The Chancellor of the Exchequer, Alistair Darling, presented his second Pre-Budget Report Summary to the House of Commons on 24 November 2008.
When first introduced by Gordon Brown, the "Pre-Budget Report" each autumn was intended to be a warm up for the main act; the Budget the following March. Not this year it isn't! With the country entering recession today's Pre-Budget could not have been more eagerly anticipated; a huge weight of expectation relying on the proposals to deliver a fast shot of financial adrenalin to avoid the worst depths of recession.
Only in March this year our main tax concerns were around the unanticipated changes to capital gains tax and non doms. Growth forecasts were downgraded to 1.75% - 2.25% in the face of an uncertain economic outlook and the slowdown in the housing market was reducing the take through Stamp Duty Land Tax. How distant March of this year seems. The concerns are now at a more fundamental level; the Chancellor today confirmed that it is expected that the economy will shrink by 0.75% - 1.25% over the next year and government borrowing will be £118bn. Messrs Brown and Darling need the public to start spending and the Pre-Budget Report contains measures designed to encourage that, including a reduction in the rate of VAT.
The business sector is paralysed by the shortage of finance and needs the credit markets to be restored. Despite the injection of £37bn popular opinion is that banks are not making it available to businesses on reasonable terms. Without loan facilities many businesses will not survive and the Chancellor hopes that the measures announced today will encourage the banks to start lending again.
Will these measures be enough? Only time will tell but the Chancellor has cautioned that these will only be short term and we can expect tax increases as a consequence. With the prospect of higher taxes to come the question is whether these proposals will encourage people to spend or use the period of notice to save and prepare?
As always, notwithstanding headlines targeted at improving the economic plight there are many tax changes hidden in the detail; we hope that our following commentary will bring you up to date on the main issues.
Click here to view Vantis' summary of the Chancellor's Pre-Budget 2008 Report