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HC 388

Stability and opportunity:building a strong, sustainable future

Budget 2008March 2008

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Return to an Order of the House of Commons dated 12 March 2008

Copy of Economic and Fiscal Strategy Report and Financial Statement and Budget Report March 2008as laid before the House of Commons by the Chancellor of the Exchequer when opening the Budget.

Jane KennedyHer Majestys Treasury

12 March 2008

Ordered by the House of Commons to be printed 12 March 2008

Economic and Fiscal Strategy Report andFinancial Statement and Budget Report

March 2008

45.00HC 388

Stability and opportunity:building a strong, sustainable future

Budget 2008

LONDON: The Stationery Office

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The Economic and Fiscal Strategy Report and the Financial Statement and Budget Report contain the Governmentsassessment of the medium-term economic and budgetary position. They set out the Governments tax and spending plans,including those for public investment, in the context of its overall approach to social, economic and environmental

objectives. After approval for the purposes of Section 5 of the European Communities (Amendment) Act 1993, thesereports will form the basis of submissions to the European Commission under Article 99 (ex Article 103) and Article 104(ex Article 104c) of the Treaty establishing the European Community.

Crown copyright 2008

The text in this document (excluding the Royal Armsand departmental logos) may be reproduced free of chargein any format or medium providing that it is reproducedaccurately and not used in a misleading context. The materialmust be acknowledged as Crown copyright and the title of

the document specified.

Any enquiries relating to the copyright in this documentshould be addressed to:

Licensing DivisionHMSOSt Clements House2-16 ColegateNorwichNR3 1BQ

Fax: 01603 723000E-mail: [email protected]

HM Treasury contacts

This report can be found on the Treasury website at:

hm-treasury.gov.uk/budget2008

For general enquiries about HM Treasury and its work, contact:

Correspondence and Enquiry UnitHM Treasury1 Horse Guards RoadLondonSW1A 2HQ

Tel: 020 7270 4558Fax: 020 7270 4861E-mail: [email protected]

This and other government documents can be found on theInternet at:

www.official-documents.gov.uk

ISBN: 978-0-10-295333-6

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C o n t e n t s

Page

Economic and Fiscal Strategy Report

Chapter 1 Overview 1

Chapter 2 Maintaining macroeconomic stability 13

Chapter 3 Sustainable growth and prosperity 41

Chapter 4 Fairness and opportunity or all 57

Chapter 5 Stronger communities and e ective public services 75

Chapter 6 An environmentally sustainable world 89

Financial Statement and Budget Report

Chapter A Budget policy decisions 109

Chapter B The economy 139

Chapter C The public fnances 175

List o abbreviations 205

List o tables 209

List o charts 210

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1Budget 2008

1 O v e r v i e wThe Governments economic objective is to build a strong economy and a air society, wherethere is opportunity and security or all. Budget 2008, Stability and opportunity: building a

strong, sustainable future , presents updated assessments and orecasts o the economy andpublic nances, and reports on how the Government's policies are delivering its long-termgoals. The Budget:

reports that the economy is stable and resilient, and continuing to grow, and that

the Government is meeting its strict scal rules or the public nances;

sets out urther nancial support or children, which will li t 250,000 children out

o poverty;

alongside the Winter Fuel Payment, an additional one-o payment o 100 to over

80s households and 50 to over 60s households in 2008-09. This will bene t around

9 million households;announces a package o access to nance measures including enhancing the Small

Firms Loan Guarantee Scheme and the Enterprise Capital Funds to support small rms in accessing the resources they need to start up and grow;

sets out a 200 million package over the next three years to bring orward by a year

to 2011 the Governments ambition or no school to have ewer than 30 per cent o its pupils achieving 5 A*-C grades at GCSE, including English and maths.

