Pre-Budget report: point by point guide

Compiled by Gordon Smith, Michael Hunter and Emily Rotberg, FT.com site
Published: Oct 09, 2007

The Economy

Growth expected to be 3 per cent this year but forecast for next year cut to between 2.5 per cent and 3 per cent. However, the chancellor said growth would rebound in 2009-10 to 2.5 to 3 per cent, in line with earlier forecasts.

The Chancellor raised the government's borrowing target for this financial year by £4bn to £38bn. The year to March 2009 would see borrowing rise by £6bn to £36bn. Net borrowing would then be £31bn in fiscal 2010 against a previous estimate of £28bn and £31bn in 2009-10 and £28bn in 2010-11 and £25bn in 2011-12.

However, the Chancellor said he would meet the government's economic "golden rule" this cycle, with a budget deficit of £8bn in fiscal 2008, a deficit of £4bn in fiscal 2009, and surpluses of £3bn and £9bn in 2010 and 2011 respectively.

He said inflation would meet earlier forecasts of 2 per cent next year and the year after.

Public spending

Government spending to rise to £397bn in 2010 from £345bn in 2007. The Comprehensive Spending Review identified savings of £30bn in the next three years across all government departments. Asset sales are expected to reach £36bn by 2011.

Taxation

Inheritance Tax

Combined inheritance tax relief for married couples and civil partnerships doubled to £600,000 from today and rising to £700,000 by 2010. This benefit to be backdated for every widow or widower. Inheritance tax threshold to rise in "future years" and the chancellor said he was considering linking the inheritance tax limit to rises in house prices and inflation.

Capital Gains Tax

Taper relief on capital gains tax to be abolished from next April. In its place the chancellor proposed a single capital gains rate of 18 per cent.

Non-Domicile Residents

The chancellor said he would consult on imposing a charge on non-domiciled residents after seven years' residence and a higher rate after 10 years in the UK. He also said he would clamp down on those trying to disguise income as untaxed capital or those trying to hide how long they spent in the country. He said these measures would raise £650m.

Corporation Tax

The main rate of corporation tax would be cut by 2p to 28p from next April.

Education

The education and skills budget would rise to £74bn in 2010. Investment on science and technology to rise to £6bn in three years' time.

Health

Health spending will rise to £110bn by 2010, from £90bn this year. The single fund for health research to reach £1.7bn by 2010, in line with the full recommendations of Sir David Cooksey's review

Defence

Chancellor makes an additional £400m available for armed forces operations in Iraq and Afghanistan

Environment

From 2009 the government plans to switch levy from passengers to airlines. It will also seek to lower VAT on the most energy efficient consumer goods. Defra's budget to rise to £4bn by 2010 to help combat climate change, including £800m for flood defences. Environmental Transformation Fund established with an initial budget of £1.2bn to provide investment in new energy technologies

Intelligence services

New single budget that brings together the work of the police, the security services and all parts of the government responsible for addressing the threat from terrorism. This budget will rise by £1bn over the next three years to £3.5bn.

Local Government

Local government to be granted powers to set the business rate supplement. Grants to local authorities for local services in England up to £26bn by 2010. Total settlements for the devolved administrations: Scotland up to £30bn in 2010, Wales up to £16bn and Northern Ireland up to £10bn

International Aid

Aid to developing countries to rise to £9bn by 2010, meeting commitment to double multilateral and bilateral aid to Africa. Chancellor says will meet all developing country obligations by 2010.

Transport

Transport spending will rise to £14.5bn per year by 2010 to provide extra money for M1 and M25 widening schemes and for upgrading the national rail network.

Housing

The Chancellor confirmed plans to build 240,000 new homes per year by 2016, up from 200,000 per year now.

Social care

Amount of child maintenance doubled to £20 per week next year. Child tax credit up to £175 per year from 2008.

Pension Credit for older people with a "small pension" of their own up by £5 a week from next April for a single person and by £7.65 for a couple. Social care budget up to £1.4bn by 2010. Extra £200 million in 2008 to provide pensioners and disabled people with free and off-peak national bus travel

Provision of £4bn over the next three years to help people in poor-quality housing renovate their homes

Sport

Department of Culture, Media and Sport; budget up to £2.2bn by 2010