Alistair Darling has set out the key points of his forthcoming budget, designed, "to support families, business and the economy during the current period of economic uncertainty". The main talking point of the Report is, of course, the reduction of VAT from 17.5% to 15% from 1 December 2008. Or at least it was until last Tuesday, when that story about the alternative plan to raise VAT instead broke.
All National Insurance Contributions are set to rise by half a percent for both employees and employers from April 2011, as a way of making up the deficit caused by the reduction in sales tax.
The final major change would be the introduction of a new 45% rate of income tax for those earning over £150,000. This one is dependent on Labour being elected for a fourth term, as it wouldn't be introduced until then. This is also designed to make up the VAT losses, and its late implementation means that Labour won't be breaking their pledge to freeze income tax rates during this electoral period.
The CBI welcomed the decision to accelerate planned public capital spending programmes. £3 billion of capital spending is being brought forward from 2010/11.
John Cridland, Deputy Director-General of the CBI, said: "Not only will this give the construction industry a much needed shot in the arm, it will lead to increased motorway capacity, more social housing, primary and secondary schools being renovated, as well as investment in energy efficiency measures."
Unite Joint General Secretary Derek Simpson was similarly upbeat: ""Today's Pre-budget report gives Britain a reason to be optimistic this Christmas and beyond. This is a welcome warm up exercise after 30 years of inaction and neo-liberal economics. Gordon Brown has thrown-off the shackles of new Labour to reveal the real Labour."
Dr John Philpott, Chief Economist at the CIPD, was more cautious, however.
"The Chancellor has hoofed a massive economic stimulus package up the pitch, and is hoping consumers and employers will pick it up and run with it, but there's a danger that this hit-it-and-hope approach won’t be enough to counter the job cuts that are already being planned."
"There is certainly a good spread of jam today in this budget. But with the bill so clearly in the post, including a hike in national insurance contributions as the economy is expected to be recovering, there's a real danger that this budget may do as much to slow medium-term jobs growth as it does to slow short-term job cuts."
"In the face of the avalanche of job cuts we’re predicting over the winter, the package of support for people facing redundancy is welcome. These initiatives demonstrate the Government recognises the severity of the looming jobs crisis. The extension of pre-redundancy support from the employees of large firms to those working in SMEs and the provision of more pre-redundancy training to help prepare people for the jobs market is particularly welcome."
However, it is a shame that the National Employment Partnership appears to be focusing only on larger employers. With such a high proportion of people employed by smaller employers, it is essential for Government to find ways of engaging these employers in efforts to find jobs for the unemployed."

(Courtesy The People Bulletin)