Here is the Reuters "Scenarios" which sets out some of the key options for the pre-budget report today bit.ly

As Greg Mankiw said: "it is best to be suspicious of any policy whose benefits are supposed to work through the amorphous channel of "confidence."” (!)

Is this Labour's last Pre Budget Report? And does that have any significance?

@Thomas Story I remember the first time I heard a serious forecast of the budget deficit that exceeded £200bn (back in February), and it was widely mocked at the time. Could well turn out to be an under estimate…

The context of the PBR is critical. The Budget anounced measures to increase a variety of taxes starting next year to begin the process of fiscall tightening. There was little detail on how cuts would be made in spending from 2014. Today, the size of that fiscal tightening has grown. Of interest today is the Chancellor's assessment of that worsening situation, and how he proposes to bridge this additional funding gap through a mix of taxation and spending cuts. Will he give 'clarity' on the target and details of the cuts? I suspect not, deferring that decision until later.

Much of the speculation ahead of the PBR has focused upon taxing bank bonuses, capital gains tax rates and inheritance tax. Whilst these are highly politically sensitive, none of these measures are able to make a substantial dent in the £175 billion deficit. For example-

A 7% increase in the rate of CGT from 18% to 25% would raise about £1 billion

A 10% increase in the rate of IHT from 40% to 50% would raise less than £0.5 billion

If tax rises, together with public spending cuts, are to play a significant role in raising the larger sums that will be needed to meet the Government's commitment to halve the deficit, there will need to be raises in the key taxes that collect the largest amounts.

Possible tax rises include:-

An increase in the basic rate of income tax of 1% would raise about £5 billion

An increase in the higher rate of income tax of 1% would raise about £1.5 billion

An increase in employer's National Insurance of 1% would raise about £5.5 billion

An increase in employee's main rate National Insurance of 1% would raise about £4.5 billion

An increase in the standard rate of VAT of 1% would raise about £5.0 billion

Although we may not see changes to these key taxes in the PBR, unfortunately, tax rises of this magnitude may be unavoidable after the election, irrespective of the party in power.


Note - figures from November 2008, HM Treasury paper "Tax ready reckoner and tax reliefs". The document estimated the direct effects of changes in tax rates. Figures above based on 2011/12 projections.

The tone and content of the PBR is going to be key in setting the tone of the governments plans to helping businesses and the country in general on the road to economic recovery. I really hope that it is recognised that supporting innovation in businesses of all sizes is linked to this recovery, plus recognisition that innovation is not just about research and development, but about collaborating together to realise the benefits of innovative ideas. The other aspect is that it isn't just about money, but how that money is used and the policies associated with it

Any short term wealth tax on high earners as merely a knee-jerk reaction would be very misguided

Darling says he's confident the economy will start growing by the end of 2009.

Darling says he will defer the increase in corporation tax for smaller companies

As an aside, employees tend to bear the largest burden (around 70% in the US) of corporation tax. thefilter.blogs.com

Some interesting and helpful things to help smaller businesses survive, but nothing at the moment to stimulate growth.. lets see what's still to come

Darling confident of growth by turn of year

Encouragement for older people staying in work is good but alongside this a change to the age discrimination regulations to permit flexible requirement is essential

Darling expects UK GDP to fall 4.75 percent in 2009 versus his earlier 3.25 to 3.75 percent estimate

@freshnick The deferement of the proposed 1% increase in corporation tax for small businesses is welcome but is really very small beer

Darling sees GDP growing 1 to 1.5 percent in 2010, unchanged from his earlier estimate

The main recast of his forecasts - from - 3.5% this year to -4.75% - adds a further £10bn or so to the deficit

And some of the giveaways he has just announced were new and so un-funded so far. where does that come from?

Are these deficit forecasts any more credible than those coming from the private sector?

£500 million growth fund - why only £500 million? Good that EFG is continuing - perhaps it will give banks chance to understand it