High spending on education and increased “green” taxes

At the heart of Gordon Browns 10th Pre-Budget Report was high spending on education and increased “green” taxes. He announced that he would be squeezing an extra £2 billion in tax out of the economy this year to finance his higher spending.

He ended the three-year freeze on fuel duty and doubled the tax for air travellers as he sought to establish his “green” credentials. Fuel duty was increased by 1.25p a litre increasing the average petrol price to around 88p a litre.

From February 1 this year, air passenger duty will double - rising from £5 to £10 for most European flights and from £20 to £40 for economy-seat travellers on long-haul flights.

Mr Brown pledged to tackle climate change with an ambitious target of making every new home a zero carbon home within the next ten years - which is likely to involve fitting new houses with solar panels. But he ruled out swingeing increases in energy prices to tackle pollution.

Mr Brown said investment in school, college and university buildings would rise to £10.2 billion by 2010-11 a cumulative increase of £36 billion over the next four years.
He also promised additional cash paid direct to head teachers rising from £39,000 to £50,000 for the typical primary school and from £150,000 to £200,000 for secondary schools - equivalent of £200 per pupil.

Quick guide to the main measures – the key Pre-Budget Report points

Children and Education

	Direct payments to schools will go up in April from £39,000 to £50,000 for primaries and £150,000 to £200,000 for secondaries.
	Mr Brown said his goal was 12,000 new or completely refurbished schools - half of all primaries and 90% of secondaries - and 100 rebuilt colleges and 3,500 new children's centres.
	Schools, colleges and universities will receive capital funding worth £10.2 billion by 2010.
	Capital investment in education this year will be £8.3 billion, on transport £9.6 billion and on housing nearly £8 billion.
	Universities will receive £60 million a year for applied research with commercial potential to help British science to transform knowledge into new jobs.
	A proposed "earn to learn" programme will allow people to gain graduate qualifications while working.
	New "summer universities", work experience and coaching will be established to encourage post-16 education.
	The Government will also consider bursaries worth £2,000 to encourage children in care to go to university.
	Additional child benefit to be paid to every mother in the last months of pregnancy.
	From 2009, expectant mothers can receive this payment from the 29th week of pregnancy.
	Mr Brown confirmed that the child element of the tax credits will rise in line with earnings this year, giving families who qualify for the payment £1,845 a year, up by £80.

Defence

An extra £600 million for military operations in Iraq, Afghanistan and elsewhere and another £84 million for intelligence.

Housing

	Another 160,000 families to be helped onto the housing ladder through shared equity schemes.
	Every new home to be a zero-carbon home within ten years. The vast majority of zero carbon homes will be exempt from stamp duty.

Arts and Culture

	New penalties for film and music piracy to be introduced alongside greater rights to copy for personal use.
	January 1 2007 confirmed as the date for the introduction of new tax reliefs for film-making. Production houses spending 25 per cent of a film’s budget in the UK will qualify.

Transport

	Rise in fuel duty for petrol and diesel of 1.25p, in line with inflation. Mr Brown said he would not restore the fuel duty escalator. Petrol duty currently raises about £24 billion a year.
	Tax discounts for bio fuels to be extended.
	From February 1 2007, air passenger duty will be doubled to £10.

Work and pensions

	Crackdown on employers flouting the minimum wage with the enforcement budget rising to £9 million.
	Basic state pension to rise 3.6% in April this year and the pension credit minimum guarantee will rise to £5 for single people and £7.65 for couples.

ISA allowances to be made permanent

Individual Savings Accounts (ISAs) will become a permanent feature of the savings market but the investment limits will not increase from £7,000 for equities and £3,000 for cash. Investors in Personal Equity Plans will have a 20 per cent tax imposed on any interest they earn on cash when they are compulsorily converted into ISAs. Interest on cash held in a stocks and shares ISA will still be subjected to a withholding tax. Within ISAs, cash will be convertible into stocks and share but not vice versa. The Chancellor gave no date for the reforms, implementation of which is still open for consultation.

Economy

	Total capital investment will rise to £48 billion in 2007 and rise to £51 billion, £54 billion, £57 billion and £60 billion in subsequent years.
	Borrowing will fall from 2.3 per cent of national income to 1.3 per cent by 2011.
	Growth expectations to rise between 2.75 per cent and 3.25 per cent this year. The two per cent inflation target will be met in 2007 and through 2008.

The Pre-Budget Report is subject to the Finance Bill becoming law. The value of units can go down as well as up. Past performance is no guarantee of future returns. Levels and bases of, and reliefs from, taxation are subject to change.
Article date: 12.06