Financial Regulatory Forum

UK Darling’s 2009 pre-budget report to parliament

December 9, 2009

Alistair Darling    LONDON, Dec 9 (Reuters) – Below are highlights from British finance minister Alistair Darling’s pre-budget report to parliament on Wednesday.
    
   ON INCOME TAX
   “I have decided against any further changes to income tax rates or thresholds next year, except for some changes in what can be tax-deductible.”
   “In April 2012 I have decided to freeze the point at which people start paying income tax at 40 per cent for one year. No-one with income below 43,000 pounds will be affected by this change.”
   
   ON TAXING BANKS
   “This should be a time for banks to rebuild their capital base and become stronger. A tax on profits, as has been suggested, will prevent them from doing this. So I have decided against a windfall tax.”
   “I have decided to introduce from today a special one-off levy of 50 per cent on any individual discretionary bonus above 25,000 pounds. This will be paid by the bank not the bank employee.”
   “Anti-avoidance measures will be introduced with immediate effect. High-paid bank staff will of course also have to pay, as usual, income tax at their top rate on any bonus they receive. On a cautious assumption, which includes our expectation that some banks will rein back bonuses, this one-off levy is expected to yield 550 million pounds.”
   
   ON INCOME FROM UK BIO/PHARMA PATENTS
   “I will introduce a 10 percent corporation tax rate on income which stems from patents in the UK. This will help maintain jobs in science and technology in this country.”
   
   ON PENSION TAX
   “I announced in the Budget that we would reduce pension tax relief for people with incomes over 150,000 pounds. I want do this as fairly as possible, and treat individuals the same regardless of whether they receive their pay as current salary or as a future pension benefit, and prevent avoidance.”
   “I have decided to include employer pension contributions in the definition of income for this tax measure. To provide certainty, I will introduce a floor, so that irrespective of the size of employer pension contributions, no one with an income below 130,000 pounds will be affected.”
   
   ON ELECTRIC CARS
   “To help boost the number of electric cars on our streets, I have decided to exempt them from company car tax for 5 years.”
   
   ON LOANS TO SMALL BUSINESS
   “In January we launched the Enterprise Finance Guarantee which has already offered government guarantees on bank loans to over 6,000 businesses. Today I have decided to extend this scheme for a further 12 months which will guarantee a further 500 million pounds of loans to small businesses.”
   
   ON FISCALLY NEUTRAL BUDGET
   “In line with this Pre-Budget Report being neutral overall, two thirds of the targeted measures that I will now announce come from within existing budgets.”
   
   ON PUBLIC BORROWING
   “The Government will ensure public sector net borrowing, as a share of GDP, falls every year and is more than halved by 2013-14; and net debt, as a share of GDP, is falling in 2015-16.”
   “I forecast that public sector net borrowing would be 175 billion pounds this year and fall to 97 billion pounds in 2013-14. Because of the severity of the recession my forecast for borrowing this year is 178 billion pounds. Next year it will fall to 176 billion pounds.”
   “And, as the economy recovers and the deficit reduction plan starts to take effect, then falls to: 140 billion pounds; 117 billion pounds; and reaches 96 billion pounds in 2013-14, slightly lower than I forecast in April; before falling to 82 billion pounds in 2014-15.
   “As a share of GDP, borrowing will be: 12.6 percent this year, 12 percent next, then 9.1 percent, 7.1 percent, 5.5 percent in 2013-14, and falls to 4.4 percent in 2014-15.”
   
   ON LOSSES FROM FINANCIAL INTERVENTION
   “At the Budget, given the extreme uncertainty at the time, I made a provisional 50 billion pounds estimate of possible taxpayer losses from our interventions in the financial sector. These risks have now significantly diminished.”
   “I can revise down my provision for any potential impact on the public finances from 50 billion pounds to around 10 billion pounds.”
   
   ON CPI INFLATION
   “Partly because of the reversal of the VAT cut, consumer inflation will rise from 1.5 percent to around 3 percent early next year, before falling back. The Bank of England expects inflation to then fall below target and reach 1 ½ per cent by the end of next year.”
   
   ON GDP GROWTH
   “Over the year as a whole, the UK economy is expected to have contracted by 4.75 per cent this year.”
   “Next year, I forecast growth of between 1 and 1.5 per cent.”
   “Because of the underlying strength of our economy, the pick-up in world demand, and the substantial spare capacity opened up by the recession, my Budget forecast, broadly in line with the Bank of England, of growth of 3.5 percent in 2011 and 2012 remains unchanged. But this growth will come from more varied sources and not depend as much on the financial sector which will, of course, remain an important part of our economy.”
   
   ON CHILD BENEFIT
   “I also want to help families receiving other benefits linked to the inflation figures – such as child benefit and some disability benefits. These benefits will rise by 1.5 per cent in April.”
   
   ON BINGO DUTY
   “I will cut bingo duty from 22 to 20 per cent.”
   
   ON STATE PENSION
   “The basic state pension will not be frozen, but will rise by 2.5 percent in April.”
   
   ON UNEMPLOYMENT
   “Unemployment has increased much less than expected by independent forecasters. If we had seen the same rate of job loss, relative to GDP, as we saw in the early 1990s, four times as many people would have lost their jobs.”
   
   ON COMMERCIAL PROPERTY TAX
   “Last year, I temporarily increased the threshold for empty property relief to help small businesses. I can announce it will be extended so that, for 2010-11, empty commercial properties with a rateable value below 18,000 pounds will be exempt from business rates. Seventy per cent of all empty properties will continue to be exempt.”
   
   ON CORPORATION TAX
   “I have decided to defer the increase in corporation tax for smaller companies. This will leave the 2010 tax rate unchanged for 850,000 small businesse.”
   
   ON VAT
   “I can confirm that VAT will return to 17.5 per cent on January 1 as planned … I have no other changes in VAT to announce.”
   
   ON UK GROWTH
   “I am confident that the UK economy will start growing by the turn of the year.”
   
   ON GLOBAL ECONOMIC CONFIDENCE
   “We supported our economies, with tax cuts, increased government spending and co-ordinated action to lower interest rates and to boost money supply. None were easy choices. Some even argued that we should not have acted. But as a result of these actions, there is growing evidence that global confidence is returning.”
   
   ON HOUSING MARKET
   “The US housing market, which triggered the crisis, is stabilising. So is the housing market here.”
   
   ON FISCAL SUPPORT
   “To promote growth we need as well to maintain support until the recovery is secured and to halve the deficit over four years, in an orderly way, which does not threaten the investment vital for our future.”
   
   ((UK Economics Desk; Tel. +44 207 542 2774))
 Keywords: BRITAIN BUDGET 
  
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 Wednesday, 09 December 2009 13:17:43RTRS [nDARLING] {EN}ENDS

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