Budget 2008: Economic slowdown but fuel duty delayed
Alistair Darling opened his first Budget speech by saying that its “core purpose” was “stability now and in the future”. All governments, he said, have one aim in 2008, which is to maintain stability in the face of the global economic slowdown. Mr Darling said that “with low inflation, record levels of employment, and unemployment at its lowest level for a generation, Britain is better placed than other economies to withstand the slowdown in the global economy”. However, the Chancellor acknowledged the difficult times ahead for the economy by paring back his growth forecasts. He downgraded predicted growth for 2008 to 1.75 per cent – 2.25 per cent, and for next year to 2.25 per cent – 2.75 per cent. Promising there would be no return to the inflation rates of the early 1990s, the Chancellor said that he was “writing to the Governor of the Bank of England to re-confirm that the inflation target for the Monetary Policy Committee remains 2 per cent”. The Chancellor re-affirmed that, as of April, the main rate of income tax is to fall from 22 per cent to 20 per cent. Also confirmed was the cut in the main rate of Corporation Tax from 30 per cent to 28 per cent, effective from April. As widely predicted, Mr Darling announced that the fuel duty increase of 2p per litre, due on 1 April, has been postponed for six months. The Chancellor went on to say that “the UK is one of the best places in the world to do business” and that the government is committed “to consultation with business to maintain a stable business tax system that remains responsive to business’ needs and internationally competitive”. Mr Darling said that the changes to Capital Gains Tax announced in the pre-Budget report and in January – the introduction of a flat rate charge of 18 per cent and the entrepreneurs’ relief on lifetime sales of assets of up to £1million – would come into effect next month. In order to make it easier for smaller enterprises to gain access to investment, the Chancellor announced that funds available through the Small Firms Loan Guarantee scheme will increase by £60 million for the coming year. Red tape also came under scrutiny, with the Chancellor promising that the Business Secretary would consult on radical new proposals to place a limit on the amount of regulation that can be imposed by Whitehall departments. There were no changes to plans to charge non-domiciles a fee when they have lived in the UK for seven years in order to maintain their non-dom tax status. There will not, however, be any further changes to the tax regime for this Parliament or the next. To help families, child benefit for the first child will increase to £20 a week from April 2009 – a year earlier than planned. As well as the pension credit, which guarantees a minimum income of £124 per week as from April, winter fuel payments for over 60s will rise from £200 to £250 and for the over 80s from £300 to £400. It was anticipated that the Chancellor would introduce additional green measures in his Budget. If voluntary schemes by retailers to get rid of the use of plastic bags are not effective, the Chancellor promised the government would impose a charge on plastic bags. To encourage the use of low emission cars, drivers are to get an incentive to go green. From April 2010, for cars that emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions there will be no car tax to pay at all in the first year. But a higher first year rate will be introduced on the most polluting cars. There is to be more money to help failing schools, while an extra £60 million will be invested over the next three years to improve the skills of those people who want to re-enter the jobs’ market. The duty on tobacco is to rise, adding 11 pence to the price of a packet of 20 cigarettes and 4 pence to the price of five cigars. Alcohol duty rates will increase by 6 per cent above the rate of inflation, with beer rising in cost by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle. Date:12 March 2008
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