What’s in the Pre-Budget Report?
Today sees the Chancellor, Alistair Darling, release his Pre-Budget Report, starting from about 15:30 this afternoon. Introduced when the Labour Government came to power in 1997, the Pre-Budget Report is intended to "encourage debate on the proposals under consideration for the Budget". But what is likely to be in the Pre-Budget Report?
- VAT is expected to be cut temporarily from 17.5% to 15%.
- Higher Rate Income Tax is expected to increase for those who earn over £150,000 a year, although the new 45% rate on earnings will only be introduced if Labour are re-elected next year.
- Vehicle Excise Duty rises are expected to be postponed.
- Corporation Tax rises are also expected to be postponed.
- The 10p Tax Rebate is expected to be extended for a year.
These moves are all seen as potential stimuli to boost the economy and increase spending, with the exception of the change in the higher rate of income tax which has been remarked on as being a way to balance the books when the income to government coffers is reduced.
Speaking at the CBI Annual Conference this morning, both Gordon Brown and David Cameron commented on this afternoon’s PBR.
David Cameron said that the Tories would allow small business to delay VAT payments by 6 months, thereby freeing up money for firms with cashflow problems. He also suggested cutting the small companies tax rate to 20p, cutting Employers’ NI contriutions by 1% for the smallest firms and a £3billion worth of tax breaks for companies that take on new staff.
Gordon Brown suggested that borrowing billions to cut taxes is the only way to prevent a long and deep recession.
Responding to the party leaders’ speeches, Richard Lambert of the CBI said he found both leaders’ plans to be "compelling", agreeing that quick moves for a financial boost are certainly needed but that the possible state of public finances is definitely a cause for concern.