Income tax

The basic rate of income tax will be cut to 20p from 22p in April 2008. The top-rate income tax threshold will also increase to £43,000, from £38,000 by 2009. The 10 per cent band - currently payable on £2,230 of income will be abolished - in effect increasing it to 20 per cent. This level of reform is much bigger than expected. Nearly all of the cost of reducing the basic rate will be paid for by abolishing the 10 per cent initial rate and the remainder is paid for by aligning the upper-earnings threshold for national insurance with the higher-rate band of income tax, leaving the Treasury better off by £340 million overall, and in real terms taxpayers out of pocket.

Corporation tax

The headline rate of corporation tax will be cut to 28 per cent, from 30 per cent, from April 2008. Mr Brown heralded the move as part of “a major package of reforms to the corporate tax system” designed to boost the UK’s competitiveness on the global stage. The Chancellor said the new headline rate was the most competitive “in the G7 and other major economies”. The Conservatives had said earlier in the week that they would cut corporation tax by 3 per cent. Mr Brown raised small company corporation tax from 19p to 22p by 2009, to stop self-employed people from starting incorporated businesses.

Beer, wines, spirits and cigarettes

Beer up 1p a pint, wine up 5p a bottle, duty on spirits frozen. Cigarettes up 11p for a packet of 20 - VAT on nicotine replacements down to 5 per cent.

Road tax and fuel duty

Fuel duty will rise 2p a litre but the hike will be delayed six months, until October. The top-rate of road tax will rise to £400 in two years but will be cut from £50 to £35 for the most fuel-efficient cars. The green lobby will argue that the Chancellor has not gone far enough. The motoring lobby will point out that this mix of policies is unlikely to reduce the number of miles driven.

Savings

The Chancellor announced that from next April the cash Isa limit will increase to £3,600. This is the first increase since Isas were introduced in 1997, so in real terms savers are no better off. It is also disappointing for savers to see such a small increase in the equity Isa limit from £7,000 to £7,200.

Inheritance tax

Plans to increase the inheritance tax threshold to £350,000 by 2010 is unlikely to appease the vocal critics of this tax. House prices have increased by 180 per cent since Labour came to power. During the same time the revenue raised from inheritance tax has more than doubled.

Debt

Mr Brown announced that he will sharply increase planned Government borrowing over the coming four financial years by a total of £10 billion. Borrowing in 2007-08 will rise by £3 billion to £34 billion, compared with the forecasts set out in the Pre-Budget report in December. In the following years borrowing will be £3 billion, £2 billion and £2 billion more than previously intended in successive years,

Asset sales

Asset sales such as the disposal of the Student Loans Company's debt book are being pushed forward to “release” cash for spending. Over the forecast period, this will permit a further £18 billion for the summer spending round. Cuts of £2 billion in small departments and general savings expand this to £26 billion.

Small business

Small businesses, like income tax payers, see money given with one hand and taken away with the other. The small firms' rate of corporation tax will rise from 20 per cent to 21 per cent next year and then 22 per cent but the estimated £820 million this will cost small businesses will in theory be fully offset by a new £50,000 annual investment allowance. Further enhancement of R&D credits is of only minor significance. The existsuing 50 per cent first year allowance for investment will last a further year to ease the transition.

Spending

The Chancellor's new spending plans mean that total government spending will now rise by 2 per cent a year in real, after inflation terms from 2008-09 to 2010-11. This means a sharp drop in spending growth from the average of 4 per cent in real terms seen since the turn of the decade. It means a sharp squeeze on spending growth which will confront the Chancellor with tough choices in the coming spending round.

Economy

The Chancellor's economic forecasts are little changed from December's Pre-Budget Report. Output is still expected to grow slightly above trend at 2.75-3.25 per cent this year, falling back to 2.5 to 3 per cent thereafter. Inflation is forecast to return quickly to the Bank of England's target of 2 per cent. The forecast for private investment has been raised, but this is notoriously hard to predict.

Health and education

There was little new news on health or education. Mr Brown said spending on education will rise to £64 billion in 2008 and £74 billion in 2010. He also confirmed that "money available for investment and reform" in the NHS in England will increase by £8 billion this year. He added that education would "become a right" for everyone up to age 18.

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