takes urther steps to meet the long term challenge o delivering decent and

a ordable housing;

postpone the planned uel duty increase o 2 pence per litre in April 2008 until 1

October 2008;increases alcohol duty rates by 6 per cent rom 17 March 2008;

lays the ground work or the introduction o ve-year carbon budgets, and

announces that the rst budgets will be set as part o Budget 2009;

announces urther steps to tackle climate change including re orms to Vehicle

Excise Duty, auctioning o 100 per cent o allowances or large electricity producersin Phase III o the EU Emissions Trading Scheme, and that to eliminate single usecarrier bags, the Government will legislate and impose a charge i retailers do nottake voluntary action; and

introduces urther re orms to modernise the tax system, and a number o measures

to tackle tax raud and avoidance.

The Governments economic objective is to build a strong economy and a air society,1.1 where there is opportunity and security or all.

The long-term decisions the Government has taken independence or the Bank o 1.2England, new scal rules and a reduction in debt have created a strong plat orm o economicstability. With low and stable infation, interest rates set by the Monetary Policy Committeeto meet the Government's symmetric infation target, and scal policy supporting monetary policy over the cycle, the economy has grown continuously or 62 consecutive quarters.

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1 O v e r v i e w e F S r

2 Budget 2008

1.3 The world economy is now acing a more challenging environment than was apparentat the time o the 2007 Pre-Budget Report, with continued disruption in global nancialmarkets. While the UK and other economies have bene ted signi cantly rom globalisation,recent events have shown how interconnected capital markets mean shocks in one region caneasily be transmitted elsewhere. In addition to responding to the short term challenges, in thisBudget the Government has taken urther action to ensure the UK is well placed to adapt tothe long-term challenges o globalisation, technological change and climate change.

Box 1.1: The UK economy: analysis of long-term performance andstrategic challenges

The UK economy: analysis of long-term performance and strategic challenges , publishedalongside the Budget, analyses the long-term per ormance o the UK economy and updatesrecent work on the economic challenges ahead.

The analysis o the per ormance o the economy over the past decade highlights two keytrends:

much improved resilience the ability to cope with economic shocks quicklyand with low economic costs which has resulted in an unprecedented period o macroeconomic stability. The UK economy is now the most stable in the G7 andGDP per capita has increased aster than in any other G7 economy over the pastdecade with employment reaching record levels o more than 29 million; and

the UK has adapted success ully to the changing structure o the world economy by

switching resources to sectors in which it maintains a comparative advantage suchas services and high-technology manu acturing. While the UKs share o world goodstrade has allen in the context o dramatic increases rom emerging markets, it isthe only G7 country that has achieved a rising share o global trade in services.

The Governments macroeconomic ramework and the fexibility o the UKs product, labourand capital markets have been key to building resilience and to allowing the economy toadapt e ciently to longer-term structural changes a ecting the world economy.

The analysis also highlights areas where urther progress needs to be made. It will be vitalthat the UK continues to narrow the productivity gap between the UK and other majoreconomies. The skills o UK workers still lag behind other countries and must be enhancedto ensure the economy is equipped to compete in high value-added sectors in the uture.

Although progress has been made in recent years to narrow the gap in growth ratesbetween regions, there are still persistent long-established gaps in employment, skills andenterprise.

Analysis o the strategic challenges ahead shows the importance o continuing to make

progress in all these areas. Demographic trends will lead to an increase in the proportiono retired people in the economy relative to those o working age. Emerging markets arequickly developing skilled labour orces and innovative business sectors and are movinginto higher value-added sectors. Climate change means that the UK will need to adaptand make the most o the economic opportunities rom the transition to a low-carboneconomy. Recent events show how the interconnectedness o global capital markets meansshocks in one region o the world can be quickly transmitted elsewhere. This Budget setsout the next stages in the Governments programme o re orm to address these strategicchallenges.

