In it's roundup of the PBR, Deloitte said there was evidence that the prime minister chose not to go to the country on account of the economic and financial position of the country worsening.

'It would now only be possible to give some significant pre-election sweeteners by raising the already high borrowing numbers still more and hence endangering the government’s reputation for fiscal prudence,' Deloitte said.

The firm also noted that the PBR reflected a keen political judgment in partially adopting the Conservatives’ tax proposals while appearing to direct extra money at the margin into spending on health and education.

Overall, the PBR was pretty much fiscally neutral, giving away small amounts for the next two years (mainly on inheritance tax measures) and raising it in the next two (mainly through the end of capital gains tax taper relief and the reform of non-domicile taxation).

The chancellor’s acknowledgement of the darker economic outlook is marginal. He reduced the forecast for growth next year to 2% to 2½%. We are forecasting 2% – but the outturn could easily be much worse than our forecast. Moreover, it is noteworthy that the official forecast envisages growth rebounding to a higher level than previously forecast in 2009/10.

It is this which explains how, after raising his borrowing numbers for next year by £6bn, borrowing is pretty much back to the previous track within three years.

We suspect that, without significant further tax rises, borrowing will turn out to be nearly £10bn higher than the official forecast for 2009/10 and by 2011/12 it may still be standing close to £40bn.

Furthermore, this reflects a central forecast, yet economic risks are now firmly skewed to the downside. Moreover, given this, and the clear chance that government spending will not slow as much as the Treasury’s plans envisage, the risks to borrowing are skewed to the upside.

Mr Darling’s first PBR was a workmanlike performance without the bravura of his predecessor. But economic circumstances are much less favourable for him. And they may well get less favourable still. As always, Chancellors can only achieve what the economy allows. We may be entering a new period of hard problems and hard choices.

Air Duty

Tax partner Tony McClenaghan, welcomed the announcement to replace Air Passenger Duty with a tax payable per plane rather than per passenger from 1 November 2009.

'Proposals to replace Air Passenger Duty with a tax based on the level of carbon emissions per flight would make the relative carbon cost of a flight easier to understand.

'In its current form the relatively low ''flat rate'' Airline Passenger Duty is unlikely to lead to wholesale behavioural change amongst passengers and simply raises additional tax. It also ignores freight and private flights. In contrast, having a tax based on the carbon cost of a particular journey could encourage a change in passenger behaviour,' he said.

'It will be interesting to see the outcome of the proposed consultation with industry and stakeholders. There are many practical issues that would need to be considered before any such a tax could be implemented. For example, how would the carbon impact of each aircraft type be measured and verified; how would figures be obtained from overseas airlines; how would passenger load averages be included (so as to reflect the benefit of flying with a fully-loaded aircraft) and checked; how would passenger flights and cargo flights be dealt with under one regime and how often are all these figures updated?

'Passengers paying the new tax would also want to know how the additional £520m generated would be spent. Air Passenger Duty is simply part of general taxation: is the government prepared to dedicate tax revenue to spending in particular areas?

'In practice it may also be very hard to set the tax at a level that would have a genuine impact on the majority of travellers’ flight choices without making flying prohibitively expensive for the less well off. The weakness with a tax such as this is that with the tax levied on the airline and not the individual, it will make it less transparent for individuals to see the impact of their behaviour,' said McClenaghan.

Individual Tax

Patricia Mock, private client services director said there were three main points of interest for individual tax payers.

'Firstly, Alistair Darling, perhaps spurred into action by the Conservative announcements last week, has announced relaxations in the use of the nil rate band for inheritance tax (IHT). Up to now, if a spouse dies there is no IHT payable if the assets are left to the surviving spouse or civil partner. 'When the survivor dies, only one nil rate band is available. Thus the nil rate band of the first of the couple to die is lost unless the couple have enough assets to leave some of them to, for example, children, on the first death.

'The new measure allows for a transferable allowance for married couples and civil partners. This means that any unused allowance on the first death can be used on the second. The allowances themselves, according to the 2007 Budget, are set to rise to £350,000 by 2010/11. For a couple with a combined estate of £600,000, where all the assets are left to the surviving spouse on the first death, this would mean a saving of £120,000, based on current rates.

'This measure will be welcomed by taxpayers whose main asset is the family home and do not have sufficient assets to make gifts to children on the first death. The measure will apply to couples where the first death was before October 2007 and the second death is on or after 9 October. The Treasury anticipates that this measure will cost £1bn in 2008/09, although it is worth noting that there has been a certain amount of planning in this area, which will no longer be needed.

'Secondly, and a measure which will have mixed effects, a new flat rate of capital gains tax has been introduced at 18%, to apply from 6 April 2008. This is coupled with simplification measures around the calculation process, which has become increasingly complex over the years, and this aspect will be welcomed, particularly by unrepresented taxpayers.

'On the change in rates, there will be winners and losers. The flat rate of 18% replaces the gradual reduction of the gain through taper relief. General investors in shares and those with buy-to-let or second properties, who achieve a minimum rate of 24% after 10 years ownership will find their position improved, although accumulated indexation allowance will no longer be available (which applied to assets owned before 1998). There will be no holding period required to benefit from this new rate. However, entrepreneurs and taxpayers who hold shares in their employer will find a 10% rate replaced by one of 18%. The changes are bound to mean a flurry of sales in the period up to 5 April 2008, as people make sales to lock into current rates if this is to their advantage.

'Finally, there are changes in the non domicile regime. Mr Darling has proposed a flat rate charge for non domiciles of £30,000, which will apply after they have been UK resident for seven years. In his speech and in calculating the yield from the measure, the Chancellor suggested that 15,000 taxpayers would find it beneficial to pay the levy. The new rules will apply from 6 April 2008 onwards, and to people who have already clocked up 7 years of UK residence on that day. There is a suggestion that higher charges will apply to those who have been here for more than 10 years.

'Coupled with the change is a tightening up of loopholes and anomalies, which have allowed people to manipulate the rules. We will need to wait for the legislation to assess the precise impact, but it seems that overseas structures such as trusts and companies will be affected. There will be a consultation process on the details of the change,' she said.

CGT

CGT taper relief for individuals and trustees withdrawn with effect from 6 April 2008, replaced with 18% tax rate. Up to April 2008 the effective tax rate for entrepreneurs is as low as 10%.

Sam Hart, a director in the Entrepreneurial Business team said: 'To date, the optimum capital gains tax rate on an exit for an entrepreneur has been 10%. However, from next April the tax rate rises to a flat rate of 18% and will become a much more substantial cost. 10% tax was seen by many as an acceptable cost on an exit, but 18% is significantly higher and may affect the decision whether or not to sell. An entrepreneur with a business worth £5 million will now face an additional tax cost of £400,000.

'There will of course be winners from these CGT simplification measures. These will include individuals selling assets that would previously have been subject to tax rate of 24% after 10 year's ownership. From April 2008, they can benefit from 18% tax after day one. This will include assets such as buy to let properties, second homes and other investments, including shares,' said Hart.