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As Chancellor Alistair Darling unveils how the government will undertake the UK economic recovery, the report was revealed shortly after the Bank of England revealed that it expected the UK economy to fall into a deep recession next year.
Also at an 11 year high, new unemployment figures showed that Britain's jobless total had swelled to 1.82 million in the three months to September.
Both Alistair Darling and Prime Minister Gordon Brown have advocated higher borrowing to help the struggling economy.
So let's see what the pre-budget report said.....
Economy
UK GDP has contracted by 0.5% over three months to September. Economic growth is forecast at between -0.75% and - 1.25%. This figure is down from the 2.5% originally predicted in March.
Inflation is also forecast to fall sharply by the end of next year reaching 0.5%.
Growth is forecast between 1.5% and 2% in 2010, with the economy expected to recover after that.
The Pre-Budget Report represents a £20bn fiscal stimulus (1% GDP) between now and April 2010.
VAT
The VAT rate is to be cut from 17.5% - 15% from 01/12/2008 until 31/12/2009. Retailers have been urged to pass it on as soon as they can.
Duty on alcohol and tobacco will be increased to match the VAT cut. Prices of both alcohol and tobacco will not fall.
Borrowing
Borrowing is expected to reach £78bn this year and up to £118 bn (8% of GDP) next year. Again, these levels are up from the £43bn predicted earlier this year.
Darling has said that that is the "right choice for the country".
2010 will see borrowings fall to £105bn then to £87bn, down to $54bn so by 2016 borrowings would only be made to invest.
UK net debt as a share of GDP this year will be 41%. Subsequent years will see the debt at 48%, 53% and 57%.
Spending
Capital spending of over £3bn is to be brought forward from 2010/11. Money will be used to improve motorway capacity, for the improvements and construction of new social housing, renew both primary and secondary schools and invest in energy efficient measures.
Public spending will witness a sharp cut in the rate of growth, expected to grow 1.2% per year. This is a sharp decrease from the 1.8% planned for before.
The government has also 'penciled in' £5bn in efficiency savings.
Income Tax
For earnings above £150,000, a new higher tax at 45% is proposed from April 2011. This is expected to impact 1% of people.
The £120 rebate for basic tax payers, introduced following the 10p tax row, is to be made permanent. This will be increased to £145 from April.
Darling said this will not just benefit households "not just this year but for good".
National Insurance
National insurance contributions are to be increased by 0.5% for all employers and employees from April 2011. No-one on less than £20,000 will see their National Insurance contributions increased.
Tax Credits and Allowances
From April pension credit will be increased from £124 - £130 a week for individuals and £189 - £198 for couples.
State pensions will rise in line with the highest rate of inflation to £95.25 from £90.70 for a single person.
Pensions and child benefit increases are due to take effect in January. This is three months early with every pensioner to receive a one-off payment of £60 from January while couples get £120.
For people with up to £1.8m in pension funds, they will receive tax relief extended to 2016.
A means tested savings scheme will be offered to up to eight million people on low incomes or benefits from 2010 where the government will provide up to 50p for every pound saved. Maximum government contribution will be £300 per person, with the scheme offered through a number of banks, building societies and credit unions, along with the Post Office.
Air Passenger Duty
Alistair Darling has said that reforming the Air Passenger Duty to a tax per plane rather than a tax per passenger could potentially harm the aviation industry already facing huge problems.
The Air Passenger Duty is to be reformed so those who travel the furthest, with a larger impact on the environment will meet the cost.
Fuel and Excise Duty
Differential first year rates on new cars will go ahead in April 2010. Controversial new rates on older cars will are due to be phased in.
From next year, duty rates for all cars will only increase by a maximum of £5. By 2010 the maximum rise will be limited to £30 per car rather than £90.
Cars that are less polluting will see no increase, even a cut of up to £30.
To match the VAT cut, there will be a rise in fuel duties, leaving drivers no worse off.
However it is possible that rises in petrol costs combined with the end of the VAT cut in 2010 could result in higher fuel prices.
Green Measures
60,000 more households are to be given help to insulate their homes. An extra £100m is to be provided, with a further £50m brought forward.
Darling also said that the government would invest more than £535m more quickly on energy efficiency, rail transport and environmental protection.
Employment
Recruitment is to speed up along with improved access to training. Over 500,000 job vacancies with 20 major employers are to be filled by offering a rapid response service to expand help to those who have been made redundant.
A further £15m of funding will be made for free debt advice.
Business Taxes
The report confirmed the exemption for foreign dividends for large and medium sized businesses to be introduced in 2009. Small firms are to get a temporary increase in threshold for empty property relief. For 2009/2010 empty commercial property with a rateable value below £15,000 exempt from business rates.
Struggling businesses will be able to spread their VAT, corporation tax and National Insurance contribution payments over a longer period of time.
Corporation tax for small firms is due to rise from 21p to 22p planned for April 2009 is to be deferred.
Tax repayments schemes for previously profitable businesses will be extended. Losses of up to £50,000 can be offset against profits made over the last three years.
The European Investment bank has a agreed to a £4 bn deal with UK banks to provide them with money to pass onto small and medium sized businesses.
Housing Market
Major mortgage lenders have agreed to wait for three months after falling into arrears before initiating repossession proceedings.
To help the mortgage market, the government will seek European Commision approval to provide temporary period guarantees for securities backed by new mortgages.
As of January those motgages of up to £200,000 will be eligible for a state benefit which pays the interest on their mortgage. This doubles the current £100,000 cap. Approval has been cut from 39 weeks to 13 weeks.
