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Oct 07. The new Chancellor of the Exchequer Alistair Darling MP, gave his report on the health of the economy in the Pre-Budget report and set out government spending plans for the next three years.


Total planned defence spending will rise from £32.6bn in 2007-08 to a total budget of £36.9bn by 2010-11.

The settlement will allow the MoD to purchase two new aircraft carriers alongside two protected vehicle types for the army and additional air transport capability for the Royal Air Force.

An additional £400mn has been allocated for defence operations abroad this year.

Investments will be made to continue to improve the standard of accommodation for the Armed Forces, including £550 million for single and family accommodation, drawing on anticipated receipts from the sale of Chelsea barracks.

£1bn for R&D Investment

The Chancellor accepted the recommendations of the review by Lord Sainsbury, which sets out a greater leadership role for the Technology Strategy Board in coordinating funding for business innovation. Together with co-funding of at least £120m committed by the Research Councils, and co-funding of £180m committed by the Regional Development Agencies (RDAs), total public support for business innovation in support of the Technology Strategy will amount to over £1 billion over the CSR07 period.

The TSB will publish its detailed strategy in early 2008, but plans include:
* three new Innovation Platforms to find technological solutions to major societal challenges: health care for ageing populations; low environmental impact buildings; and low carbon transport;
* extending the TSB’s sector coverage by creating two new Knowledge Transfer Networks in digital communications and the creative industries; and
* doubling the number of Knowledge Transfer Partnerships to get highly qualified science and technology graduates working with businesses.

The Department for Innovation, Universities and Skills (DIUS) has been allocated a total budget of £18.7bn in 2008-09, £19.7bn in 2009-10 and £20.8bn in 2010-11, equivalent to 2.2 per cent annual average real growth.

In addition to TSB and science spending investment in Higher Education and Skills will rise by 2.0 per cent in real terms over the CSR07 period.


A single security and intelligence budget for counter-terrorism which will see the UK’s security spending on counter-terrorism, intelligence and resilience increase from £21/2 billion in 2007-08 to £31/2 billion in 2010-11. This includes an addition of over £220 million by 2010-11 for the Home Office, taking the real terms increases in its budget to 1.1 per cent a year on average over the CSR07 period. The Ministerial Committee on National Security International Relations and Development will review the spending plans for this budget on an annual basis

Heathrow expansion

The prebudget report recognises that additional airport capacity will increase competition between airlines and ease congestion, benefiting passengers and the wider economy. The Eddington Transport Study and the Stern Review made clear that infrastructure projects should proceed where there is a net economic benefit once external costs – including environmental impacts – have been taken into account. The Government will consult shortly on whether the expansion of Heathrow, the UK’s only major hub airport, can take place while meeting stringent environmental conditions.

Air Passenger Duty

The Government intends to reform the taxation of aviation so that from 1 November 2009 APD will be replaced with a duty payable per plane rather than per passenger. A consultation on this proposal will begin shortly. The consultation will consider ways to make aviation duty better correlated to distance travelled and encourage more planes to fly at full capacity. In introducing this duty, the Government will also take into account the impact on freight and tran

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