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Business accounts for 40 per cent. of emissions: our objective is that we have not only the most economically competitive but environmentally sustainable companies too. Since 1997, business and Government together have achieved a 25 per cent. reduction in the carbon intensity of the economy. To
complement the new environmental tax credit that I have just announced, the advice, support and incentives available from Business Link and our regional development agencies to small businesses for environmental improvement, innovation and energy audits of their work will rise from £140 million this year to £240 million in the coming year.
To encourage recycling and to reduce landfill, the landfill tax will, from April next year, rise by £8 each year to 2011. To reduce the environmental impact of quarrying, the aggregates levy, which has been frozen since its introduction, will rise in April 2008 from £1.60 to £1.95 per tonne. Those measures, our membership of the European emissions trading scheme and the inflation increase that I propose from next April in the climate change levy, will together each year contribute 16 million tonnes of carbon reductions.
As recommended by the Barker report and today by the Lyons report, and in line with representations from the Federation of Small Businesses, commercial property lying empty should not continue to be given such generous business rate relief, particularly because that leads to higher rents in the areas with highest demand. To encourage the better use of commercial premises, I will restrict the relief available for empty industrial properties to six months, and for empty offices and retail to three months. There will be special exemptions for charities.
Transport accounts for a quarter of emissions: our objective for Britain is the lowest carbon cars using the least polluting fuels. Average new car emissions are around 167 g of carbon dioxide. A medium-term objective is 100 g per kilometre. We want Britain to lead in developing the next generation of low and no-carbon vehicles and fuels. The Secretary of State for Transport and I have invited Sir Nicholas Stern and the vice-chancellor of Aston university, Professor King, to report to us on the energy saving potential of innovation in this area.
Renewable transport fuel obligations mean that biofuels will, by 2010, account for 5 per cent. of all fuel in road vehicles, and by 2020 potentially 10 per cent. So I am extending to 2010 the biofuels duty differential worth 20p per litrea fuel duty discount of 40 per cent. I am also extending to 2012 the biogas incentive, worth 40p per litrea discount of more than 60 per cent. For this year I will maintain the differential for rebated oils. I can also announce that we will triple our funding for targeted enforcement against unfair competition from haulier companies from outside the United Kingdom.
We inherited a one-band system of vehicle excise duty in 1997. Britain now has environmentally graduated bands. That is one reason why the proportion of least polluting cars on our roads has risen by 30 per cent., while that of the most polluting cars has fallen. So there are potential gains from enhancing the incentive. In addition to maintaining a zero rate for the lowest band, aligning petrol and diesel rates at the diesel rate and raising the rates by £5 each year for the next three years, and for band F by £10 this year, I propose an immediate 30 per cent. cut in band B from a top rate of £50 down to £35 for the most fuel-efficient cars. That will be matched by moving the top band 30 per cent. higher to £300, and then again to £400 next year. Taken together, those measures will cut
vehicle emissions since 1997 by 2 million tonnes. For the coming year I will set fuel duty rises at 2p a litre, for 2008 at 2p, and for 2009 at 1.8p, but I will defer this year's annual fuel duty increase by six months to October.
I have had representations to put VAT on airline ticketsa 17Â1/2 per cent. rise in the cost of airline travel. I have investigated the detail of that proposal. It gives me no pleasure to have to tell the House that the substance of the measure has not been properly thought through. It would apply only to domestic flights, business would be able to claim back the VAT, and even by 2020 it would save just 50,000 tonnesfewer savings in one year than achieved by the climate change levy in just one week. So I have rejected the proposal in favour of the 6 million tonnes of carbon saving achieved by the fairer and more environmentally efficient measures that I am outlining in the Budget today.