The Pre-Budget Report
As Chancellor Alistair Darling unveils how the government will undertake the UK economic recovery, the report was revealed shortly after the Bank of England revealed that it expected the UK economy to fall into a deep recession next year. Also at an 11 year high, new unemployment figures showed that Britain's jobless total had swelled to 1.82 million in the three months to September.
Both Alistair Darling and Prime Minister Gordon Brown have advocated higher borrowing to help the struggling economy.
So let's see what the pre-budget report said.....
Economy
UK GDP has contracted by 0.5% over three months to September. Economic growth is forecast at between -0.75% and - 1.25%. This figure is down from the 2.5% originally predicted in March.
Inflation is also forecast to fall sharply by the end of next year reaching 0.5%.
Growth is forecast between 1.5% and 2% in 2010, with the economy expected to recover after that.
The Pre-Budget Report represents a £20bn fiscal stimulus (1% GDP) between now and April 2010.
VAT
The VAT rate is to be cut from 17.5% - 15% from 01/12/2008 until 31/12/2009. Retailers have been urged to pass it on as soon as they can.
Duty on alcohol and tobacco will be increased to match the VAT cut. Prices of both alcohol and tobacco will not fall.
Borrowing
Borrowing is expected to reach £78bn this year and up to £118 bn (8% of GDP) next year. Again, these levels are up from the £43bn predicted earlier this year.
Darling has said that that is the "right choice for the country".
2010 will see borrowings fall to £105bn then to £87bn, down to $54bn so by 2016 borrowings would only be made to invest.
UK net debt as a share of GDP this year will be 41%. Subsequent years will see the debt at 48%, 53% and 57%.
Spending
Capital spending of over £3bn is to be brought forward from 2010/11. Money will be used to improve motorway capacity, for the improvements and construction of new social housing, renew both primary and secondary schools and invest in energy efficient measures.
Public spending will witness a sharp cut in the rate of growth, expected to grow 1.2% per year. This is a sharp decrease from the 1.8% planned for before.
The government has also 'penciled in' £5bn in efficiency savings.
Income Tax
For earnings above £150,000, a new higher tax at 45% is proposed from April 2011. This is expected to impact 1% of people.
The £120 rebate for basic tax payers, introduced following the 10p tax row, is to be made permanent. This will be increased to £145 from April.
Darling said this will not just benefit households "not just this year but for good".
National Insurance
National insurance contributions are to be increased by 0.5% for all employers and employees from April 2011. No-one on less than £20,000 will see their National Insurance contributions increased.
Tax Credits and Allowances
From April pension credit will be increased from £124 - £130 a week for individuals and £189 - £198 for couples.
State pensions will rise in line with the highest rate of inflation to £95.25 from £90.70 for a single person.
Pensions and child benefit increases are due to take effect in January. This is three months early with every pensioner to receive a one-off payment of £60 from January while couples get £120.
For people with up to £1.8m in pension funds, they will receive tax relief extended to 2016.
A means tested savings scheme will be offered to up to eight million people on low incomes or benefits from 2010 where the government will provide up to 50p for every pound saved. Maximum government contribution will be £300 per person, with the scheme offered through a number of banks, building societies and credit unions, along with the Post Office.
Air Passenger Duty
Alistair Darling has said that reforming the Air Passenger Duty to a tax per plane rather than a tax per passenger could potentially harm the aviation industry already facing huge problems.
The Air Passenger Duty is to be reformed so those who travel the furthest, with a larger impact on the environment will meet the cost.
Fuel and Excise Duty
Differential first year rates on new cars will go ahead in April 2010. Controversial new rates on older cars will are due to be phased in.
From next year, duty rates for all cars will only increase by a maximum of £5. By 2010 the maximum rise will be limited to £30 per car rather than £90.
Cars that are less polluting will see no increase, even a cut of up to £30.
To match the VAT cut, there will be a rise in fuel duties, leaving drivers no worse off.
However it is possible that rises in petrol costs combined with the end of the VAT cut in 2010 could result in higher fuel prices.
Green Measures
60,000 more households are to be given help to insulate their homes. An extra £100m is to be provided, with a further £50m brought forward.
Darling also said that the government would invest more than £535m more quickly on energy efficiency, rail transport and environmental protection.
Employment
Recruitment is to speed up along with improved access to training. Over 500,000 job vacancies with 20 major employers are to be filled by offering a rapid response service to expand help to those who have been made redundant.
A further £15m of funding will be made for free debt advice.
Business Taxes
The report confirmed the exemption for foreign dividends for large and medium sized businesses to be introduced in 2009. Small firms are to get a temporary increase in threshold for empty property relief. For 2009/2010 empty commercial property with a rateable value below £15,000 exempt from business rates.
Struggling businesses will be able to spread their VAT, corporation tax and National Insurance contribution payments over a longer period of time.
Corporation tax for small firms is due to rise from 21p to 22p planned for April 2009 is to be deferred.
Tax repayments schemes for previously profitable businesses will be extended. Losses of up to £50,000 can be offset against profits made over the last three years.
The European Investment bank has a agreed to a £4 bn deal with UK banks to provide them with money to pass onto small and medium sized businesses.
Housing Market
Major mortgage lenders have agreed to wait for three months after falling into arrears before initiating repossession proceedings.
To help the mortgage market, the government will seek European Commision approval to provide temporary period guarantees for securities backed by new mortgages.
As of January those motgages of up to £200,000 will be eligible for a state benefit which pays the interest on their mortgage. This doubles the current £100,000 cap. Approval has been cut from 39 weeks to 13 weeks.
Nazare, Portugal
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