Pre Budget Report November 2008

Alistair Darling delivered his pre-budget report. The main points

• Temporary 2.5% cut in VAT to 15% from 1st December for 13 months
• New 45% tax band for those earning more than £150 000
• National Insurance to go up by 0.5% in 2011
• £60 Christmas gift for pensioners
• Phased increase in vehicle excise duty

The key question is that will the government be able to pay for the increased borrowing caused by events such as bailing out failing financial institutions and financing wars in Iraq & Afghanistan.

Interest Rate cut of 1.5%

As anticipated the Bank of England cut interest rates to 3%. The lowest in some 50 years.

Will mortgage rates come down?

That is the important question, banks and building societies have not been passing on reductions to consumers because they have been worried about their profit margins.

There are some lenders who would be able to lower rates substantially but are not doing so becasue of lack of competition in the market place.

Will savers be hit?

Yes, rates for savers will reduced much quicker than for lenders.