Commenting on the macro economic elements of today’s PBR, David Kern, Chief Economist at the British Chambers of Commerce said: "The PBR acknowledged that the official 2009 GDP forecast in the Budget was too optimistic. The recession was clearly much deeper than previously envisaged. The Chancellor’s GDP growth forecasts for 2009 and 2010 are now realistic and achievable.

“Expectations that the UK economy will grow by 3.5 per cent in both 2011 and 2012 are too optimistic. The forecast uses assumptions of spare capacity in the economy that may prove to be too hopeful. The reality is that some of the economy's productive potential was very probably lost during the recession, and it is unwise to assume that we can easily recover this capacity.

"To the extent that the official GDP growth forecasts are too optimistic, the predicted reduction in the budget deficit over the next few years would be slower than the Chancellor envisages. His forecast that net debt as a share of GDP will peak at 78 per cent in 2014/15 before falling, appears unrealistic.

"This means that to ensure Britain's international credit rating is not threatened, he may have to be more aggressive in his future public spending cuts. Most importantly he will have to abandon measures that negatively impact on business, such as the proposed increase in NICs."

Pre Budget Report at a glance

Departmental spending

• 2010/11: total public spending will increase by 2.2% in real terms

• 2011 onward: 0.8% annual spending growth – means real cuts to a number of budgets.

• Protected: frontline services education, health and policing; international aid

Investment spending

• Capital investment will fall from £49.5bn in 2009/10 to £22bn in 2013/14.

• Previously-announced work on Crossrail, Thameslink, M1, Great Western Mainline to continue. Manchester-Liverpool-Preston rail lines to be electrified. Midland Mainline electrification to receive further consideration.

• Government announcements on High Speed Rail expected during 2010.

Fiscal forecast

• 4.75% contraction in UK economy during 2009. Return to growth in Q4 2009. 2010 forecast growth 1.0%-1.5%. 2011: 3.5% growth forecast. BCC: 2011 number overly optimistic.

• Inflation forecast to rise from 1.5% to 3% before falling back in 2011.

• Borrowing to be ‘more than halved’ by 2013/14 – Gov’t argues earlier cuts would put recovery at risk.

• Asset sales to be used to fund investment.

• Gov’t borrowing: £178bn in 2009/10; £176bn in 2010/11; £140bn 2011/12; £117bn 2012/13; £96bn 2013/14

• Forecast net debt as a percentage of GDP will peak at 78% Banking system

• One-off bank payroll tax on bonuses – 50% on any individual discretionary bonus above £25,000 with immediate effect. • £10bn loss for bank interventions forecast

Employment

• Young people: move up job/training guarantee for 18-24s from 12 months to 6 months

• Government guarantee that people will be better off in work than on benefits

• Short-term business internship scheme – details to be announced.

Public sector pay

• 2011/12 and 2012/13: 1% cap on all public sector pay settlements.

• Public sector pensions contributions will be capped by 2012/13; greater contributions from high-earning public-sector workers. BCC view: needs to happen earlier

Enterprise finance guarantee

•Extended for another 12 months, with an additional £500m in bank loans guaranteed. BCC POLICY WIN.

Investment allowances

• Enhanced capital allowances will end in April 2010, as originally planned.

• No increase to Annual Investment Allowance, which remains at £50,000 BCC SAYS: MISSED OPPORTUNITY TO PROMOTE INVESTMENT

HMRC ‘Time to Pay’

• Extended ‘for as long as it is needed’

SME equity finance

• Growth Capital Fund for equity investments in SMEs requiring £2m to £10m – details to be available soon. BCC POLICY WIN.

Trade credit insurance

• Domestic trade credit insurance scheme closing to new customers from December 2009

• No announcement on export credit insurance

Capital for enterprise fund

• Will close to new applicant ll s as planned in March 2010

Manufacturing

• £30m to help industry on Teesside following Corus closure announcements

Income tax

• No substantive changes for 2010.

VAT

• Returns to 17.5% from 1st January 2010. No other changes

National Insurance

• Additional 0.5% increase in all NIC rates (employee, employer and self-employed) from April 2011 – meaning 1% overall increase for employers in April 2011. MAJOR ISSUE FOR BUSINESS.

Corporation Tax

• 1p rise in small business rate has been deferred. SME rate remains at 21%. BCC POLICY WIN

Business Rates

• Exemption for small businesses with rateable values extended to April 2011. Threshold rises from £15,000 to £18,000 to take 2010 revaluation into account. BCC POLICY WIN.

Innovation

• UK Innovation Investment Fund increased to £325m. Hermes Private Equity to manage.

• From April 2013, a new 10p corporation tax on income stemming from patents obtained in the UK – so-called “Patent Box”

• Strategic Investment Fund – to grow by £200m

• Expansion of the R+D tax credit – removal of IP restrictions

Mortgage interest support scheme

• Extended for a further six months

Stamp Duty

• Holiday for properties under £1750,000 ends 31st December 2009.

Inheritance Tax

• Freeze individual allowance at £325,000 for 2010

Pensions

•Personal accounts roll-out to be phased in – beginning in October 2012, but only 1% employer payment until 2015, going up to 2% in 2016 and 3% in 2017. Similar arrangements will apply for employees.

• New businesses starting up between 2012 and 2015 will not have to pay until after 2015.

• State pension – 2.5% increase in 2010

• Tax reliefs reduced for people with incomes over £150,000

Company vehicles

• Electric vehicles to be exempt from vehicle excise duty

• 100% first-year capital allowances for electric vans

Public Procurement

• Policy Through Procurement Actin Plan due later in December 2009

• Commitment to publish Government spend with SMEs in Summer 2010

Taxes to support broadband

• 50p landline tax for universal broadband service to go ahead in 2010 Finance Bill

Regeneration / Tax Increment Financing

• Further consideration – but no concrete measures.

• Further consultation expected on implementation of Community Infrastructure Levy for local infrastructure