Lisa Bachelor looks at who gains - and who loses - in what is seen as a disappointing pre-budget report from the chancellor

With little money to play with in a recession that chancellor, Alastair Darling admitted had hit the British economy harder than feared, last Wednesday's pre-budget report contained little in the way of glad tidings for anyone.

Pensioners received some good news with the confirmation of a 2.5% increase to the basic state next year (meaning a full basic state pension will be worth £97.65 a week. The full couple's rate for those whose entitlement is based on their spouse or civil partner's pension will increase to £156.15 a week) and an extension to the Warm Front scheme, which helps low income households make their homes more energy efficient.

Young people were also given a hand in the form of a promise of work or training for those under 24 who have been out of work for six months or longer. Higher earners were hit again with the announcement that not only will they pay more tax next year, they will receive less tax relief on contributions to an employer's pension scheme.

But perhaps the PBR was best summed up by Liberal Democrat Treasury spokesman Vince Cable.

"This is a good budget for bingo and boilers," he added, referring to the cut in bingo duty from 22% to 20% and a boiler scrappage scheme.

Here, we elaborate on some of the announcements that you might have missed but which might affect you while, below, our panel outlines the headline announcements.

Improving work opportunities for the over-50s

There are now 367,000 people aged 50 or over out of work, a rise of nearly 40% during the past year, according to the Office for National Statistics. The chancellor announced on Wednesday that the government will make additional support available to this group through Jobcentre Plus and specialist providers, to ensure that the over-50s move back into work quickly.

However, this won't come in until 2011 - not much use for those over 50 who are unemployed now. The details of what this "additional support" entails will be worked on with key stakeholders over the next year, according to the Treasury. Given the scant detail, the announcement received only a lukewarm response.

"The additional support announced to help unemployed older workers is a sign that their plight has finally come to the government's attention," said Andrew Harrop, head of public policy at Age Concern and Help the Aged.

"Yet, this falls short of providing the guarantees needed for the increasing number of over-50s in long-term unemployment. The government needs to take more vigorous action if it wants to avoid creating a 'lost generation' of older workers shut out of the job market and forced into premature retirement."

The government also announced that from April 2011 people aged 65 and over will qualify for working tax credit if they work at least 16 hours a week, rather than 30 hours as currently.

"We welcome the increased eligibility for working tax credit for older people - the reduced hours threshold will help people work in ways that suit their situation, and maintains their financial stability," said David Harker, chief executive of Citizens Advice.

Scrap your boiler for cash

Building on the successful car scrappage scheme, which is due to end in February, the chancellor announced he would help up to 125,000 homes replace the most inefficient boilers with new models. He said each inefficient boiler adds more than £200 to household bills, and contributes one tonne of carbon to the atmosphere a year.

The details of how this scheme will work are still sketchy but it has been confirmed that households in England will be able to claim up to £400 if they replace an inefficient boiler (rated G or worse) with an A-rated energy-efficient one or other renewable technology.

Consultations are currently taking place with the boiler industry but - like the car scrappage scheme - it looks likely that claiming the incentive will be handled by the retailer. It will be launched at "the earliest opportunity" in 2010.

Meanwhile, npower has announced that it is launching a boiler replacement scheme tomorrow. Anyone with a boiler that is 10 years old - or close to it - will be able to replace it with an A-rated Vaillant boiler and get a £400 rebate.

For further information on npower's £400 offer, call 0800 0722 999.

Salary sacrifice: canteen perk has been ditched

The chancellor put an end to the free lunch enjoyed by some workers last week when he said he would close a scheme from 2011 that allows them to use "salary sacrifice" to buy canteen meals out of pre-tax income. The scheme works in a similar way to other forms of salary sacrifice - such as buying a bike through work or getting childcare vouchers - with employees agreeing to forgo a small slice of their gross monthly salary in return for a tax-free benefit.

The scheme is used largely by those in City firms but also by big companies such as Nestlé . The government will put the money it saves towards more free school meals for children.

