The Budget at a glance

Key announcements

Employment

• Public sector employment has fallen in the past year.
• Private sector employment has risen to record levels.
• Some £60m to be spent over the next three years to encourage people to enter work and progress.
  

Public spending

• Public spending in the next three years will grow by 2.2 per cent.
• The government will spend £2bn more
  on British troops in 2008, including £900m
  on equipment.

Tax and National Insurance

• Changes to income tax confirmed from April. Basic rate drops from 22 per cent to 20 per cent and the 10 per cent band is abolished.
• The upper earnings limit on National Insurance contributions increased from £670 per week to £770 per week from April.
• Non-domicile tax scheme implemented from April, charging a fee to those in the UK for more than seven years who wish to retain non-domicile status. Annual tax charge of £30,000 on overseas income and gains unless these amount to less than £2,000. There will be no further changes to the regime in this parliament or the next.
• Beer duty to increase by 4p per pint, wine up 14p a bottle, cider up 3p a bottle and spirits up 55p a bottle.
• Tobacco duty increased by 11p per packet of 20 cigarettes and 4p for five cigars.
• An escalator was introduced by the Chancellor on alcohol duties, which will see charges increase by 2 per cent above inflation for the next four years.
  

Motorists

• Major reform of the vehicle excise duty from 2009. For new cars from 2010, the lowest-polluting cars will pay no road tax in the first year, with the highest-polluting cars paying £950.
• Funding set aside for road-pricing proposals.
• For environmental reasons, fuel duty will rise by 0.5p per litre in real terms in 2010.

Welfare

• Long-term recipients of sickness benefits to attend ‘work capability assessments’ from April 2010.
• Government plans to reform council tax and housing benefit.
• New contract to help parents into work, involving a commitment to find employment. Benefits for working families will be boosted.
• Government to invest an extra £125m over three years to stop child poverty.
• From April 2009, child benefits will rise to £20 for the first child. An extra £50 above inflation will be added to child tax credit for low-income and middle-income families.
• Government will work with energy companies on a voluntary and statutory basis to help low-income households meet fuel bills.
• The government will again be making Winter Fuel Payments to most people aged 60 or over for winter 2008/09. There will be an additional one-off payment for winter 2008/09 of £50 for households with someone aged 60-79 and £100 for households with someone aged 80 or over. This will be paid alongside the Winter Fuel Payment.

Savings

• All PEPs will automatically become Stocks and Shares ISAs.
• Individuals aged 16/17 can save up to £3,600 in a Cash ISA.
• Government to launch the Saving Gateway, a cash saving scheme for those on lower incomes, which will be introduced nationally with the first accounts available to savers in 2010.
• To encourage people to save money, the government increased the ISA investment limit to £7,200 from April for Stocks and Shares ISAs, with the amount that can now be held in a Cash ISA rising to £3,600. Investments in a Cash ISA can be transferred to a Stocks and Shares ISA.
• Investors can invest in both a Cash ISA (up to £3,600) and a Stocks and Shares ISA (up to £7,200) in the same tax year, provided they don’t exceed an overall total of £7,200.  The investments do not have to be with the same provider.

Transport

• Funding for the Crossrail project in London secured.
• New measures to be introduced at Heathrow and other airports aimed at increasing the use of biometric technology to speed up air travel.
• Aviation duty to increase by 10 per cent in the second year of operation.

Defence

• The Chancellor expects to spend £2bn more on defence, including £900m on new equipment.
  

Education

• Government to spend £10m over the next five years to create a new science fund for teachers in secondary schools.
• Investment of £200m in under-performing schools in an effort to improve GCSE grades by 2011.
• There will be an increase in the amount of funding for adult training.

Economy

• UK GDP growth is forecast to slow from 3 per cent in 2007 to between 1.75 per cent and 2.25 per cent in 2008, before picking up to 2.25 per cent and 2.75 per cent in 2009 and 2.5 per cent and 3 per cent in 2010.
• The inflation target for CPI will remain at 2 per cent.
• Borrowing will rise from £36bn to £43bn in 2008, equal to 2.9 per cent of national income. This will decline to £23bn, or 1.3 per cent, by 2012/13.
• Borrowing will total £140bn over the next
  four years.
• The current Budget deficit will be £10bn in deficit in 2008/09. It is forecast to decline to £4bn in the following year and is expected to return to a surplus in 2010/11 – a year later than was scheduled.
• UK debt is now 36.6 per cent of GDP. Debt is forecast to reach 38.5 per cent in 2008.
• Public sector investment will reach £33bn
  next year.
  

Business and corporation tax

• New flat rate capital gains tax charge of
  18 per cent for individuals introduced from April as previously announced, up from 10 per cent.
• Small firms loan guarantee scheme increased by £60m this year. Enterprise management incentive tax relief scheme increased from £100,000 to £120,000.
• Target for small and medium-sized businesses to win 30 per cent of public sector contracts in the next five years.
• No further cut on corporation tax above the 2 per cent reduction to 28 per cent announced last year. Main corporation tax rate reduced from 30 per cent to 28 per cent from April.
• Small business corporation tax rate increased to 21 per cent in 2008/09 and 22 per cent in the following year.
• Government to go ahead with plans to charge a levy, set at £30,000, for non-doms in the UK who will not be charged on offshore income.
  
• An extra £60m has been committed to filling the UK ‘skills gap.’
• Government will introduce a capital fund of £12.5m to encourage more female entrepreneurs.
• The threshold for businesses to account for VAT on a cash basis increases from £660,000 to £1.35m from April.
  

