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Budget 2007 - Speech highlights

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21st Mar 2007
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Gordon Brown has delivered his 2007 budget speech in the House of Commons. These are the main points.

Economy

"Looking to build a Britain of high asipiration"

UK economy is growing faster than all other G7 companies - stronger than the euro area and the US.

Inflation peaked at 4.7% in the US and 3.3% in G7; in the UK, inflation, measured on the same index, has never gone above 3%, has fallen from 3% to 2.8% and will fall further this year to 2%

Looking ahead to 2008-09 - inflation will be on target

Since 1997, inflation has averaged 1.5%, half that of previous decade - Britain's best inflation performance for a century

"We will never return to the old boom and bust"

In the last year investment has grown by 6%, business investment by 7% and inward investment by 10%

Alongside the US, Britain has fastest growing business investment in the G7

THe UK has closed the productivity gap with US and Japan and halved it with France

Growth in 2008 will be highest in G7 - 2.5% to 3%

Balance of current spending and revenues reports a surplus of £11bn in last economic circle - meeting the golden rule

On track in the new cycle to meet the golden rule despite lower levels of production and higher cost in the North Sea which cut revenues from £13-£8bn

Second fiscal rule met - debt kept at a sustainable level. Expected to be 38.2% of national income in 2007/8 and meeting the second fiscal rule through to 2012

Third fiscal rule proposal rejected

"Not the time for a fiscal loosening"

Environment

Landfill tax to rise by £8 each year to 2011

Aggregrate levy to rise to £1.95 per tonne

£16m of carbon reductions each year

Lyons report - commercial property lying empty not given such generous business relief

Relief available for empty properties restricted to six months. Special exemption for charities

Transport - UK lead developing low carbon vehicles.

Nicholas Stern and the chancellor of Aston University to report on energy saving potential in transport area

Biofuels duty differential extended to 2010

Biogas incentive extended to 2012

Triple funding for enforcement of haulier companies outside UK acting unfairly

Secure agreements internationally over environment

Competition to be launched for the first British carbon capture storage demonstration

Financial support of £50m for a 10 country initiative in central Africa to prevent rainforest destruction - help 50 million people's livelihoods

Encouraging banks to offer mortgages for immedite captal investment in energy efficiency

Grants of £300 - £4000 available to pensioners to install insulation and central heating

Rise in grants to install micro-generation plants

All new zero carbon homes up to £500,000 exempt from stamp duty

Pushing for European wide decision to reduce rate of VAT to 5% on energy saving home products

Environmental advice and energy audits available to small b usiness through Business Links and the regional development agencies to rise from £140m to £240m

Road tax cut for Band B vehicles from £50 to £35. Duty on "gas guzzlers" to rise from from £220 to £400

Fuel duty to rise 2p a litre - deferred to October

Proposal to tax airline tickets rejected

Employment

"UK is equipped for next challenges of the global economy"

Employment risen in last year - 220,000 more people in work - more people in work than major competitors

The next stage is to do more to equip people with new skills for new jobs in decade ahead

Priority services

Capital investment in schools, hospitals and infrastructure has doubled from £18bn in 1997 to £43bn a year

Will set in place consultation to build a shared national consensus around future priorities

Package of reforms to release resources for priority services - sale of Spectrum and student loan book means asset sales will rise from £18bn to £36bn

Efficiency savings, Savings in administration costs worth £1bn a year by 2010/11, and below inflation spending review settlements for DWP, HMRC etc will release £26bn for front line services

Capital investment in schools, hospitals, security and defence and infrastructure will rise to £48bn in 2008, and then to £52bn, £55bn in 2010, £57bn, and £60bn in subsequent years

Total expenditure to rise to £674bn by 2010

Inteligence and counter-terrorism to recieve an extra £86m

Additional £400m for armed forces

Money available for investment and reform in NHS to rise by £8bn next year, the biggest cash increase ever - 7% increase in real terms. Taking whole of UK, the total additional expenditure from April will be £10bn above last year - a 10% rise in NHS expenditure

Business

To lead in global competition and to secure the UK's place in growth sectors, Britain must champion open market flexibility and free trade.

