At first sight there is a distinct lack of clarity in the Chancellors pre-budget statement, so to that extent nothing has changed from Gordon’s time at No 11.   

Darling boasted that the fiscal rules were met in the previous economic cycle and forecast the same stellar performance in the next cycle despite an externally induced growth slowdown next year. But the Treasury's forecast for 2008 growth remains optimistic. Despite above trend growth in 2006-07 public finances remain stretched. The only way the government will meet its rules is if taxes go up or the rules are fudged. 

Clearly it is a better time to die! Margaret Thatcher more than halved the number of inheritance tax payers - Gordon Brown more than doubled them. Cameron's Tories spotted the potential in exposing the IHT stealth tax creep.  Darling stole the Tory’s pants but easing IHT remains Cameron's designer wear.

From an equity investment perspective the proposed reforms to Capital Gains Tax appear significant (if rushed and ill thought out) and some potential implications are summarised below:

Changes to Capital Gains Tax (CGT): This appears to be a fairly major change for equity investors. With effect from 6 April 2008, a new single rate of CGT will be introduced at 18%. This replaces the current rates of CGT which are currently chargeable at the tiered rates of 10%, 20% and 40%. Taper relief and indexation allowance will be abolished. The Annual Exempt Amount (AEA) will remain and was £9,200 in the year to April 2008.

Investors: The implication is that the reduction in CGT will encourage higher rate taxpayers to focus on investment products which generate capital gains (taxed at 18%) in place of income producing products (income taxed at 40%). Investors who have retained long term equity investments may be keener to sell those now that the rate of CGT has been substantially lowered. Previously the rate of CGT was tapered down to 24% after an equity investment was retained for 10 years.

Capital vs Income Shares: Higher rate taxpayers may favour Split Investment Trust zeros and capital shares as opposed to income shares.

Private Equity Sector: It appears that one of the reasons the Treasury has changed the CGT regime is to deal with the issues surrounding the taxation of carried interest which is received by many private equity executives. In the past, when business asset taper relief had been taken into account the rate of tax paid on carried interest has been 10% or perhaps less. Going forward carried interest will also be taxed at 18%. Many executives were concerned the outcome of the carried interest tax review was going to be worse, although many smaller company entrepreneurs face an 80% hike in their prospective CGT bill on disposal. These changes will not impact the UK listed private equity investment trusts such as 3i which do not pay CGT due to their investment trust status.

AIM Stocks: The abolition of taper relief will result in a tax rise from 10 to 18 per cent on the selling of many AIM shares. There is a clear incentive for investors to dispose of AIM stocks before April with less incentive to reinvest. If people rush to dispose of AIM shares it could hurt the market.

VCTs: The key reason that VCTs have been popular over the years is because of the CGT relief that they have provided. With a CGT rate of 18%, new VCT launches may be less popular in future.

PEPs and ISAs: The income tax saving advantages of investing in a PEP/ISA have been eroded over a number of years. Another reason for investors to have a PEP/ISA was the attractions of a CGT shelter. The reduction in CGT to 18% is likely to make PEPs and ISAs less attractive.

Technically speaking……….

Unfazed by the Chancellor yesterday, the FTSE100 closed 74.5 points higher thanks to strength in the oil stocks. That rise lifted the leading index back to levels last seen at the end of July. The good news for the bulls is that the technical outlook remains fairly benign - the momentum oscillators continue to trend higher (but do not yet look especially overbought) and the rally is still being driven by decent volumes. The 52 week high, at 6732, is just 2% above current levels and it seems possible that we will see that tested before too long.

And finally………………the All Blacks                                    

As part of the humiliation process: 

1) What do you a call a New Zealander in the semi final of a World Cup? 

A referee 

2) What's the difference between an All Black and a tea bag? 

A teabag stays in the cup longer. 

3) Global Consciousness: World leaders are united in praise for the New Zealand All Blacks after hearing they will contribute to the planet's carbon footprint reduction by dropping off the Aussies on their way home.

Prometheus from sources: ADM, Barclays Capital, Cazenove, Charles Stanley, HSBC, ING, SocGen, UBS.