Budget Predictions 2007

The knives are out for smokers. Last year the Chancellor raised duty on a pack of 20 cigarettes by 9p. Ahead of the smoking ban in England and Wales, he has been urged by health campaigners to raise duty by 20p this time. With one foot in the door of Number 10, it's unlikely he'll go this far, but puffers can still expect to pay 10p-15p more for a pack of fags.

Beer drinkers already pay 59p a pint in tax and the drinks industry has lobbied for a freeze to slow a fall in sales. If he hammers smokers, Mr Brown might spare tipplers in order to preserve his image as a fun guy.

Education

Expect great emphasis on training and the need for the UK to increase its skills level in order to compete with the challenges of globalisation.

Child poverty

Mr Brown is expected to set out his plans for tackling child poverty and council housing deprivation, following recent influential reports.

Public sector

Mr Brown's projections for public spending have indicated that the era of huge expansion is nearing an end, and that hard choices about spending and taxes will have to be made in the future. Prudence is back.

The environment

'We're greener than the Tories' will be one of the key messages of the Budget, particularly following the EU agreement to reduce emissions by 2020, and ahead of the next General Election. More detail on planned environment taxes is possible.

Mark Schofield, tax partner at PricewaterhouseCoopers LLP, said: "With the global attention that government policy on the environment is receiving, it is hoped that the Chancellor will use this Budget to demonstrate the UK Government's long term strategy for dealing with the environment and climate change. Businesses need greater certainty in this area so that they can plan ahead and play an effective role."

PWC reckon VAT on low-energy light bulbs will be lowered, and there's an outside chance that air passenger duty will be further increased. Tax relief for personal purchases of carbon offsets may be in the offing, as well as incentives for green energy generation.

Fuel

Expect further increases in duty on petrol and diesel. High emission company cars may also be hit with a tax rise.

Inheritance tax

The Chancellor could raise the threshold to £500,000, but it's deemed unlikely by tax experts.

Leonie Kerswill, tax partner at PricewaterhouseCoopers LLP, said: "There is little sign of any significant change here."

Business tax

However, PWC predicts that Mr Brown will be feeling more benevolent towards business. Look out for further reductions in red tape for businesses (a Gordon Brown Budget classic); changes to corporation tax to ensure international competitiveness and reduced corporation tax for smaller companies. There may also be a review of employee car ownership schemes.

Personal tax

Income tax thresholds will probably be raised in line with inflation, and a simplification of the capital gains tax system could be announced.

Pensions

With above inflation rises in council tax and energy bills, many pensioners are struggling to survive on the basic State pension of £84.25 a week. According to a government report published in February, nearly one in four (24 per cent) of pensioners are at risk of poverty, compared to a European average of 18 per cent.

However, there is likely to be little for pensioners in the Budget, other than tinkering with the rules that came in on ‘=A-Day.