I propose only the normal indexation of alcohol duties, with one exception. From midnight on Sunday, beer will rise by 1p a pint, cider by 1p a litre, wine by 5p a bottle and sparkling wine by 7p, but for the 10th Budget in a row I will freeze duty on spirits. While I will go ahead from 6pm tonight with the annual inflation rise on a packet of 20 cigarettesof 11pI want us to do more to support the health advice campaign initiated by my right hon. Friend the Secretary of State for Health, with a new incentive to encourage people wishing to give up smoking. For a year from 1 July, for nicotine replacement and other products that help smokers to quit I am cutting VAT to the lowest I can, from 17Â1/2 per cent. to 5 per cent. I propose to align the bottom two rates of gaming duty at 15 per cent., and for the largest casinos to set a 50p rate.
Our culture of volunteering and giving defines Britain as a fair and compassionate society. To help small local community organisations, my hon. Friend the Member for Doncaster, North (Edward Miliband), the Parliamentary Secretary, Cabinet Office and Minister for the third sector, is announcing for the years to 2011 a new fund for local communities worth £80 million. Hundreds of millions of pounds worth of giving is eligible for tax relief through gift aid, but is not currently claimed. My right hon. Friend the Chancellor of the Duchy of Lancaster and I will consult the charitable sector on measures that we will fund to increase take-up of gift aid, and in the run-up to the spending review my right hon. Friend the Secretary of State for Culture, Media and Sport and I will examine the help we can give the churches and heritage buildings that are at the heart of so many of our communities.
I turn to the tax incentives with which we propose to help more people into jobs, and to make work pay. More than 1Â1/2 million low-income workers in Britain receive the working tax credit, worth to them on average £48 a week. In making work pay, we ensure that people on low incomes get more benefit from the working tax credit than either the minimum wage or any other tax measure, whether it be the 10p rate or personal allowances.
If I invested a billion pounds in helping low-income workers by raising personal allowances, they would be only 68p a week better off. If I used the same money to lower the 10p rate, they would be just 67p a week better
off. But the use of the same money to extend the working tax credit means that they are £7.10 a week£370 a yearbetter off. That is a clear incentive to take jobs, to gain skills, and to work your way up from a lower-paid to a better-paid job.
This Budget will invest over £1 billion a year in raising the value of the working tax credit, so thatbuilding on the minimum wage of £5.52 from Octoberfor the parent in full-time work with one child it will rise to £7.70 per hour. Because of the working tax credit, that is £290 for a 35-hour week.
Since 1997, lone-parent employment has risen from under 45 per cent. to over 56 per cent., and 300,000 more lone parents are now in work. In addition to helping them by increasing the working tax credit, I will extend the £40 a week in-work bonus paid for their first 12 months in work. In London the bonus will be extended to £60, and for up to 50,000 workless parents undertaking training we will extend access to free child care.
With this additional support to make work pay and our new conditionality, announced by my right hon. Friend the Secretary of State for Work and Pensions a few days ago, and building on the successful employment partnerships in the new deal, we are now able to announce a partnership for jobs with our major retail companiesTesco, Sainsbury's, Asda, B&Q and Marks and Spencerand the British Retail Consortium: an agreement that in every part of the country, unemployed men and women who successfully pass work trials or induction courses will be considered for jobs by those leading firms. It is a new and innovative partnership that will, across the sector over the coming five years, help create 5,000 jobs in Wales and 10,000 in Scotland. In total, for Britain it will help 100,000 men and women to find employment in our country.
Since 1997, the number of 16-to-24-year-olds in full-time education, employment or training has increased from 5.2 million to 5.8 million. For those who have fallen through the net, over the next spending period we will do more. We are setting aside new funds today, so that 50,000 out-of-work 16-to-17-year-olds who sign activity and learning agreements will now receive a training wage in return for gaining skills. For small companies that take on an employee needing to acquire the most basic skills, we will also offer £2,000 training help per employee, and in some cases £3,000 for training.
There are 125,000 employees who, through no fault of their own, lost their work pension when their employer became insolvent,. My right hon. Friend the Secretary of State for Work and Pensions is announcing that he will extend the financial assistance scheme from its present budget of £2 billion to a total of £8 billion. Every one of those 125,000 workers will now receive help. Reporting later this year, my right hon. Friend will also investigate in full the assets within the affected schemes, and how those funds can also now help those who have lost their pensions.