"Use of these arrangements enables a minority of employees to buy canteen meals out of pre-tax income, giving them an additional tax and NICs advantage that other employees do not enjoy. The exemption will continue to apply for subsidised canteens that are available to all employees," the chancellor said.

However, Matthew Hall, head of tax at Wilkins Kennedy, said that although the tax clampdown might sound marginal, it would make canteen meals much less attractive to employees

"With a fall in demand, many companies will stop offering canteen food," he said. "Employees will lose both the tax break and the subsidies from their employer."

While canteen food might be on the way out, the increase in national insurance contributions make other salary sacrifice schemes more attractive, said Andrew Tully, senior pensions policy manager at Standard Life.

"Putting in place a salary or bonus sacrifice arrangement is likely to prove a popular option for many people," he said. "Sacrificing salary or bonus to reduce national insurance can be part of an effective tax planning strategy."

See our online coverage on the PBR for more on how it will affect you.

■ How do you feel about this year's pre-budget report? Did the chancellor do a good job with few resources or did he disappoint? What would you like to have seen? Email us at cash@observer.co.uk or write to us at Cash, The Observer, Kings Place, 90 York Way, London, N1 9GU.

Lisa Bachelor looks at who gains - and who loses - in what is seen as a disappointing pre-budget report from the chancellor

With little money to play with in a recession that chancellor, Alastair Darling admitted had hit the British economy harder than feared, last Wednesday's pre-budget report contained little in the way of glad tidings for anyone.

Pensioners received some good news with the confirmation of a 2.5% increase to the basic state next year (meaning a full basic state pension will be worth £97.65 a week. The full couple's rate for those whose entitlement is based on their spouse or civil partner's pension will increase to £156.15 a week) and an extension to the Warm Front scheme, which helps low income households make their homes more energy efficient.

Young people were also given a hand in the form of a promise of work or training for those under 24 who have been out of work for six months or longer. Higher earners were hit again with the announcement that not only will they pay more tax next year, they will receive less tax relief on contributions to an employer's pension scheme.

But perhaps the PBR was best summed up by Liberal Democrat Treasury spokesman Vince Cable.

"This is a good budget for bingo and boilers," he added, referring to the cut in bingo duty from 22% to 20% and a boiler scrappage scheme.

Here, we elaborate on some of the announcements that you might have missed but which might affect you while, below, our panel outlines the headline announcements.

Improving work opportunities for the over-50s

There are now 367,000 people aged 50 or over out of work, a rise of nearly 40% during the past year, according to the Office for National Statistics. The chancellor announced on Wednesday that the government will make additional support available to this group through Jobcentre Plus and specialist providers, to ensure that the over-50s move back into work quickly.

However, this won't come in until 2011 - not much use for those over 50 who are unemployed now. The details of what this "additional support" entails will be worked on with key stakeholders over the next year, according to the Treasury. Given the scant detail, the announcement received only a lukewarm response.

"The additional support announced to help unemployed older workers is a sign that their plight has finally come to the government's attention," said Andrew Harrop, head of public policy at Age Concern and Help the Aged.

"Yet, this falls short of providing the guarantees needed for the increasing number of over-50s in long-term unemployment. The government needs to take more vigorous action if it wants to avoid creating a 'lost generation' of older workers shut out of the job market and forced into premature retirement."

The government also announced that from April 2011 people aged 65 and over will qualify for working tax credit if they work at least 16 hours a week, rather than 30 hours as currently.

"We welcome the increased eligibility for working tax credit for older people - the reduced hours threshold will help people work in ways that suit their situation, and maintains their financial stability," said David Harker, chief executive of Citizens Advice.

Scrap your boiler for cash

Building on the successful car scrappage scheme, which is due to end in February, the chancellor announced he would help up to 125,000 homes replace the most inefficient boilers with new models. He said each inefficient boiler adds more than £200 to household bills, and contributes one tonne of carbon to the atmosphere a year.

The details of how this scheme will work are still sketchy but it has been confirmed that households in England will be able to claim up to £400 if they replace an inefficient boiler (rated G or worse) with an A-rated energy-efficient one or other renewable technology.

