2010 the maximum rise will be limited to £30 per car, rather than £90. Less polluting cars will see no increase, or a cut of up to £30. AIR PASSENGER DUTY
While there had been support to reform APD to become a "tax per plane" rather than per person, the chancellor said that could harm the aviation industry which was facing "huge problems". Instead APD is to be reformed so that those who travel the furthest - and who have a bigger environmental impact - meet the cost, he said.While there had been support to reform APD to become a "tax per plane" rather than per person, the chancellor said that could harm the aviation industry which was facing "huge problems". Instead APD is to be reformed so that those who travel the furthest - and who have a bigger environmental impact - meet the cost, he said.
GREEN MEASURESGREEN MEASURES
An extra £100m is to be provided, with a further £50m brought forward, to help 60,000 more households insulate their homes. Mr Darling said the government would invest £535m more quickly on energy efficiency, rail transport and environmental protection.An extra £100m is to be provided, with a further £50m brought forward, to help 60,000 more households insulate their homes. Mr Darling said the government would invest £535m more quickly on energy efficiency, rail transport and environmental protection.
BUSINESS TAXESBUSINESS TAXES
Exemption for foreign dividends for large and medium sized businesses confirmed, introduced in 2009. Small firms to get a temporary increase in threshold for empty property relief. Also struggling businesses able to spread their VAT, corporation tax and NI contribution payments over a longer timetable. Rise in small business profits tax delayed for 2009. Exemption for foreign dividends for large and medium sized businesses confirmed, introduced in 2009. Small firms to get a temporary increase in threshold for empty property relief - for 2009/10 empty commercial properties with a rateable value below £15,000 exempt from business rates. Also struggling businesses will be able to spread their VAT, corporation tax and NI contribution payments over a longer timetable. Rise in corporation tax for small firms from 21p to 22p - planned for April 2009 - will be deferred. Tax repayment scheme for previously profitable businesses will be extended so up to £50,000 of losses can be offset against profits made over last three years. A £4bn deal has been agreed with the European Investment Bank to provide money to UK banks to pass onto small and medium-sized businesses.
HOUSING MARKETHOUSING MARKET
Major mortgage providers have agreed to wait three months after falling into arrears before initiating repossession proceedings. The government will also seek European Commission approval to help the mortgage market by providing for a temporary period guarantees for securities backed by new mortgages.Major mortgage providers have agreed to wait three months after falling into arrears before initiating repossession proceedings. The government will also seek European Commission approval to help the mortgage market by providing for a temporary period guarantees for securities backed by new mortgages.
EMPLOYMENTEMPLOYMENT
New initiative to fill 500,000 job vacancies with 20 major employers by speeding up recruitment and improving access to training. A rapid response service will expand to help those thrown out of work in all redundancies. There will also be £15m funding for free debt advice.New initiative to fill 500,000 job vacancies with 20 major employers by speeding up recruitment and improving access to training. A rapid response service will expand to help those thrown out of work in all redundancies. There will also be £15m funding for free debt advice.