1.4 As set out in Box 1.1 and Chapter B, over the past decade the UK economy has become

increasingly resilient to shocks. This has led to an unprecedented period o economic stability and growth with record levels o employment. Key to developing greater resilience has beenthe Governments macroeconomic ramework and promotion o open and fexible labour,

Meeting globaleconomic

challenges

Resilience o the

UK economy

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e F S r O v e r v i e w 1

3Budget 2008

product and capital markets. This resilience puts the UK in a strong position to deal with thecurrent global economic uncertainties.

1.5 This Budget sets out the action the Government is taking to support the economy inthe short term, ensure the resilience o the past decade continues, combined with action to

make urther progress against its long-term goals o :

maintaining macroeconomic stability, ensuring the scal rules are met and

that infation remains low;

sustainable growth and prosperity, through re orms that promote enterprise,

support business growth, simpli y the tax system, and enhance fexibility andpromote science, innovation and skills;

ensuring airness and opportunity or all, tackling child and pensioner poverty,

providing opportunity or all children and young people, delivering security orall in retirement, and ensuring a modern and air tax system where everyone

pays their air share o tax;

creating stronger communities and e ective public services, and improving

long-term housing supply and a ordability; and

ensuring an environmentally sustainable world, with action to address the

global challenge o climate change.

MA IN TA IN IN G MA CRO ECO N O MIC STA BILITY

The Governments long-term goal is to maintain macroeconomic stability in order to1.6achieve its objective o a air society where there is security and opportunity or all. Chapter 2

sets out how the government is working to achieve this objective and summarises prospectsor the UK economy and public nances, details o which are set out in Chapters B and C o the Financial Statement and Budget Report (FSBR).

1.7 The Governments macroeconomic ramework and promotion o fexible and openlabour, product and capital markets continue to deliver sustained economic growth with low infation. The monetary policy ramework seeks to deliver low and stable infation by ensuring that interest rates are set in a orward looking manner to meet the Governments symmetricinfation target. Fiscal policy is determined by clear objectives and two rules to ensure scalpolicy can support monetary policy. The scal rules underpin the Governments publicspending ramework which acilitates long-term planning and provides departments with thefexibility and incentives they need to increase the quality o public services and deliverspeci ed outcomes.

1.8 The UK economy continued to per orm strongly in 2007, growing 3 per cent on a yearearlier, the astest growth rate among the G7 economies. Employment reached a record highand claimant count unemployment ell to a 32 year low. The UK is the only G7 economy tohave avoided any single quarter o negative growth over the past decade. The fexibility andresilence o the UK economy provides a solid plat orm rom which to ace the global economicshocks rom the continued disruption in global nancial markets and the increase in energy and commodity prices. UK GDP growth is orecast to slow rom 3 per cent in 2007 to 1 to 2per cent in 2008, be ore picking up to 2 to 2 per cent in 2009 and 2 to 3 per cent in 2010.

1.9 Despite the impact o nancial market disruption on the public nances, the Budget2008 projections show that the Government is meeting its strict scal rules:

Budget 2008

The policy ramework

Economicprospects

The publicfnances

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4 Budget 2008

the current budget shows an average surplus as a percentage o GDP over the

current economic cycle, which began in 1997-1998, ensuring the Governmentis meeting the golden rule. The current budget moves clearly into surplus rom2010-11 onwards; and

public sector net debt is projected to remain low and stable over the orecastperiod, stabilising below the 40 per cent ceiling set in the sustainableinvestment rule.

Tab le 1 .1 mee t ing the i sc a l ru l e sPer cent o GDP

Outurn Estimate Projections

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Golden Rule

Surplus on current budget 0.3 0.6 0.7 0.2 0.3 0.6 1.0

Average surplus since 1997-1998 0.1 0.1 0.0 0.0 0.0 0.1 0.1Cyclically-adjusted surplus on current budget 0.3 0.7 0.5 0.1 0.5 0.8 1.0

Sustainable investment rule

Public sector net debt 1 36.6 37.1 38.5 39.4 39.8 39.7 39.31Debt at end March; GDP centred on end March

An analysis o long-term scal sustainability is published alongside Budget 2008 in1.10the 2008 Long-term public fnance report . As set out in Chapter 2, this report con rms that theGovernment will be in a position to meet its scal rules in the long-term, ensuring that thelong-term public nances remain sustainable.

