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Key points

The Pre-Budget Report and Comprehensive Spending Review sets out the government’s priorities and spending plans for the next three years. Key points include:

• inheritance tax allowances will be transferable between married couples and civil partners, doubling their tax-free allowance
• the tax system will be simplified to make it fairer and more efficient
• NHS spending will increase from around £90 billion in 2007-08 to £110 billion by 2010-11, an increase of 4 per cent a year in real terms
• education spending in England will rise on average by 2.8 per cent a year in real terms between 2007-08 and 2010-11
• total public spending will rise from £589 billion in 2007-08 to £678 billion in 2010-11, an increase of 2.1 per cent per year in real terms

The 2008-09 rates and allowances for Income Tax, National Insurance Contributions, the Working and Child Tax Credits and Child Benefit/Guardian’s Allowance will be published after the September RPI becomes available.

• Income Tax, National Insurance and Tax Credit rates for 2008-2009
• Comprehensive Spending Review 2007
• Summary information from HM Treasury Opens new window
• Detailed information from HM Treasury Opens new window

Economic growth

In 2007, the UK economy has continued to perform strongly and inflation is close to target. GDP growth in the first half of the year reached 3.25 per cent on a year earlier, towards the upper end of the Budget 2007 forecast range.

Reflecting the combination of momentum in the economy, but higher interest rates than markets expected at the time of Budget 2007 and the assumed impact of financial market disruption, the 2007 Pre-Budget Report economic forecast is for GDP growth of 3 per cent in 2007, slowing to 2 to 2.5 per cent in 2008, before strengthening to trend at 2.5 to 3 per cent in 2009 and 2010.

Tax and benefits

The government is committed to a modern and fair tax system that ensures that everyone pays their fair share of tax. Measures include:

Inheritance tax and capital gains tax

• from today, the survivor of a marriage or civil partnership can benefit from double the inheritance tax allowance – £600,000 immediately, rising to £700,000 by 2010-11, in addition to the entitlement to full spouse relief
• a major reform of capital gains tax will introduce a single rate of 18 per cent from April 2008

 Poverty and employment

• the child element of the Child Tax Credit will increase by a further £25 per year above earnings indexation from April 2008, and by a further £25 above indexation from April 2010, in addition to the £150 increase announced in Budget 2007
• Jobseeker’s Allowance and Income Support rates for 16-17 year olds will increase from April 2008 to align with the 18-24 rates
• there will be a national roll-out from April 2008 of the In-Work Credit for lone parents at a rate of £40, retaining a rate of £60 in London, ensuring a more substantial financial gain from moving into work
• the Pension Credit standard minimum guarantee will increase to £124 for single pensioners and £189 for couples in 2008-09

Tackling tax avoidance

• UK residents who are non-domiciled will have to pay an annual charge of £30,000 to ensure that they contribute in respect of the foreign income and gains on which they do not pay UK tax, if they’ve been resident here for more than 7 years
• further reforms will modernise the tax system and protect tax revenues, including work to tackle avoidance

Community and quality of life

To respond to the rising aspirations of the British people and the desire for stronger, safer, more sustainable communities, the Chancellor announced that:

• NHS spending will increase from around £90 billion in 2007-08 to £110 billion by 2010-11, an increase of 4 per cent a year in real terms
• education spending in England will rise on average by 2.8 per cent a year in real terms between 2007-08 and 2010-11
• an £11.5m package of support for schools to teach children financial skills
• to deliver the target of 2 million new homes by 2016, spending on housing will increase from £8.8 billion in 2007-08 to £10 billion by 2010-11

• Comprehensive Spending Review 2007

Previous Budget and Pre-Budget statements

• The Budget 2006
• Pre-Budget Report 2006
• More money webcasts and statements