What will Darling's speech do for you?

The Chancellor's pre-Budget report on Monday has to make a little go a long way
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Indy Politics

1. Pensioners

After decades of neglect by both parties, senior citizens are suddenly going to be showered with extra cash. Fuel prices have risen so much that it was always on the cards that the Chancellor would keep or even boost winter fuel payments for pensioners, which stand at £250 for most OAPs and up to £400 for the over-80s.



2. Families

Or "hard-working families" as ministers always call them. Another favourite to receive help, with the additional benefit that it will help the Government to meet its targets for reducing child poverty. Options include raising tax credits or increasing universal child benefit, which is a less targeted way of helping the poor. There may even be a special winter fuel allowance payment for them – for this year only.

Overall, taking into account tax cuts, changes to mortgage rates (especially for those on tracker mortgages linked to the Bank of England base rate), the reduction in fuel prices on the way and other measures, the disposable incomes of families will see a marked increase next year – provided they keep their jobs. Thus, those in the relatively secure surroundings of the public sector will enjoy the best of the feelgood factor being delivered to them by the Treasury and the Bank of England over the next few months. Increases in personal allowances (beyond allowing for inflation) tend to be more indiscriminate than changes in tax credits and benefits, so may be less favoured. A cut in the basic rate of tax is another option; bold and embarrassing for the Tories, but expensive.

3. Small businesses

The Chancellor will almost certainly do something to help them. The most optimistic will be hoping for direct action to make the banks tide them over difficult times, or even for the Government to lend to them directly, as some Labour MPs suggest. However, ministers and civil servants may be reluctant to decide which firms live or die during this recession, and will continue to leave such matters to the banks. Tax concessions on the cards include: rate relief on empty property (to avoid unsightly demolitions of sound buildings), a reduction in small companies' corporation tax rate, and improvements in areas such as the entrepreneurs' tax relief scheme.

4. First-time buyers

With no end to the housing slump in sight and little improvement so far in the number of property transactions, the Chancellor could demonstrate his sympathy for the plight of first-time buyers, now virtually locked out of the property market. An extension of the stamp-duty holiday, perhaps to homes valued at £175,000 or more, would surprise no one. Again, Mr Darling may "urge" the banks to be more sympathetic to first-time buyers. Virtually anything positive in this field would come as a bonus to the beleaguered construction sector, and would also help to boost spending on household durables, another area badly hit by the downturn.

5. Consumers

One clever move would be a temporary reduction in VAT for, say, a year, to be paid for by an equivalent increase in Vat after the initial concession period. This would help to bring purchases forward. It would also allow the Chancellor to "prove" that his fiscal boost is essentially temporary and self-financing. It would, however, be expensive and, inevitably, some of the money would be spent on imports. There is also a regressive element to it; there would be a big cut in the price of a Porsche, but a loaf of bread (zero rated for VAT) would be no cheaper.

6. The construction industry

Bringing forward infrastructure projects such as the London Olympics and the school building programme would save many builders from collapse. It would also help the Government to achieve its regeneration goals and, if some of the money were spent on social housing, its aim of building three million new homes by 2020.

7. The rich

Just as the economic world has changed, so has the political one. There is a less patient public mood when it comes to executive pay and bonuses, and Mr Darling could take the opportunity to pay for his package of measures to boost the economy by raising taxes on the better-off further down the line. He has pledged that there will be no major alteration in the tax treatment of "non-doms" for the rest of this parliament. That still leaves the broad mass of the prosperous middle classes, and he may well signal moves to cut down on higher rate tax relief on pension contributions, and steep rises in petrol duties and car taxes a few years down the line. This could be the most redistributive – if not socialist – set of measures from a Labour chancellor since the 1970s.

8. The unemployed

This growing army is predicted to be three million strong by 2010. Those lucky enough to receive redundancy payouts from employers may see an increase in the sum they are allowed tax-free – the present £30,000 limit has been in place for 20 years. Help with avoiding homelessness among the jobless is also a strong possibility. Few expect much improvement in benefits beyond an adjustment for inflation, though almost all of any uprating would undoubtedly be spent.

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