Key announcements

• reports that the economy is stable and resilient, and continuing to grow, and that the Government is meeting its strict fiscal rules for the public finances;

• sets out further financial support for children, which will lift 250,000 children out of poverty;

• alongside the Winter Fuel Payment, an additional one-off payment of £100 to over 80’s households and £50 to over 60’s households in 2008-09. This will benefit around 9 million households;

• announces a package of access to finance measures including enhancing the Small Firms Loan Guarantee Scheme and the Enterprise Capital Funds to support small firms in accessing the resources they need to start up and grow;

• sets out a £200 million package over the next three years to bring forward by a year to 2011 the Government’s ambition for no school to have fewer than 30 per cent of its pupils achieving 5 A*-C grades at GCSE, including English and maths;

• takes further steps to meet the long term challenge of delivering decent and affordable housing;

• postpone the planned fuel duty increase of 2 pence per litre in April 2008 until 1 October 2008;

• increases alcohol duty rates by 6 per cent from 17 March 2008;

• lays the ground work for the introduction of five-year carbon budgets, and announces that the first budgets will be set as part of Budget 2009;

• announces further steps to tackle climate change including reforms to Vehicle Excise Duty, auctioning of 100 per cent of allowances for large electricity producers in Phase III of the EU Emissions Trading Scheme, and that to eliminate single use carrier bags, the Government will legislate and impose a charge if retailers do not take voluntary action; and

• introduces further reforms to modernise the tax system, and a number of measures to tackle tax fraud and avoidance.

BUILDING A STRONG SUSTAINABLE FUTURE

The Government’s economic objective is to build a strong economy and a fair society, where there is opportunity and security for all.

The long-term decisions the Government has taken – independence for the Bank of England, new fiscal rules and a reduction in debt – have created a strong platform of economic stability. With low and stable inflation, interest rates set by the Monetary Policy Committee to meet the Government's symmetric inflation target, and fiscal policy supporting monetary policy over the cycle, the economy has grown continuously for 62 consecutive quarters.

The world economy is now facing a more challenging environment than was apparent at the time of the 2007 Pre-Budget Report, with continued disruption in global financial markets. While the UK and other economies have benefited significantly from globalisation, recent events have shown how interconnected capital markets mean shocks in one region can easily be transmitted

This Budget sets out the action the Government is taking to support the economy in the short term, to ensure the resilience of the past decade continues, combined with action to make further progress against its longterm goals of:

• maintaining macroeconomic stability, ensuring the fiscal rules are met and that inflation remains low;

• sustainable growth and prosperity, through reforms that promote enterprise and business growth, simplify the tax system, enhance flexibility and promote science, innovation and skills;

• ensuring fairness and opportunity for all, tackling child and pensioner poverty, providing opportunity for all children and young people, delivering security for all in retirement, and ensuring a modern and fair tax system where everyone pays their fair share of tax;

• creating stronger communities and effective public services, and improving long-term housing supply and affordability; and

• ensuring an environmentally sustainable world, with action to address the global challenge of climate change.

Further detail on each of these areas in Budget 2008 is below.

Further details

MAINTAINING MACROECONOMIC STABILITY

The Government’s long-term goal is to maintain macroeconomic stability in order to achieve its objective of a fair society where there is security and opportunity for all.

The UK economy continued to perform strongly in 2007, growing 3 per cent on a year earlier, the fastest growth rate among the G7 economies.

Employment reached a record high and claimant count unemployment fell to a 32 year low. The UK is the only G7 economy to have avoided any single quarter of negative growth over the past decade. The flexibility and resilience of the UK economy provides a solid platform from which to face the global economic shocks from the continued disruption in global financial markets and the increase in energy and commodity prices. UK GDP growth is forecast to slow from 3 per cent in 2007 to 1¾ to 2¼ per cent in 2008, before picking up to 2¼ to 2¾ per cent in 2009 and 2½ to 3 per cent in 2010.

Despite the impact of financial market disruption on the public finances, the Budget 2008 projections show that the Government is meeting its strict fiscal rules:

• the current budget shows an average surplus as a percentage of GDP over the current economic cycle, which began in 1997-1998, ensuring the Government is meeting the golden rule. The current budget moves clearly into surplus from 2010-11 onwards; and

• public sector net debt is projected to remain low and stable over the forecast period, stabilising below the 40 per cent ceiling set in the sustainable investment rule.

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