BUDGET 1996:; Mark the Chancellor: Your Budget scorecard

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Income tax cuts expected, toward government aim of 20p basic rate. Clarke's options are to reduce the basic rate by 1p, 2p or even 3p in the pound; increase allowances by more than the rate of inflation; increase tax thresholds by more than the rate of inflation; widen the lower rate 20p band.

Profit-related pay suggested as a likely candidate for abolition. Tax relief for about 3 million employees in PRP schemes costs close to pounds 1bn. Restricting the tax relief might be more palatable

Government spending planned for hospitals and schools is likely to rise. Roads programme is expected to suffer. Clarke will have to reduce the public spending "control total" by pounds 1bn-3bn. Lower inflation means there can be cuts without any reduction in real spending. Watch or an announcement about social security fraud.

Single parent benefit might fall victim to the pro-family lobby on the Conservative back benches even though the money can make a huge difference to recipients.

Alcopops a swingeing increase in excise duty likely. Accounts for less than 2 per cent by volume of the alcoholic drinks market. Strongly criticised for being aimed at young people. Brewers would like to see a cut in duty on beer to fight back against Cross-Channel shopping and smuggling.

MAKING BUSINESS PAY

The Government likes to encourage small businesses. A reduction in the rate of corporation tax by 1 or 2 per cent is a possibility. The reintroduction of first year capital allowances is an outside chance. Expect further snips at red tape.

Insurance premium tax introduced by Clarke in 1994. Insurers fear an increase this year.

Gaming duties might fall, to help pools and betting companies compete with the National Lottery.

Clarke might have some wheeze for extra taxes on privatised electricity, water and gas companies to undermine Labour's plans for a windfall tax.

Clarke will probably try to close tax loopholes when it comes to corporate taxation too.

The state

we're in

Current rates are 20% up to pounds 3,900, 24% up to pounds 25,500, and 40%. Allowances: personal pounds 3,765; married couple pounds 1,790 (higher for older couples); aged 65-74, pounds 4,910; over 75, pounds 5,090

Profit-related pay up to pounds 4,000 or 20 per cent of salary saves a basic rate tax payer up to pounds 1,000 a year, a higher rate payer pounds 1,600 a year.

The planning total for departmental spending set in last year's Budget was pounds 260.2bn in 1996/96, pounds 268.2bn in 1997/98 and pounds 275.6bn in 1998/99.

The benefit is worth just under pounds 5.20 a week.

The tax on alcopops is currently 10-15p a pint less than tax on a premium lager

The current rate of corporation tax for small businesses is 24 per cent for 350,000 companies. The standard rate is 33 per cent.

The tax of 2.5 per cent applies to non-life insurance premiums.

Pools tax is 26.5 per cent. General betting duty was cut to 6.75 per cent last year.

These companies would face paying some pounds 5bn-10bn under Labour

After the puzzle about unexpectedly low corporate VAT payments last year, he could tighten rules

Clarke's

medicine

KEEPING THE VOTERS SWEET

Petrol duty should rise by 5 per cent more than inflation, adding 3p a litre. Norman Lamont introduced the principle that duties on road fuel should increase in real terms every year. Tobacco duties will increase by 3 per cent on top of inflation, adding about 12p to a packet of 20 cigarettes.

John Major promised to abolish capital gains tax and inheritance tax so that wealth could "cascade down" the generations. But Clarke is unlikely to deliver. Abolishing capital gains tax would give a huge boost to the tax avoidance industry while abolishing inheritance tax would benefit fewer than 25,000 voters

The Chancellor might decide to do more to encourage savings by making Peps and Tessas even more attractive or augment the enterprise investment scheme.

Redundancy pay might lose its tax exemption, saving the Treasury pounds 1.5bn

The Chancellor will try to close tax loopholes. Will probably, as usual, extend national insurance to the ever more esoteric means that companies use to pay bonuses to high earners

VAT is not expected to be raised or extended. Clarke is vulnerable to Labour attacks over its record of raising VAT.

PLEASING THE MARKETS

Clarke's forecast for growth next year now looks quite cautious so he may raise it a little. This would make the outlook for government borrowing look better, would have to edge up the inflation forecast.

Privatisation proceeds are a handy source of money to finance tax cuts. Mr Clarke may announce new asset sales.

The Public Finance Initiative allows planned capital spending by the public sector to be cut. After slow start Clarke will probably predict a big increase in PFI investment in coming years.

The contingency reserve, planned expenditure not allocated to any particular department will, as always, be cut

The Public Sector Borrowing Requirement has to be no higher than projected in last year's Budget to make markets applaud andminimise the pressure on him to raise interest rates.

The state

we're in

The duty on a litre of petrol stands at 34.3p, and on a packet of cigarettes pounds 1.83.

The first pounds 6,300 of capital gains are tax free. Sale of principal home is free of the tax. The first pounds 200,000 of an estate is free of inheritance tax, the rest taxed at 40 per cent.

Pep schemes allow the investment of up to pounds 6,000 a year and up to pounds 3,000 a year in a single-company Pep. People can put up to pounds 9,000 over 10 years in a Tessa

The first pounds 30,000 of redundancy pay is currently tax free.

Life assurance policies are this year's hot tip for being brought into the tax net.

The standard VAT rate is 17.5 per cent. A range of items - including food, construction, passenger transport, children's clothes, books and newspapers and prescription drugs remain zero rated.

Treasury's summer forecast put growth in 1997 at 3.25 per cent and inflation at 2.25 per cent by the fourth quarter.

Last year's Budget put privatisation revenues at pounds 4bn in the current year,

Capital spending plans fell from just under pounds 22bn in 1995/96 to pounds 19.2bn by 1998/99. The PFI was due to see spending of pounds 1.9bn this year

Some of the pounds 2.5bn reserve this year and the pounds 5bn for next year will pay for BSE and gun compensation

According to the Treasury's latest published forecasts the PSBR should be pounds 26.9bn this year and pounds 23.1bn next year. Lower figures will come today.

Clarke's

medicine

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