Q&A: pre-budget statement and
comprehensive spending review
Updated on 09 October 2007
This afternoon the chancellor presents his pre-budget report and comprehensive spending review to parliament.
Today's statements come to a backdrop of a predicted slowdown in growth in 2008, combined with shadow chancellor George Osborne's recent proposals to cut inheritance tax and the decision by Gordon Brown not to call an election until 2009.
What is the pre-budget report?
The HM Treasury website states that the pre-budget report (PBR), introduced by Gordon Brown in 1997, "provides a progress report on what has been achieved so far, gives an update of the state of the economy and public finances, and sets out the direction of government policy in the run-up to the spring budget".
In other words, the PBR allows the government to update its economic forecasts and to anticipate the measures contained in the next spring budget.
What is today's PBR likely to say?
There are fears of an economic slowdown in the wake of the recent credit market squeeze.
Alistair Darling has already signalled that the Treasury's growth forecast will be revised down from the current 2.5-3 per cent, probably to 2-2.5 per cent. That makes it likely the chancellor will have to borrow more in 2008.
In terms of headline measures, there could be a cut in stamp duty imposed on home-buyers. And Mr Darling may respond to shadow chancellor George Osborne's announcement at the Conservative party conference last week that a Tory government would boost the inheritance tax threshold from £300,000 to £1m.
He also promised at the last Labour conference that "Private equity will be dealt with in the PBR," by which he is likely to target the tax relief on shareholder debt utilised by private equity forms when assembling buyouts.
What is a spending review?
Spending reviews lay down the government's medium- and long-term spending priorities. Today's 2007 review will be the fifth since Labour came to power in 1997.
A distinction is made between ordinary spending reviews, which set out the government's medium-term spending strategy, and a review such as today's "comprehensive spending review", which has a longer-term remit.
The last comprehensive spending review, in 1998, prioritised education and health spending. The most recent spending review, in 2004, again prioritised health spending "to provide a health service for the 21st century".
Today's comprehensive spending review will set spending plans for 2008-9, 2009-10 and 2010-11. The treasury says it will "identify what further investments and reforms are needed to equip the Uk for the global challenges of the decade ahead".
What could today's spending review say?
The predicted revision in the treasury's growth forecast for 2008 means promised investment will be less than in the previous decade, but analysts believe health is likely to be the biggest winner.
The review's other priority areas include: globalisation, technological change, global uncertainty, climate change, and demographic and socio-economic change.
