Pre-Budget Report

Posted on 9 Dec 2009 by The Manufacturer

Chancellor Alistair Darling has today delivered this year's Pre Budget Report to the House of Commons.

The Pre Budget Report is considered a ‘mini’ version of the main address delivered by the Chancellor each spring. It was first introduced by Gordon Brown when he was chancellor in 1997, the year that Labour came to power.

Before getting around to the action, Darling revealed that the economy will grow by between 1 and 1.5 per cent next year and by 3.5 per cent in 2011 and 2012 following a contraction of 4.75 per cent.

He said debt as a share of GDP will peak at 78 per cent in 2015 but assured that this will be in line with other economies.

As for the measures, I borrow from Guardian blogger Andrew Sparrow what he himself describes as a “rather crude” analogy:

“…his team are 3-1 down with 10 minutes to go and he’s been asked to take a penalty. That’s the kind of pressure he’s under. If he gets it right, Labour won’t necessarily win. But if he misses – in other words, if he announces measures that somehow backfire, politically or economically – he could lose the match.”

So has Darling set us up for a grandstand finish?

Key measures the Chancellor announced include:

• VAT is to return to 17.5 per cent in January. It will stay at its more familiar level for the foreseeable future.

• Boiler scrappage scheme to be introduced

• Employer/employee National Insurance to rise 0.5 per cent from 2011 for those who earn over £20,000 (on top of 0.5 per cent increase due to start in April 2010).

• £500m more credit to be provided to businesses through 12 month extension of Enterprise Finance Guarantee

• Small corporation tax rise (from 21p to 22p) to be deferred until April 2011

• Fifty per cent tax on any bank bonus worth more than £25,000, to be paid by bank not individual. Will raise £500m

• £160m of public and private investment in low carbon projects

• Electric cars to be road tax exempt for five years

• He wants to encourage research and investment in the pharmaceutical bio-tech industries. A 10p tax on income from UK patents will fund research and investment in the pharmaceutical bio-tech industries

• Profit from patents to be taxed less from 2013 to encourage innovation

• Additional £400m for offshore wind

• Funding for Carbon Capture and Storage demonstration projects doubled.

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