Consultations are currently taking place with the boiler industry but - like the car scrappage scheme - it looks likely that claiming the incentive will be handled by the retailer. It will be launched at "the earliest opportunity" in 2010.

Meanwhile, npower has announced that it is launching a boiler replacement scheme tomorrow. Anyone with a boiler that is 10 years old - or close to it - will be able to replace it with an A-rated Vaillant boiler and get a £400 rebate.

For further information on npower's £400 offer, call 0800 0722 999.

Salary sacrifice: canteen perk has been ditched

The chancellor put an end to the free lunch enjoyed by some workers last week when he said he would close a scheme from 2011 that allows them to use "salary sacrifice" to buy canteen meals out of pre-tax income. The scheme works in a similar way to other forms of salary sacrifice - such as buying a bike through work or getting childcare vouchers - with employees agreeing to forgo a small slice of their gross monthly salary in return for a tax-free benefit.

The scheme is used largely by those in City firms but also by big companies such as Nestlé . The government will put the money it saves towards more free school meals for children.

"Use of these arrangements enables a minority of employees to buy canteen meals out of pre-tax income, giving them an additional tax and NICs advantage that other employees do not enjoy. The exemption will continue to apply for subsidised canteens that are available to all employees," the chancellor said.

However, Matthew Hall, head of tax at Wilkins Kennedy, said that although the tax clampdown might sound marginal, it would make canteen meals much less attractive to employees

"With a fall in demand, many companies will stop offering canteen food," he said. "Employees will lose both the tax break and the subsidies from their employer."

While canteen food might be on the way out, the increase in national insurance contributions make other salary sacrifice schemes more attractive, said Andrew Tully, senior pensions policy manager at Standard Life.

"Putting in place a salary or bonus sacrifice arrangement is likely to prove a popular option for many people," he said. "Sacrificing salary or bonus to reduce national insurance can be part of an effective tax planning strategy."

See our online coverage on the PBR for more on how it will affect you.

■ How do you feel about this year's pre-budget report? Did the chancellor do a good job with few resources or did he disappoint? What would you like to have seen? Email us at cash@observer.co.uk or write to us at Cash, The Observer, Kings Place, 90 York Way, London, N1 9GU.

Your headline (Union warning over wages squeeze as payback begins, 10 December) rather raises the question, payback for what? New Labour has been absolutely craven to the business world – its puffed-up claims, its assumed celebrity, and, of course, its idle threats. Further, they have swallowed every hyperbolic, management-school-driven claim regarding the superiority of the private sector, while the rich (filthy and otherwise), with whom New Labour have been perfectly comfortable of course, have spotted an open door and kicked it off its hinges.

As a key part of this trickle-up strategy, most public-sector workers have been subject to a relentless material and ideological attack – the long-term, drip-drip recasting of "bureaucracy" as a pejorative term, and the expunging from our language of any idea of "public service" (we have financial services, mind!) has laid the ground for the assault on public-sector pay and pensions as a means of underwriting corporate welfare on an unprecedented scale. Since the rich have fiddled, literally, the public will get burnt.

Steve Tombs

Professor of sociology, John Moores University

• Cuts of 15% or more to "other" council-run services will not work. Cuts in some areas will simply add costs in others.

Turning off street lights will result in more burglaries and antisocial behaviour (ASB). Closing pools, sports centres, parks and youth facilities will result in more ASB, petty crime and health problems. Cutting road and pavement repairs will result in more claims against highways authorities – and injuries for the NHS to treat.

Failing to deal with litter, graffiti and petty crime will result in a growing tide of decay in towns and communities and the consequent effects on mental health. Cutting bus services will lead to increasing social isolation and health problems. And so on until the resources are put back.

But it will not be practical for other reasons. A year or two of slashing and burning community services in this way will lead to a massive wave of protest after protest, and catastrophic election results for whichever party is in power at national and local level.

The consequences of the cuts for local communities will be dire. But the consequences for the politicians imposing these cuts will be worse. So they won't last, though the costs of dealing with the consequences may end up costing more than the money saved in the short run.

