Pre-Budget Summary

Economy

Economic Growth:
Treasury expected to concede growth in 2008 will be 0.8 per cent. The economy will shrink between -1% and 1.5% in 2009. These are enormous downgrades from the Budget forecast of growth of around 2% in 2008 and between 2.25 and 2.75% in 2009.

Structural Weakness:
Britain’s economy is weaker than he thought in March.

Unemployment:
Will rise to between 2.5m and 3m over the next two years.

House Prices:
Weakness in the housing market will continue

Public Finances:

Public borrowing:
This will rise in 2008-9 from a budget projection of £43bn to over £70bn. In 2009-10 borrowing will exceed £100bn. This is worse than the huge rates of borrowing of the early 1990s, early 1980s and mid 1970s. These figures will include the fiscal stimulus package.

Public Sector net debt:
The chancellor will ditch the sustainable investment rule. He will project debt rising above 50% of gross domestic product.

Fiscal Stimulus.

Reduced VAT:
The aim is to encourage spending to to limit the recession.

Income Tax allowances:
The rise in allowances for 2008-9, announced to head off the 10p tax furore, will be made permanent.

Petrol Duty:
The decision not to raise petrol duty this October will be extended in 2009-10.

Vehicle Excise Duty:
Postponement of the planned rises in vehicle excise duty for older cars.

Corporate Tax:
Small companies corporate tax rate to be 22%.