It’s that time of year and we are not talking about Christmas, although that’s only 14 days away, but whose counting, I’m referring to the Chancellors Pre-Budget Report of 2009 that was delivered on 9th of December by Alistair Darling.
It was an interesting speech for those who where lucky enough to watch it, although questions of its political agenda arise ahead of the general election, but that discussion is for another day.
In 2008 global economies entered the most severe recession since the Great Depression, marking the UK’s economic conditions the worse since records began. It is believed global government intervention has helped reduce the impact on world economies, with signs of recovery in the UK and the Rest of the World. Government intervention in the banking sector has placed a huge debt on the UK economy that is said to cost around £14,000 per person.
So how does the Treasury plan to stabilise and grow the UK economy, EKW Group highlight the key issues in the Pre-Budget Report 2009:
Economic Forecasts
- The UK economy is forecast to contract 4.75% this year, with growth expected in the 4th qtr
- The UK economy is forecast to grow 1%-1.5% next year and a 3.5% growth in 2011-12
Borrowing
- Borrowing hit £178bn in 2009
- There is an estimated borrowing of £176bn in 2010 and £140bn in 2011, with borrowing falling to £96bn in 2013
- Over 4 years the budget deficit is to be halved
- Public loss from bailing out the UK banks is said to reduce from £50bn to £10bn
Tax
- From April 2011 all national insurance rates to increase by a further 0.5% for individuals who earn £20,000+, raising £3bn a year
- Bank bonuses of more than £25,000 comply with a one-off 50% tax; expected to raise £550m to help people back into employment
- VAT to return to 17.5% from the 1st of January 2010
Pay, Pensions and Benefits
- In April 2010 basic state pension will rise by 2.5%
- In 2010 child and disability benefit will rise by 1.5%
- Contributions to public sector pensions to be cut by £1bn a year
- For two years from 2011 all public sector pay settlements to be capped at 1%
Environment
- £160m investment into low-carbon and renewable projects
- Warm Front insulation scheme that will help 65,000 households will get an extra £200m
- 125,000 households eligible for boiler scrappage scheme to replace inefficient boilers
- Electric car will be exempt from company car tax for 5 years
- There will be a tax rebate for installation of wind turbines and solar panels
Employment
- The report forecasts unemployment will keep rising for some time
- Under-24’s who are out of work for more than 6 months will be guaranteed work or training
- Guaranteed training or education for 16-17 year-olds to be extended to 2010
Business
- Enterprise Finance Guarantee scheme to be extended for a further 12 months for small businesses, guaranteeing £500m of loans
- A new tax on superfast broadband is to be introduced, set at 50p
- A new tax of 10% on income from patents to boost science development
- The 1p increase in corporation tax for small businesses is to be deferred
Education
- An extra 500,000 low income families will be entitled to free school meals
Defence
- An extra £2.5bn will be allocated to help military operations in Afghanistan for 2010
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