Cllr Tony Greaves

Liberal Democrat, Pendle borough council and House of Lords

• The chancellor says "public pensions need to be broadly in line with those offered by the private sector" (Teachers, nurses and civil servants face much higher price of retirement, 10 December).

If Darling wants working-class voters to turn out for Labour, a better approach to implementing this principle would be to legislate for and encourage decent occupational pensions in the private sector – perhaps by extending the admitted-body status already offered to some private employers in the (funded) local government pension scheme.

This would lead to long-term savings in means-tested benefits for future pensioners as well as combating poverty in old age. In the long term, proper pension provision will be economically efficient as well as socially just.

Jon Rogers

Unison NEC member

• An ineffectual one-off windfall tax on bankers' bonuses is all very well and good, but the small print of the pre-budget report shifts most of the fiscal burden on to the rest of society. Those who made a killing before the financial bubble burst will in many cases have enough assets stashed away to live on the profits generated by their dividends, leaving their capital largely untouched.

Rather than raising national insurance, we should consider introducing an annual wealth tax on a modest sliding scale like the French. This would include the value of property, including one's primary residence, so a mansion tax could be rolled into it. Furthermore, assets including companies and shares held by family trusts based in tax havens should be taxed at a double rate to encourage the swift repatriation of their ownership by non-domiciled British tax scroungers.

Such a move would herald a significant shift in the tax burden from those with below average incomes to the wealthy who can well afford to pay.

David Nowell 

New Barnet, Hertfordshire

• Alistair Darling has stated that public-sector pay awards must be held at 1% for two years from 2011. Given that RBS is now more than 70% publicly owned, does this qualify their managers and staff as members of the public sector and are they to be subject to the same limits?

Dan Tanzey

Thornton Cleveleys, Lancashire

• I looked in vain in your coverage of Alastair Darling's report for a statement that MPs would be subject to the "cap" on public-sector pensions.

Charlie Withall

Sheffield

• Who are the examples in your article (What it means for you, Pre-budget report, 10 December) supposed to represent? Of the 20 fictional case studies, 12 were salaried. Of these 11 were earning over the minimum wage with five over £100,000. That left only one earning less than the average wage quoted in your front-page article (Darling soaks the rich … and the rest of us too, 10 December) as being £25,000. This strikes me as a rather strange representation of today's society and perhaps more representative of Guardian employees than its readers. I failed to find what it meant for me or other members of my family.

Jane Towers

Chidham, West Sussex

• Cuts, cuts, cuts – we must be in the last chance salon.

Simon Charterton

London

Where analysts say spending will be cut or clawed back

Afghanistan

Earlier this year, the government warned spending on public services would need to fall by 2.9% a year from 2011 to 2014 to bring down the deficit. Alistair Darling said this week there would need to be a much more severe 3.2% reduction. What he failed to mention was that a bigger than expected bill for the Afghan war accounts for almost all the extra cuts needed, the Institute for Fiscal Studies (IFS) said.

Benefits

A 1.5% rise next year in areas such as carers' allowance and child benefit was hailed by the government as a measure that protected vulnerable groups and families from inflation. But according to the IFS this move, which will cost £700m, will be clawed back in 2011 when benefits will increase by inflation minus 1.5%.

Tax credits

In the last year more than 440,000 families who benefit from tax credits received an extra £37 a week on average to compensate them for cuts in hours, wages or both. The Treasury said it showed how tax credits supported people on low pay in a downturn. However, Citizens Advice said that it believed more than a million families on low incomes were still paying back money to HM Revenue & Customs following overpayments dating back to 2003.

Public sector pensions

Plans to cap government spending on public sector pensions were questioned by pension industry experts who said it would, at most, restrict costs to the taxpayer. A claim by the Treasury that a dose of private-sector reality would mean a shift to workers paying more for their pensions was dismissed as fanciful. Workers will pay for any increases in life expectancy with extra contributions, but a link to falling investment returns, which have wrecked private sector schemes, is absent. Savings of £1bn were speculation based on revaluations of scheme liabilities over the next few years, said pension advisers Watson Wyatt.

Phillip Inman