SU STA IN A BLE G RO WTH A N D PRO SPERITY

Productivity growth, alongside high and stable levels o employment, is central tolong-term economic per ormance. The UK has made good progress over the last decade inimproving productivity and levels o employment have risen to record highs. TheGovernments strategy is structured around the drivers o productivity: competition,innovation, investment, skills and enterprise. The Governments actions have ensured thatthe UK is one o the best places in the world to do business 1.

The Government remains committed to maintaining an environment that1.11

encourages investment and growth. Budget 2008 provides short-term action to help businessdeal with current economic uncertainties, and drives orward delivery on longer termre orms to ensure UK businesses a re able to take advantage o the opportunities presentedby the changing global economy. The Budget announces:

access to nance measures including enhancing the Small Firms Loan

Guarantee Scheme and the Enterprise Capital Funds to support small rmsin accessing the resources they need to start up and grow;

a package o re orms on regulation and tax simpli cation and implementation

o the business tax re orms announced in Budget 2007, including the lowestrate o Corporation Tax in the G7;

1 Doing Business 2008, World Bank, ranked the UK ranked UK 6th out of 178 countries.

Budget 2008policy decisions

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5Budget 2008

urther implementation o the Leitch 2 and Sainsbury 3 Reviews to build onimprovements in the UK skills base and to provide a world-class science baseand innovation ramework;

exploring options to make better use o transport in rastructure, on top o

the major programme o investment announced in the 2007 ComprehensiveSpending Review;

progress on business support simpli cation and measures to ensure better

access to Government procurement or small rms; and

a study o public service markets and a new ramework or in rastructure

procurement.

FA IRN ESS A N D O PPO RTU N ITY FO R A LL

The Government is committed to employment opportunities or all. As well as1.12

ensuring that individuals can take advantage o the opportunities o an increasingly globalised world, it is also cr itical to the ambition o eradicating child poverty and promoting saving. The Governments approach to delivering on this commitment is two old: integrating the tax and wel are system, so that work always pays; and providing everyone the supportthey need to nd, retain and progress in work.

1.13 Budget 2008 takes the next steps towards tackling child poverty, provides support topensioner households, promotes nancial inclusion and announces measures to ensure thateveryone pays their air share o tax under a modern and air tax system in order to delivere cient and e ective public services. The Budget announces:

urther nancial support or children, which will li t up to 250,000 childrenout o poverty;

Work Capability Assessments or all existing Incapacity Bene t claimants,

ocusing on what people can do in work;

urther action, with the energy companies and O gem, to help vulnerable

groups deal with rising energy prices;

alongside the Winter Fuel Payment, an additional one-o payment o 100

to over-80s households and 50 to over-60s households in 2008-09. This willbene t around 9 million households;

the Saving Gateway,

which is a cash saving scheme or those on lower incomes, will be introduced nationally, with the rst accounts available to savers in2010;

increasing all alcohol duty rates by 6 per cent. This will add 4 pence to theprice o a pint o beer, 14 pence to the price o a bottle o wine and 55 pence tothe price o a bottle o spirits;

increasing tobacco duty in line with infation. This will add 11 pence to theprice o a packet o cigarettes; and

urther re orms to modernise the tax system, modernise tax administration

and protect tax revenues.

2Leitch Review on skills, prosperity for all in the global economy world-class skills, HM Treasury, December 2006.3The race to the top: A review of Governments science and technology policies , Lord Sainsbury of Turville, October 2007.


