UK growth for 2004/2005 is forecast to be 3.25%, with similar growth expected next year. Brown's critics point out that this growth is entirely in the public sector. Borrowing this year is forecast to be GBP35bn, up from a 24bn forecast in last year's budget - but the forecast is dependent on tax revenues meeting their forecast level, something that is seen as very unlikely by most commentators.

Fiscal measures announced yesterday include an extra £1bn for Council tax support, plus additional spending on childcare. Proposals for increased maternity leave will worry employers, but the major business issue raised by the largely content-free Chancellor's speech is the question of anti-avoidance, and the imposition of transfer pricing and thin capitalisation rules within the UK.

One positive note, carefully concealed in the fine print of the ‘Red Book’, is an announcement that the Government is not going to make immediate moves to change the taxation regime for non-domiciled individuals. The complexity of this issue has evidently defeated the Treasury's slash-and-tax axemen.

As expected, however, the axemen have cut a wide swathe through the avoidance industry, including an announcement (smacking of desperation) that retrospective legislation is to be utilised in future to crack down on avoidance schemes that are judged to be abusive.

More constructive is the Inland Revenue's publication of a summary of responses to their July discussion paper seeking views on the taxation of Authorised Investment Funds (AIFs) following the introduction of the new collective investment scheme sourcebook (COLL) on 1 April 2004. The new regulations permit AIFs to undertake a wider range of investment strategies and also introduced the Qualified Investor Scheme (QIS) a non retail authorised fund with a lighter touch regulatory regime aimed at sophisticated investors.

The Government has also announced that it intends to legislate against arrangements which sought to produce tax-free income from repos or stock lending arrangements involving loan relationships. Proposed legislation will provide that all profits from such arrangements involving loan relationships should be brought into tax under the loan relationships regime.

The pre-budget report also prefigures extensive tinkering with R & D tax credits, which have notably failed in their purpose, tax measures to deal with the new European Company Statute, and an enhanced focus on small business which may be well intended but will no doubt further increase the weight of bureaucracy and red tape on anyone brave enough to start a new business in the UK.