Property

• The government will be inviting views on how to provide long-term fixed rate mortgages.
• Key workers and first-time buyers to be able to borrow from new shared equity schemes to provide up to half of the price of new homes.
• Sites identified for a target of 70,000 more new houses in addition to the 40,000 already under construction.
• Stamp duty on shared ownership homes will not be required until the occupant owns 80 per cent of the equity.
• Teachers, nurses and first-time buyers can borrow money for shared equity schemes, and the minimum stake has been reduced from 75 per cent to 50 per cent.
• £8bn in funds to be committed to new, affordable and social housing.
  

Employment

• Public sector employment has fallen in the past year. Private sector employment has risen to record levels.
• Some £60m to be spent over the next three years to encourage people to enter work and progress.

Public spending

• Public spending in the next three years will grow by 2.2 per cent.
• The government will spend £2bn more on British troops in 2008, including £900m on equipment.

Tax and National Insurance

• Changes to income tax confirmed from April. Basic rate drops from 22 per cent to 20 per cent and the 10 per cent band is abolished.
• The upper earnings limit on National Insurance contributions increased from £670 per week to £770 per week from April.
• Non-domicile tax scheme implemented from April, charging a fee to those in the UK for more than seven years who wish to retain non-domicile status. Annual tax charge of £30,000 on overseas income and gains unless these amount to less than £2,000. There will be no further changes to the regime in this parliament or the next.
• Beer duty to increase by 4p per pint, wine up 14p a bottle, cider up 3p a bottle and spirits up 55p a bottle.
• Tobacco duty increased by 11p per packet of 20 cigarettes and 4p for five cigars.
• An escalator was introduced by the Chancellor on alcohol duties, which will see charges increase by 2 per cent above inflation for the next four years.

Motorists

• Major reform of the vehicle excise duty from 2009. For new cars from 2010, the lowest-polluting cars will pay no road tax in the first year, with the highest-polluting cars paying £950.
• Funding set aside for road-pricing proposals.
• For environmental reasons, fuel duty will rise by 0.5p per litre in real terms in 2010.

Welfare

• Long-term recipients of sickness benefits to attend ‘work capability assessments’ from April 2010.
• Government plans to reform council tax and housing benefit.
• New contract to help parents into work, involving a commitment to find employment. Benefits for working families will be boosted.
• Government to invest an extra £125m over three years to stop child poverty.
• From April 2009, child benefits will rise to £20 for the first child. An extra £50 above inflation will be added to child tax credit for low-income and middle-income families.
• Government will work with energy companies on a voluntary and statutory basis to help low-income households meet fuel bills.
• The government will again be making Winter Fuel Payments to most people aged 60 or over for winter 2008/09. There will be an additional one-off payment for winter 2008/09 of £50 for households with someone aged 60-79 and £100 for households with someone aged 80 or over. This will be paid alongside the Winter Fuel Payment.

Savings

• All PEPs will automatically become Stocks and Shares ISAs.
• Individuals aged 16/17 can save up to £3,600 in a Cash ISA.
  
• Government to launch the Saving Gateway, a cash saving scheme for those on lower incomes, which will be introduced nationally with the first accounts available to savers in 2010.
• To encourage people to save money, the government increased the ISA investment limit to £7,200 from April for Stocks and Shares ISAs, with the amount that can now be held in a Cash ISA rising to £3,600. Investments in a Cash ISA can be transferred to a Stocks and Shares ISA.
• Investors can invest in both a Cash ISA (up to £3,600) and a Stocks and Shares ISA (up to £7,200) in the same tax year, provided they don’t exceed an overall total of £7,200.  The investments do not have to be with the same provider.

Transport

• Funding for the Crossrail project in London secured.
• New measures to be introduced at Heathrow and other airports aimed at increasing the use of biometric technology to speed up air travel.
• Aviation duty to increase by 10 per cent in the second year of operation.

Defence

• The Chancellor expects to spend £2bn more on defence, including £900m on new equipment.

Education

• Government to spend £10m over the next five years to create a new science fund for teachers in secondary schools.
• Investment of £200m in under-performing schools in an effort to improve GCSE grades by 2011.
• There will be an increase in the amount of funding for adult training.

Economy

• UK GDP growth is forecast to slow from
  3 per cent in 2007 to between 1.75 per cent and 2.25 per cent in 2008, before picking up to 2.25 per cent and 2.75 per cent in 2009 and 2.5 per cent and 3 per cent in 2010.
• The inflation target for CPI will remain at 2 per cent.
• Borrowing will rise from £36bn to £43bn in 2008, equal to 2.9 per cent of national income. This will decline to £23bn, or 1.3 per cent, by 2012/13.
• Borrowing will total £140bn over the next
  four years.
• The current Budget deficit will be £10bn in deficit in 2008/09. It is forecast to decline to £4bn in the following year and is expected to return to a surplus in 2010/11 – a year later than was scheduled.
• UK debt is now 36.6 per cent of GDP. Debt is forecast to reach 38.5 per cent in 2008.
• Public sector investment will reach £33bn
  next year.
  

Environment

• Government is to take advice on whether the carbon emissions reduction target can be raised to 80 per cent by 2050. Climate change levy increased in line with inflation from April.
  
• Reform of the North Sea fiscal regime to encourage investment.
• Five million customers on pre-payment meters to be given a fairer deal. Legislation will be introduced if necessary.
  
• Some £26m funding next year for the Green Homes Service to help people reduce the carbon output of their homes.
  
• Threat to introduce legislation to reduce plastic carrier bags in 2009 if voluntary action does not work, with funds going to environment charities.
  
• New non-domestic buildings to become ‘carbon neutral’ by 2019.
  
• Energy companies to spend £150m a year on energy tariffs.
• ‘Carbon Budgets’ to be issued alongside regular Budgets from 2009.