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The world economy is experiencing its strongest period of growth for more than 30 years. Growth of the UK economy since Budget 2006 has surpassed expectations. This has been driven by further growth in UK business investment, as well as a recovery in the growth of the major European and Asian economies to which the UK exports. The Government’s economic reforms have continued to help the UK to maintain macroeconomic stability throughout this period. The Pre-Budget Report shows that:

• the economy is expected to grow by 2¾ per cent in 2006, and 2¾ to 3¼ per cent in 2007;
  

• inflation is set to remain low and stable; and
  

• the public finances remain sound and the Government is meeting its fiscal rules. Borrowing is forecast to be £37 billion in 2006-07 and is set to fall further, and debt is lower than the US, Japan, Italy, France and Germany.

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