Economic background

In July, George Osborne presented his post-election Budget against a background of an economy that had grown at 3.0% in 2014 and was enjoying zero inflation. The revenue-raising measures he announced then allowed the Office for Budget Responsibility (OBR) to reduce its projection for net government borrowing in 2015/16 to £74.1bn, a 20.9% drop from the previous year.

Four months on and inflation is still absent, but other economic numbers are looking slightly less rosy. Annual growth slowed to 2.3% in the third quarter of 2015, although the OBR has decided to keep its 2015 estimate unchanged at 2.4% and added 0.1% to its forecast for each of the following two years.

Government finances have also disappointed since July. In the first seven months of 2015/16, net borrowing declined by only 10.9%. The OBR, which prepared its calculations before the latest borrowing figures emerged, forecasts a further £0.5bn drop in this year's deficit. It attributes the fall to higher than expected income tax, corporation tax and VAT receipts.

Beyond the current year, many commentators had expected that Mr Osborne's plan to turn the deficit into a £10bn surplus by 2020/21 would be dented by last month's House of Lords rejection of the tax credits reforms announced in July. These cuts alone accounted for about half of the extra 2016/17 revenue raised in the July Budget.

Mr Osborne found he was able to increase his projected 2020/21 surplus, albeit only to £10.1bn, in spite of scrapping his planned changes to tax credits and making a £6.2bn tax 'giveaway' in 2016/17. This was largely thanks to his new apprenticeship levy.

Starting rate of savings tax

The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2016/17.