In meeting our objectives to support families and children, I have also received representations for the return of the married couples allowance, and for a transferable tax allowance between husbands and wives with children under five. On closer inspection, I have discovered that such a proposal would penalise
3 million widows and their children who would be denied the allowance, and would also penalise wives or husbands who had been left by their spouses. I have also discovered that the transferable tax allowance earmarked for families with children under five would be available to just under 1 million married couples. I can tell the House that, far from rewarding marriage, it would exclude the vast majority of the 11 million married couples in this country, and 11 million children would be excluded and left out of this help.
Marriage is not supported by penalising most married couples and 11 million children. It is right to recognise marriage in the tax system, but in ways that do not penalise children through the arrangements that we make for assets to be transferred free of tax between husband and wife in inheritance tax and capital gains tax. I can announce that the annual tax exemption for capital gains will rise from £8,800 to £9,200, and will be £18,400 for married couples. I can announce that the inheritance tax allowance, which is £285,000 today, will rise in each year and will in 2010 be increased to £350,000, ensuring that 94 per cent. of estates do not pay inheritance tax.
I am also today making changes in VAT, which will especially help grandmothers and grandfathers living with their sons and daughters. I can announce that for a specified list of alterations to housing, to support the needs of older people I will again reduce the rate of VAT, from 17.5 per cent. to 5 per cent.
For many families, especially young couples, the major concern is affordable homes. To further our ambition for this Parliament and the last one of 2 million new owner-occupiers, the Secretary of State for Communities and Local Government is launching the first stage of a new shared equity competition that will bring homes within the reach of first-time buyers.
I also want to send a signal about the importance we attach to encouraging savings, so while maintaining our savings rate at 10p, I will extend for the 17 million men and women with ISAsindividual savings accountsthe amount of cash that can be saved tax-free from £3,000, raising it by 20 per cent. in April next year to £3,600.
After independent taxation was introduced by the previous Government on income, there has been general agreement that the best way to help the income of families with children is to raise child benefits and to help all children. For the first child of all parents, child benefit was £11 a week in 1997. This year it is £17.45. I can announce today that we will raise child benefit annually for the first child in three successive stages to 2010raising child benefit by a total of 15 per cent. to £20 for the first child. So child benefit, which was £575 a year in 1997, will by 2010 be more than £1,000. For 6 million families on both child benefit and child tax creditthat is the vast majority of familiesthe minimum payment, which was just £11 in 1997, will rise to £31; that is a rise from £575 a year to £1,600 a year.
I can also do more to help those who need it most. Help for the poorest children, which in 1997 was £28 a week and is today £61, will now rise in three successive stages by more than 25 per cent. to £75 a week, almost three times the 1997 level. That measure will, with others, lift out of poverty 200,000 more children. With
childrens credits offsetting income tax liabilities, the effective point at which a family with two children starts paying income tax, which was £16,000 in 1997 and which is £22,500 now, will be £24,250 in April 2009tax credits therefore effectively wiping out income tax liability until earnings of £450 a week.
We will match financial support for children with more help for parents to do the best by their children. I have set aside today funds for expanding ChildLine, Parentline Plus and the services parents and children use and rely on. We now know the importance of early-years learning in developing the talents of children and the significance of investment early to determine the qualifications and success that they have later. So the Secretary of State for Education and Skills and I have today made available the funds for each of the years to 2010 to honour our promise that there will be six childrens centres in the typical constituency, and 3,500 childrens centres in total. We have also set aside funds for the years to 2010 so that we can expand the numbers of hours of free nursery education, meeting our promise to raise nursery hours for every three and four-year-old from 12Â1/2 hours to 15 hours a week. Also, to encourage the community use of schools sports facilities we will remove the VAT restriction and enable academies to make their sports facilities available to their local communities.
