Plain English 2007 budget

Below you can read our version of the 2007 budget speech without the waffle (you can view the original 2007 budget statement) here.

Inflation

Our target for inflation is 2% and this will allow low interest and mortgage rates to continue. We will never return to the old boom and bust.


Investment

Investment by businesses is forecast to rise by more than 7%. I expect our economy will grow by 2.5% to 3% in 2008 and then again in 2009.

Government spending rules

Our rules are:

  1. That over the economic cycle our spending will be covered by the money we raise from taxes.
  2. That the money we borrow for investment in the infrastructure, schools, hospitals and so on will not be more than we can afford to repay.


I forecast that our budget deficit for the coming years will be:

2007 £35 thousand million (£35 billion)
2008 £30 billion
2009 £28 billion
2010 £26 billion
2011 £24 billion.

This borrowing is for investment in our future, not for our day to day spending.


Spending by government departments

I will raise £6 thousand million (£6 billion) by selling Spectrum (the Student Loans). I will raise another £30 billion by selling other assets at home and overseas.

Government departments will save another £1 billion in administration costs. I am also saving another £ 2 billion by agreeing some below inflation spending settlements and efficiency savings for departments at the heart of government including the:

  • Department for Work and Pensions;
  • HM Revenue & Customs;
  • Cabinet Office;
  • Treasury;
  • Department for Constitutional Affairs; and
  • Attorney General’s departments.


By 20010-11 this will release £26 billion to spend on front line services (such as education, social services and waste disposal).

Our total capital investment in schools, hospitals, security and defence and infrastructure this year is £43 thousand million (£43 billion) and will be in:

2007 £48 billion
2008 £52 billion
2009 £55 billion
2010 £57 billion
2011 £60 billion.

Our total government spending this year is £552 thousand million (£552 billion) and will be in:

2007 £587 billion
2008 £615 billion
2009 £644 billion
2010 £674 billion.


Stability of our economy


We need to promote:

  • long-term investment and growth which will not damage the environment;
  • rewards for work and saving; and
  • supporting and strengthening families to give stability for parents and children.


We must have open markets and free trade with the rest of the world.
I want to combine our modern and flexible management of competition with incentives and support for British investment and new ideas. For example today risk-based regulation ( risk management systems) is being introduced into employment tribunals.

In my opinion an advanced economy like ours needs to invest up to 10% of its national income in education and new ideas. So over the next four years public investment in science will rise from £5 thousand million (£5 billion) to £6.3 billion by 2010-11.

Business taxes

Capital allowances

Long life assets Annual allowance 10%
Plant and machinery Annual allowance 20%
Research & development credit for small companies Tax credit 175%
Environmental investment Tax credit 175%
Investment allowances 100% up to £50,000
Corporation tax Mainstream rate 28%
  Small companies’ rate 20% (rising to 22% by 2009)


We are also setting up a new Northern Ireland innovation fund for the restored executive to use for industry and jobs.

Climate change and tax

We have agreed to set up the following partnerships with:

  • China on clean coal;
  • Brazil on biofuels;
  • Mozambique on biofuels;
  • South Africa on biofuels;
  • India on clean energy investment;
  • Mexico on carbon markets; and
  • Norway on carbon capture and storage.


We will give £50 million of support for ten countries in central Africa which are attempting to prevent the destruction of the world’s second largest rain forest. We will also allocate £800 million for the Environmental Transformation Fund to help reduce international poverty.


I have encouraged banks and building societies to create mortgages for people investing in energy efficiency. I am offering grants of £300 to £4,000 for pensioners installing insulation and central heating in their homes. From next month £18 million of microgeneration grants will be available for homes.

Until 2012 all zero carbon homes costing up to £500,000 will be exempt from stamp duty.

The money available from Business Links and Regional Development Agencies for advice, support and incentives for small businesses will be increased from £140 million this year to £240 million next year.

Landfill tax will increase by £8 a year until 2011.
The aggregates levy will rise in April 2008 from £1.60 to £1.95 a tonne.

These measures will reduce carbon emissions by 16 million tonnes.
Business rate relief will be reduced to 6 months for empty industrial property and
3 months for empty offices and retail premises.

Car emissions and tax

I am extending until 2010 the:

  • biofuels duty differential of 20p a litre; and
  • 40% fuel duty discount.

I am extending until 2012 the 40p a litre biogas incentive.

The graduated bands for Vehicle Excise Duty will be:

  • Lowest rate 0%
  • Band B £35
  • Top band £300 and then to £400 in 2008

Fuel, alcohol and cigarettes taxes

Fuel duty will rise by:

  • 2p a litre from October 2007;
  • 2p a litre in 2008; and
  • 1.8p a litre in 2009.


From Sunday alcohol duties will rise by:

  • 1p a pint for beer;
  • 1p a litre for cider;
  • 5p a bottle for wine; and
  • 7p a litre for sparkling wine.

Duty on spirits will not change.

Gaming duty, charities and churches

  • Gaming duty bottom rate 15%
  • Gaming duty top rate 50%


To help small community organisations an £80 million fund is being established.

Tax incentives for workers on low incomes

Impossible to translate accurately!

Wages for trainees


50,000 16 and 17 year olds who sign activity and learning agreements will be paid a wage while they learn new skills. Small companies taking on an employees needing to learn the most basic of skills will get training help of £2,000 an employee (in some cases £3,000) from now to 2011.

Financial assistance scheme

The budget for this scheme is being increased from £2 thousand million (£2 billion) to £8 billion to help people who have lost their work pension because of their employer’s insolvency.

Tax and marriage

The capital gains tax exemption will increase from £8,800 to £9,200 and will be £18,400 for married couples.

Inheritance tax, VAT and older people

The inheritance tax allowance will increase to £350,000 by 2010.

VAT on some alterations to houses will be reduced from 17.5% to 5% to help families where grandparents are living with their children.

First time buyers

We are launching the first stage of a project to help people get on the housing market by using shared equity schemes.

ISAs

The amount of cash that can be saved in an ISA is increased from £3,000 to £3,600 a year.

Child benefit and children’s tax credits

Child benefit for the first child £17.45 a week. It will rise to £20 by 2010.

Children’s centres and nursery education

There will be six children’s centres in the typical constituency by 2010.

VAT on sports facilities

We will move the VAT restriction so that schools can make their sports facilities available to the local community.

Pensioners

Age allowances Under 75 75 plus
     
Now 7,280 7,420
2008 8,990 ?
2010 9,500 ?
2011 9,770 10,000
     
Couples by 2010 19,540 20,000


Pension credit guarantee

2007 £114 a week
2008 £119 a week
2009 £124 a week
2010 £130 a week


Income tax

The 10p band is now just for savings income.
From April 2009 the top rate band will start at annual income of £43,000. The national insurance ceiling for employees will be £43,000.

Education spending

2007 £64 thousand million (£60 billion)
2008 £67 billion
2009 £70 billion
2010 £74 billion


By 2010 we will spend £6,600 a year for each pupil.
We are changing the school leaving age to 18.

Basic rate of income tax in 2008

From 6 April 2008 the basic rate of income tax will be 20%.

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