Further extension to risk based legislation into employment tribunals.

Public investment in science to rise from £5bn in 2007 to £6.3bn by 2010

New £100 million competition challenging universities and businesses to come together to convert scientific breakthroughs into jobs

Capital allowances system to be simplified: two categories based on how long assets will last, more generous relief to long life assets, phase out relief originally intended for industrial buildings, allowances for plant and machinery to be aligned with economic rate of depreciation, value of main R&D tax credit to be increased, scope of environmental capital allowances to be expanded

Annual 100% investment allowance of £50,000 for all new businesses from April 2008

Mainstram corporation tax to be cut from 30% to 28% - lower than the US, Germany, France, Japan

Small companies corporation tax rate to rise in three stages to 22p by 2009 to tackle artificial incorporations"

Small firms can claim new 100% relief for new capital investment up to £50,000, 175% tax credit for R&D and new relief for environmental investments

Alcohol and tobacco duties

Pint of beer to rise by 1p from midnight on 25 March; 1p on a litre of cider; 7p on a bottle of sparkling wine; 5p on a bottle of non-sparking wine; duty on spirits frozen, cigarettes up 11p a packet VAT on nicotine patches and similar products to cut from 17.5% to 5%

Local communities

New fund worth £80m to help local community organisations.

Consult with charities to increase takeup of Gift Aid

Families and pensions

Extra £1bn a year to raise value of working tax credit

£40 a week in work bonus extended to lone parents, £60 a week in London

Partnership for jobs scheme with companies included Tesco and M&S - people passing work courses will be considered for jobs - help 100,000 people find employment

16-17 year olds who sign learning agreements to receive training wage

Financial assistance scheme extended from £2bn to £8bn - all 120,000 workers who lost work pensions will receive help.

Return of married couples allowance rejected. "would penalise widows and children and wives and husbands left by spouse. Far from rewarding marriage it would exclude 11m married couples in the UK"

Inheritance tax allowance to rise to 350,000 in 2010 - 94% of estates do not pay IHT

Capital Gains Tax allowance doubled for married couples

New shared equity competition to bring homes in reach of first time buyers

ISA tax free allowance to be extended from £3000 to £3600 from April next year

Child benefit for first child to rise by 15% to £20 per week by 2010. Minimum payment to rise to £31 per week

Childline Parentline Plus funding extended

3,500 childrens centres to be funded

Free nursery education to be extended - raised to 15 hours a week.

VAT restrictions on sports facilities to be rtemoved and academies allowed to make sports facilities available to public

Tax free allowance raised for pensioners under and over 75 to rise

Lift 600,000 pensioners out of income tax

Those without pensions raise pensions credit guarantee to £114 to £119, £130 by 2009/10

Top rate income tax rise to £43,000. Align income tax system with NI system - two rates and two thresholds income tax

Education

Invest more in education. Spending in England will rise to £64bn next year, £67bn and then £74bn by 2010. Average rises of 5% cash - one to one tuition for 600,000 children, increased higher education numbers to 1.2m, cash spending per pupil to rise 20% to £6,600. Education rising as share of national income to 5.6% in 2010.

Changing education leaving age will first time make education a right for every young person up to age 18.

"This is a budget for Britain's families, this is a budget for the future"

From April 2008, basic rate of income tax cut from 22p to 20p - lowest basic rate for 75 years.

Budget coverage sponsored by

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Replies (10)

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By AnonymousUser
21st Mar 2007 14:16

Ouch
Looks like many owner-managed businesses will disincorporate now.

Maybe that was the intention?

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Dennis Howlett
By dahowlett
21st Mar 2007 17:22

Missed opportunity
Richard nails it but in one respect I think he missed a trick. Brown had a real chance to do something about the burgeoning legislative burden, now second only to India. I convolute reference to that thorugh this side swipe at Mike Rake.