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6 Budget 2008

STRO N G ER CO MMU N ITIES A N D EFFECTIV E PU BLICSERV ICES

Building on the plat orm o stability, successive Spending Reviews have delivered1.14

sustained increases in spending on public services. By matching this growth in spending withambitious re orms to support the e ciency, delivery and accountability o public services theGovernment has been able to achieve improvements in outcomes achieved across rontlineservices. The Government is also committed to ensuring that everyone should have accessto a home at a price they can a ord in the communities where they want to live and work.E cient and e ective public services play a central role in building the oundations o strong,sustainable communities.

1.15 The Government is supporting schools and wider childrens services to raise attainmentor all pupils, is bringing orward a package o measures to help respond to short-term andlong-term housing challenges and is supporting the third sector with a package measures toenhance Gi t Aid. The Budget announces:

that in order to maintain the pace o re orm the Government will achievesigni cant urther operational savings in the post-Comprehensive SpendingReview period and will launch the Public Value Programme to look at all majorareas o public spending to identi y where there is scope to improve value ormoney.

the Department or Children Schools and Families will take orward a 200million package over the next three years to bring orward by a year to 2011the Governments ambition or no school to have ewer than 30 per cent o itspupils achieving 5 A*to C grades at GCSE, including English and maths.

a package o measures to deliver decent and a ordable housing or all by increasing housing supply and making housing more a ordable;

a working group that will take orward market initiatives to improve liquidity in the mortgage-backed securities market. The working group will includethe mortgage industry, the investment industry and also HM Treasury, theBank o England and the Financial Service Authority. The Working Group willreport initially to the Chancellor in summer 2008 and present proposals at the2008 Pre-Budget Report;

the Government is also inviting views on options or a UK legislative

ramework to deliver more a ordable long-term xed-rate mortgages, andthe lessons to be learned rom international markets and institutions. TheGovernment will work with a range o stakeholders and experts and willprovide an update at the 2008 Pre-Budget Report.

a transitional rate o Gi t Aid worth around 300 million over three years,

enabling Gi t Aid to be paid at a rate o 22 per cent in 2008-09, 2009-10, and2010-11 rom 6 April; and

a number o measures that reduce burdens on charities and include majorre orms to the audit process, a comprehensive programme or bringingadditional smaller charities into Gi t Aid and measures to increase the

awareness o Gi t Aid including the launch o targeted marking tools.


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7Budget 2008

AN ENVIRONMENTALLY SUSTAINABLE WORLD

Tackling climate change is the most serious and pressing environmental challenge1.16the world aces. The UK has been at the heart o e orts to tackle climate change in the EU andinternationally, and has already put in place a broad set o measures to reduce greenhouse gasemissions. The UK is well-placed to succeed in the low-carbon economy o the uture.

1.17 The Stern Review on the Economics o Climate Change 4 concluded that the costs o reducing emissions to levels that avoid the worst risks o climate change are signi cant butmanageable, whereas delay will be costly and dangerous. Budget 2008 takes action to bring about reductions in the emissions rom the transport, energy, business and household sectors.The Budget announces:

laying the ground work or the introduction o ve-year carbon budgets, and

that the rst budgets will be set alongside Budget 2009;

re orm o car vehicle excise duty rates and bandings, introducing new bands

rom 2009 to reward drivers o the cleanest cars, and higher rst year rates in2010-11 to infuence purchasing choices when people buy cars. As a result in2009 the majority o drivers will be better or no worse o ;

the planned uel duty increase o 2 pence per litre in April 2008 will now be

postponed until 1 October 2008. Main road uel duty rates will rise by 1.84pence per litre on 1 April 2009, and will increase by 0.5 pence per litre aboveinfation on 1 April 2010;

auctioning 100 per cent o allowances or large electricity producers in Phase

III o the EU Emissions Trading Scheme;

unding or the Green Homes Service to advise consumers on how they canreduce carbon emissions, waste and water consumption;

strengthening the environmental incentives or taxation o business cars,

along with simpli ying measures;

