Pre-Budget Report

So Alistair Darling launched the pre-Budget report today. Helping prepare the report has consumed almost all my time here at the Treasury over the last few months. Its argument is simple. This is a very careful balance; but if we make the right decisions now, we can lock in the recovery – with extra help getting young people into jobs – and then methodically take action to halve the deficit over the next four years, while protecting spending on frontline public services like Surestarts, schools, hospitals and police teams.

The report sets out upfront, in black and white, the difficult decisions we need to make on tax. And we show a fair way forward. Indeed half of our tax rises will be paid by the top 3% of so of earners. We also set out (on page 108-113) the difficult decisions we’re going to have to take on spending; indeed some £25 billion of efficiencies and cuts to lower priority programmes will be needed.

Now the Tories I hear, say pay down the debt faster. Well, to pay down the deficit by half in three years – rather than four- would mean finding £26 billion of cuts, or tax rises in 2012/13; that’s 5.5p on VAT (something Tories always raise). And what does it mean for average families? Here’s the Treasury’s breakdown. 

Direct tax and benefit measures announced at PBR mean that in 2010-11:
*       Households will be on average £20 a year better off
*       11 million households are better off; 1.7 million households are worse off
*       Households with children will be, on average £50 a year better off

PBR and previously announced direct tax and benefit measures coming into effect in 2010-11 mean that in 2010-11, compared to 2009-10:
*       Excluding the top decile, households will be on average £70 a year better off
*       Across all households, 16.5 million households are better off; 1.4 million households are worse off