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By bigtim
21st Mar 2007 13:04

"My budget will be broadly neutral"
Then he reduces top rate Corp tax and increase the small Companies rate (albeit the latter in stages).

I don't think small businesses will see this as a neutral move.

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By andyjdicker
21st Mar 2007 13:51

Look on the bright side...
Well at least it makes doing quick income tax calculations easier...
But hits the small owner-managed business hard. Do I foreesee NI on dividends in the future?

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By User deleted
21st Mar 2007 14:26

"CGT allowance doubled for married couples"
Er, don't think so. This was pure Brown spin.

CGT allowance for 2007-08 = £9,200 for each individual

x 2 (H & W) = £18,400

Apart from the increase from £8,800 to £9,200, no change.

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By AnonymousUser
21st Mar 2007 15:47

Budget
Poor old self-employed hit yet again.
With the abolition of 10% rate band, and given the £500 rule for only one payment of tax, a lot of self-employed will end up paying an extra amount come 31st january 08 and 31st july 08. Nice little cash - flow for Mr Brown.
What was he said "Only Gladstone combined PM and Chancellor". Many a true word spoken in jest!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Oh yes how can you have an "artificial incorporation".

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Richard Murphy
By Richard Murphy
21st Mar 2007 16:29

Small business should be welcoming this
I'm amazed that anyone could say small business will not welcome this budget

The Chancellor's abolished the capital / revenue split for most small businesses

That's half way to a flat tax (- in fact far better than is available just about anywhere in Eastern Europe). And still people moan.

For more analysis see http://www.taxresearch.org.uk/Blog/2007/03/21/the-budget-now-ive-seen-the-figures/

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By John Savage
21st Mar 2007 13:54

More of the same..
Just looks like more of the same old tinkering from this chappie yet again.

And yet more spin regarding the great global warming swindle purely to raise more booty to fund Blair's illegal wars!!!

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By User deleted
22nd Mar 2007 10:36

Small business
I'm a small limited company Richard, and I am most definitely not happy. Alright, I am going to have to pay £3,000 more in tax every year, which is a lot of money, but what really grates is watching Mr Brown on telly proudly pronouncing that he has put corporation tax down by 2%.

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By User deleted
22nd Mar 2007 13:30

Incorporations
I had a pretty good spreadsheet set up for incorporation tax savings - assuming personal allowance taken as salary and balance as dividends. So it hasn't taken me long to calculate there's still savings to be made by incorporating over the next few years. I've made some assumptions for 2008/09 and 2009/10 based on what has been indicated. I believe there are still tax savings to be made as follows (forgive me if some figures are slighty wrong, i havent had a chance to check ithe figures fully yet)

Earnings 2006/07 2007/08 2008/09 2009/10
£10,000.00 £397.35 £324.30 £448.65 £400.90
£15,000.00 £947.35 £824.30 £798.65 £700.90
£20,000.00 £1,497.35 £1,324.30 £1,148.65 £1,000.90
£25,000.00 £2,047.35 £1,824.30 £1,498.65 £1,300.90
£30,000.00 £2,597.35 £2,324.30 £1,848.65 £1,600.90
£35,000.00 £3,045.15 £2,813.10 £2,198.65 £1,900.90
£40,000.00 £3,544.85 £2,994.60 £2,460.45 £2,200.90
£45,000.00 £4,044.44 £3,874.60 £3,177.45 £2,760.90
£50,000.00 £4,131.94 £3,924.60 £3,477.14 £3,479.15
£60,000.00 £4,306.94 £4,024.60 £3,502.14 £3,429.15
£70,000.00 £4,481.94 £4,124.60 £3,527.14 £3,379.15
£80,000.00 £4,656.94 £4,224.60 £3,552.14 £3,329.15
£90,000.00 £4,831.94 £4,324.60 £3,577.14 £3,279.15
£100,000.00 £5,006.94 £4,424.60 £3,602.14 £3,229.15

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