incentivising only the most sustainable bio uels, by shi ting support away

rom the duty di erential to the Renewable Transport Fuel Obligation inuture years;

increasing climate change levy rates in line with infation, in order to maintainthe environmental incentive e ect;

to strengthen the environmental signal through taxation, orecast tax

revenues rom the new per plane duty, due to replace air passenger duty on 1 November 2009, will increase by 10 per cent in the second ull year o operation;

an ambition or all new non-domestic buildings to be zero carbon rom 2019

with consultation at the timeline and its easibility and new public sectorbuildings rom 2018;

extending the Stamp Duty Land Tax exemption rom zero carbon homes to

new fats, retrospectively rom 1 October 2007.

that to eliminate single-sue carrier bags, the Government will legislate and

impose a charge and i retailers do not take voluntary action; and4The Economics of Climate Change: The Stern Review , Cambridge University Press, 2007.


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8 Budget 2008

increasing the aggregates levy rom 1 April 2009 to maintain its environmentalimpact.

BU D G ET MEA SU RES A N D TH E IMPACT O N H O U SEH O LD S

Consistent with the requirements o the1.18 Code or fscal stability , the updated publicnance projections in Budget 2008 take into account the scal e ects o all rm decisionsannounced in the Budget. The scal impact o Budget policy decisions is set out in Table 1.2.Full details are provided in Chapter A o the FSBR.

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9Budget 2008

Table 1.2: Budget 2008 policy decisions

(+ve is an Exchequer yield) million

2008-09 2009-10 2010-11 2008-09indexed indexed indexed non-indexed

Modernising the tax system1 Charities: gift aid transitional rate 60 105 120 602 Enterprise management incentive 10 10 10 103 Enterprise investment schemes: increase in investor limit 0 5 5 04 Remittance basis: foreign dividend tax rate 0 +15 +10 05 Extension of the dividend tax credit 0 * 20 06 Corporation tax: treatment of unclaimed assets +90 15 15 +907 North Sea fiscal regime modernisation 25 25 20 258 VAT: staff hire concession 0 +150 +125 09 VAT: reduced rate for smoking cessation products 10 15 15 1010 Stamp duty land tax: removal of lease duty rule from residential property 5 5 5 511 Review of powers: penalties 0 0 +10 0

Simplification12 Corporation tax: reform of associated companies rules 0 * 5 013 Capital allowances: write-off of small pools 0 25 15 014 VAT: revalorisation of registration and deregistration thresholds 0 0 0 515 VAT: option to tax exempt land and property 25 5 5 2516 VAT: extension of the exemption for fund management +5 +15 +15 +10Fairness and opportunity or all17 Increase in child element of Child Tax Credit by 50 a year 0 340 350 018 Increase first child rate of Child Benefit to 20 a week 0 210 170 019 Pilots of new approaches to tackling child poverty 10 35 80 1020 Child Benefit disregard for Housing Benefit and Council Tax Benefit 0 180 350 0

21 Age related payments: to pensioner households 575 0 0 57522 Reassessment of work capability of incapacity benefits claimants 0 0 10 023 Income tax: indexation of savings and basic rate limit 0 0 0 810Duties changes24 Tobacco duties: indexation 0 0 0 +3525 Alcohol duties: increase in rates +400 +505 +625 +60026 Amusement machine license duty: indexation 0 0 0 +5Protecting the environment27 Increase in value of landfill communities fund * * * 528 Landfill tax: reform of waste exemption 0 * +20 029 Extension of land remediation relief 0 10 20 030 Extension of enhanced capital allowances * * 5 *31 Road fuel duties 550 0 +270 55032 Rebated oils duties 10 0 +5 1033 Biofuels: removal of the duty differential 0 0 +550 034 Biofuels: reduced rate for off-road biofuel use * +5 +10 *35 Vehicle excise duty: new rates, bands and first year charge 0 +465 +735 036 Vehicle excise duty: reduced rate for cleanest vans 5 15 15 537 Company car tax thresholds 0 5 +80 038 Fuel benefit charge: revalorisation * +10 +25 *39 Fuel scale charge: revalorisation and realignment * * * +1540 Capital allowances: business cars 10 +40 +75 1041 Aviation duty 0 0 +40 0

