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Tuesday, 20 November, 2001, 10:34 GMT
What is the pre-Budget report?
by BBC News Online's Steve Schifferes

Published each autumn, the pre-budget report is the Treasury's chance to explain in advance its approach to the full budget the following spring and to update its economic forecasts.

When Chancellor Gordon Brown introduced the idea of a pre-budget statement in 1997 he heralded it as a measure that would add predictability and stability to government, while reducing uncertainly for business and the markets.

Increasingly, however, it has been used as an opportunity to launch new policy initiatives and to make the odd political concession where deemed necessary.

Last year, pensions and fuel taxes were the two big issues facing ministers - and Mr Brown announced major concessions which helped calm the protests ahead of the General Election.

This year, the effects of the terrorist attacks on the UK economy and the future direction of public spending are likely to be at the centre of the pre-Budget debate.

In previous years, major new policies such as the minimum income guarantee for pensioners and the 10p starting rate of income tax were first revealed by Mr Brown in the autumn.

The report effectively marks a return to the old autumn statement beloved of chancellors in years gone by, when governments announced in advance their spending plans for the next year.

That was abolished by the last Conservative chancellor, Ken Clarke, who sought to combine the Budget and the autumn spending statement in a single presentation to Parliament.

Budget battle ahead

This year there will much more focus on the long-term question of taxes and spending, as the huge budget surpluses enjoyed by the government in the past few years are set to disappear.

So far the UK has escaped the brunt of the world economic slowdown which is affecting the United States, Japan and much of the eurozone, but many economists warn that government tax revenues are likely to fall later on.

And bidding has already begun for the next round of spending plans, which are due to be announced next summer.

There are reports of tension between the Chancellor and Number 10, with Tony Blair wanting a commitment to continued increases in spending on health, education and transport.

But Mr Brown could give more hints of his ambitions to reform the tax system to help lower-income families, a goal he has increasingly stressed in the last two budgets.

He could also reveal more details about the expected cost of the war in Afghanistan, which could add pressure to next year's budget settlement.

Help for business

Also closely watched this year will be the government's economic forecast.

Mr Brown has already hinted that he will be proposing further measures to help businesses hit by the effect of the terror attacks on 11 September.

He may want to target manufacturing industry in particular, whose export markets have suffered from the global slowdown.

But the government will have to estimate how much overall economic growth will be affected in the future by the world economic downturn.

Although the government's previous forecasts have been cautious, any significant further slowdown could increase the tensions over the future direction of spending.

Mr Brown warned the Labour Party at its annual conference of tough decisions that lie ahead.

The pre-Budget report could give the first outlines of the choices that the government will now have to make.

The government's pre-Budget report will be on 27 Novewmber






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