Budget round-up

12 March 2008

Chancellor Alistair Darling’s first Budget was an underwhelming event with few concrete measures aside from a batch of green taxes and a revised economic growth forecast.

He started his report with a 0.25% downward revision for economic growth in the UK. The forecast is now for between 1.75% and 2.25% of growth this year, although Darling said this was still faster than Japan, the US and the Euro area.


As expected, Darling outlined several green measures in the Budget. He confirmed plans to increase fuel duty by 0.5p per litre in real terms from 2010 but, in light of higher petrol costs, did postpone a 2p increase in fuel duty for six months until October.

The chancellor also announced new funding to underpin national road pricing to ease road congestion.

And, from April 2009, he proposed a major reform to vehicle excise duty to encourage manufacturers to produce cleaner cars and by introducing new bands as incentive for drivers to choose the least polluting car.

From April 2010 there will also be a new first-year rate based on carbon dioxide emissions of the car.

Cars that emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions will pay no car tax at all in the first year but a higher first year rate will be introduced on the most polluting cars.

Carrier bags were singled out by Darling as causing damage to the environment when only used once. He therefore confirmed that the government will force shops to charge customers for plastic bags if they fail to do so on a voluntary basis.

He also announced £26 million of funding next year for a Green Homes Service to help people cut their carbon emissions and their fuel bills. This would include cavity wall insulation and more energy efficient appliances and light bulbs.

Property and home finance

Despite touching on the impact of the credit crunch in the US, Darling didn’t introduce any dramatic plans to support the floundering housing market in the UK.

However, he did unveil plans to allow first-time buyers and key workers who can only afford half the price of a home to borrow money from new shared equity schemes from this April. Previously, those eligible had to be able to afford 75% of the property value.

Despite calls for stamp duty thresholds to increase, or for first-time buyers to be made exempt from this levy, Darling failed to announce any changes. However, people who buy shared ownership homes will not have to pay stamp duty until they have built up 80% of their home.

During the Budget, Darling championed long-term mortgages as providing more stability for borrowers, and said he wanted to see more lenders offer “flexible and affordable” fixed rates of up to 25 years.

However, he failed to expand on how the government will encourage this sort of innovation by banks and building societies.

Finally, the chancellor announced that as part of the government’s target of building three million more homes by 2020, it has identified sites for 70,000 more homes.

Sinner taxes

From 6.00pm this evening a packet of 20 cigarettes will increase by 11p, while a packet of five cigars will increase by 4p.

Darling also increased taxes on alcohol in a bid to tackle binge drinking. He revealed that alcohol duties will increase by 2% above the rate of inflation in each of the next four years.

From midnight on Sunday 16 March, alcohol duty rates will increase by 6% above the rate of inflation. Beer will rise by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle.

Children and education

Darling reiterated the government’s pledge to eradicate child poverty by 2012 during his Budget and outlined measures to help more parents into work.

From October 2009, the rules for housing and council tax benefit will change to ensure parents are better off in work than on benefits.

As a result, Darling says that a working family with one child on the lowest income will gain up to £17 a week.

He also announced changes to child benefit payments so that parents will receive £20 a week for their first child from April 2009 rather than 2010 as originally planned.

The child element of the child tax credit for families on low and middle income will also be increased by £50 a year above inflation from April 2009.

Darling used the Budget to pledge a £10 million investment over the next five years to create a £30 million Enthuse Science fund, giving every science teacher in secondary and further education access to professional development.

He also announced an extra £60 million funding over the next three years to provide training opportunities for adults.


Following from January’s amendment for capital gains tax for entrepreneurs, Darling used the Budget to emphasise the government’s support for small and medium enterprises in the UK.

He announced that funds available through the Small Firms Loan Guarantee scheme will be increased by £60 million for the coming year. And from April, the scheme will be extended to small and medium firms.

Darling also confirmed that the amount of investment on which tax relief is available under the Enterprise Investment Scheme will be increased from £400,000 to £500,000, while the employee share limit for tax relief under the Enterprise Management Incentive Scheme will increase from £100,000 to £120,000.

Other issues

Darling told the Chambers that, in order to encourage more people to save, the savings gateway scheme will be launched nationally by 2010.

He also promised to help pensioners facing pressures such as higher energy bills by raising the winter fuel payment for over 60s from £200 to £250 and for the over 80s from £300 to £400.

And, Darling said he might introduce legislation to force gas and electricity companies to give a "fairer deal" to customers who use pre-payment meters.

Finally, housing benefit reforms will be brought forward, meaning from 2010 all long-term recipients of incapacity benefit will attend work capability assessments.

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