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10 Budget 2008

Table 1.2: Budget 2008 policy decisions (continued)

(+ve is an Exchequer yield) million

2008-09 2009-10 2010-11 2008-09indexed indexed indexed non-indexed

Protecting tax revenues 42 Disclosure regime: user identification 0 +10 +20 043 Disguising interest +55 +120 +105 +5544 Controlled foreign companies +150 +150 +100 +15045 Intangible assets regime 0 +10 +15 046 North Sea oil and gas: abuse of management expenses rules +140 +175 +175 +14047 Double taxation treaties +200 +40 +30 +20048 Life insurance: taxation of interest +25 +35 +35 +2549 Sideways loss relief +25 +40 +15 +2550 Unauthorised Unit Trusts: payments on account +50 0 0 +5051 Stamp duty land tax: alternative finance +5 * * +552 Stamp duty land tax: group relief +10 +10 +10 +10

TOTAL POLICY DECISIONS: 140 +790 +1,865 700

The measures announced in this Budget help the Government contribute towards its1.19aims o reducing child and pensioner poverty and making work pay. Together with measuresannounced in Budget 2007 and the Pre-Budget Report 2007 they will mean that by April 2010amilies with children will be 475 per year better o on average whilst those in the poorestth o the population will be, on average, 800 per year better o as a result o measures

announced in this Budget. Pensioner households will be 200 better o , on average.

As a result o all personal tax and bene t measures coming into e ect since 1997, by 1.20

April 2010:

households will be, on average, 1,250 a year better o ;

amilies with children will be, on average, 2,000 a year better o ; and

amilies with children in the poorest th o the population will be, on average,

4,500 better o .

G O V ERN MEN T SPEN D IN G A N D REV EN U E

Chart 1.1 presents public spending by main unction. Total Managed Expenditure1.21(TME) in 2008-09 is expected to be around 618 billion in 2008-09. TME is divided intoDepartmental Expenditure Limits (DEL), shown in table C11 o the FSBR, and Annually Managed Expenditure (AME), shown in table C9 o the FSBR.

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11Budget 2008

Chart 1.1: Government spending by functionTotal managed expenditure: 618 billion

Other 67bn

Debt interest 31bn

Public order andsafety 33bn

Housing andenvironment 23bnIndustry, agriculture,

employment andtraining 22bn

Defence 33bn

Education 82bn

Transport 21bn

Health 111bn

Personal socialservices 27bn

Social protection 169bn

Source: HM Treasury 2008-09 near-cash projections. Spending re-classied to functions compared to previous presentations and isnow using methods specied in international standards. Other expenditure includes spending on general public services: recreation,culture, media and sport; international cooperation and development; public service pensions; plus spending yet to be allocated and

some accounting adjustments. Social protection includes tax credit payments in excess of an individuals tax liability, which are now counted on AME, in line with OECD guidelines. Figures may not sum to total due to rounding.

Chart 1.2 shows the di erent sources o government revenue. Public sector current1.22receipts are expected to be around 575 billion in 2008-09. Table C6 o the FSBR provides amore detailed breakdown o receipts consistent with this chart.

Chart 1.2: Government receiptsTotal receipts: 575 billion

Source: HM Treasury, 2008-09 projections. Other receipts include capital taxes, stamp duties, vehicle excise duties and some other tax and non-tax receipts for example, interest and dividends. Figures may not sum to total due to rounding.

Other - 84 bn

Council tax - 25bn

Business rates - 24bn

VAT - 84bn

Corporation tax - 52bnExcise duties - 42bn

National Insurance - 105bn

Income tax - 160bn

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