I am also able today to take several hundred thousand of todays pensioners out of income tax. When we came to power, elderly citizens started to pay income tax when their income exceeded £5,200. Today, no tax is paid before an income of £7,280. For those under 75, the tax-free allowance will rise in three stages from £7,280 to £8,990 to £9,500 and then to £9,770 in 2011a tax-free allowance of almost twice as much as in 1997. For those over 75, the tax-free allowance will rise annually from £7,400 to, by 2011, £10,000. Couples under 75 will have a tax-free married allowance up to £19,540, and for a couple over 75 up to £20,000. Measures in this Budget mean that we will lift out of income tax a total of 600,000 pensioners in this country. For elderly people with either no works pension or small works pensions, I can confirm we will raise the pension credit guarantee from £114 a week this year to £119, rising to £130 in 2009-10. The pension credit will be raised by earnings as we move towards our commitment to link the state pension to earnings.
I have focused support on families by raising child benefits and child tax credits and taken 200,000 more children out of poverty. I have done more to support pensioners by raising the level of tax-free allowances. I have improved work incentives for lower income families with children by raising the minimum income from work to make work payto, for many, almost £300 for a 35-hour week. My aim in all measures today is a fair system for pensioners and families with children.
Having put in place more focused ways of incentivising work and directly supporting children and pensioners at a cost of £3 billion a year, I can now return income tax to just two rates by removing the 10p band on non-savings income. I can also announce that the point at which people start paying top rate income tax will from April 2009 be an annual income not of £38,000, but of £43,000; and I will align the income tax
system with the national insurance system, with its ceiling set at the same threshold of £43,000, thereby creating a tax system for income that has just two rates and two thresholds. As a result of todays measures, 58 per cent. of pensioners over 65 will not pay income tax; 6 million out of 7 million families with children are better off; and the incentive to work is increased by, for many, up to £350 a year.
With the decisions that I have made today, I am also able to announce that we will invest more in our schools and education. Separate announcements will be made later for Scotland, Wales and Northern Ireland. Education spending in England, which was £29 billion in 1997 and is £60 billion this year, will be £64 billion next year, rise to £67 billion and then £70 billion, and then rise in 2010 to £74 billion. There will be average rises of 5 per cent. cash each year for the next three years, enabling us to provide one-to-one tuition for 600,000 children, do more to double apprenticeship numbers to 500,000, increase higher education student numbers to 1.2 million, and make every school an extended community school. Also, cash-spending per pupil, which was £2,500 in 1997, will from now to 2010 rise by a further 20 per cent.10 per cent. in real termsto £6,600 per pupil, thereby continuing to narrow the gap in investment per pupil between state and private schools. Education spending will rise as a share of national income from the 4.5 per cent. that we inherited in 1997 to 5.6 per cent. in 2010. Also, as the Secretary of State for Education and Skills will set out, by changing the education leaving age we will for the first time in our countrys history make education a right for every young person until the age of 18.
I have taken 600,000 pensioners out of tax, raised child benefit in three stages to £20, cut corporation tax
from 30p to 28p and increased education spending to the highest level ever. This is a Budget for Britains families; it is a Budget for fairness; it is a Budget for the future; and I have one further announcement. With the other decisions I have made today, we are able to hold to our pledge made at the election not to raise the basic rate of income tax. Indeed, to reward work, to ensure working families are better off and to make the tax system fairer, I will from next April cut the basic rate of income tax from 22p to 20p, the lowest basic rate for 75 years. I commend this Budget to the House.
That pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:
(a) Rates of duty on alcoholic liquor (motion No. 6)
(b) Rates of tobacco products duty (motion No. 7)
(c) Amusement machine licence duty (motion No. 10)
(d) Rates of vehicle excise duty (motion No. 12)
(e) Landfill tax (bodies concerned with the environment) (motion No. 20)
(f) Insurance premium tax (meaning of premium) (motion No. 56) [Mr. Gordon Brown.]
Mr. Deputy Speaker (Sir Alan Haselhurst): I now call on the Chancellor of the Exchequer to move the motion entitled Amendment of the law. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will be taken at the end of the Budget debate, next week
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that
(i) so far as it is applicable to goods, applies to goods of every description, and
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