£20bn Stimulus but Will Darling Be Able to Pay for It?

Summary

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Households received further support with the temporary uprating of personal allowances following the 10p tax fiasco being made permanent and allowances being increased by a further £130 a year to 2010-11. ...paid for by pre-announced tax rises once the economy has recovered However, given the dire state of the public finances even before the economy entered recession, the Chancellor was under pressure to put forward a plan to rebuild the public finances once the economy was into the recovery phase. The survey was conducted after the Bank of England cut interest rates by 1 50bps to 3% but before the Pre-Budget Report, Retail sales drop in November - CBI The Confederation of British Industry's Distributive Trades Survey balance fell dramatically, dropping from -27 to -46 in November - matching the series low posted in August.

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£20bn Stimulus but Will Darling Be Able to Pay for It?

Key points:

* The Pre- Budget Report saw the announcement of a ?20 billion fiscal stimulus that will be paid for by higher taxes and exceptionally tight spending growth once the economy has recovered.

* The central plank of the Chancellor's policy is a reduction in the VAT rate from 17.5% to 15% for the next 13 months, starting on 1st December 2008.

* The Chancellor has slashed his forecasts for the UK economy, while more than doubling his borrowing projections and suggesting that the current budget will not return to balance until 2015/16. However, given t...

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