Chancellor boosts housing spending and reforms taxes

Chancellor Alistair Darling reiterated the government's target to build three million homes by 2020, a total of 240,000 homes a year from 2016, by increasing spending on housing from £8.8bn in 2007-08 to £10bn by 2010-11.

He added the government will spend more than £4bn over the next three years to pay for public sector housing renovations, although it is unclear if this money is part of the £10m figure.

The chancellor also pledged to reform the tax and planning systems to facilitate the target, but little detail was provided about what measures he is considering.

Economic grow forecast and tax reforms
In his first Pre- Budget Report Darling said the UK economy remained "in good stead" but cut earlier economic growth forecasts for next year. He also announced a new flat rate for Capital Gains Tax, an increase to the inheritance tax threshold, and plans to examine taxing "non-domicile workers".

Darling's most significant announcement is the abolition of "taper relief" on capital gains tax charged on business asset investments.

From next year CGT will be paid at a flat rate of 18%. CGT is currently 40% but most of those who pay CGT pay just 10% via taper relief on business investments owned for two years.

Darling cut UK growth forecasts for next year to 2-2.5%, against the Treasury's previous forecast of 2.5 to 3% in 2008, but insisted growth would reach 2.5 to 3% in 2009, in line with the previous forecast.

Darling also said he would examine whether non domiciled tax payers should pay a flat rate after seven years of being based in the UK and a higher one after 10 years.

He insisted Tory plans to charge a flat rate of £25,000 on so called "non doms" would only raise £650m a year, less than the £3.5bn that the Tories claim.

The inheritance tax threshold for couples will rise to £600,000 and then to £700,000 by 2010.

The main rate of corporation tax will be cut by 2p in the pound to 28% next year.

Local authority grants
Grants to local authorities for local services in England will increase to £26bn by 2010.

Long term fixed rate mortgages
Proposals are to be brought forward in next year's Budget to help lenders provide longer term fixed rate mortgages for 10 years or more.

Government borrowing
Net borrowing was forecast to fall from £38bn this year to £23bn in 2012, which puts borrowing at around twice Gordon Brown's previous forecasts.

Public spending
Government spending on the NHS will increase by an average of 4% a year in real terms, taking the NHS budget from £90bn in 2007-08 to £110bn by 2010-11.

Government's transport budget will increase to £14.5bn a year, including funding for Crossrail and projects to widen the M1 and M6.

The budget for the Department for the Environment, Food and Rural Affairs will rise to £4bn by 2010, which will include £800m by 2010 for flood defences, up from £600m.

Government reviews
Darling announced three reviews to examine simplifying payroll taxes, capital gains tax and taxes for the self-employed.

But the Federation of Small Businesses said: "The PBR is bad news for small business, adding to the tax burden. The chancellor's statement is a huge disappointment for most small businesses still reeling from the increase in corporation tax announced in the last budget. The FSB welcomes plans to simplify taxation."

Commenting on the revised growth forecasts for next year, the British Chambers of Commerce said: "Reflecting the lower growth forecast the Chancellor found it necessary to raise his borrowing figures for the next few years. This was expected but heightens concerns amongst businesses that further tax increases may be needed in future years."