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In 1997, child benefit for the first child was just £11 a week. I can tell the House that, from April 2009, I will increase child benefit for the first child to £20 a week—a year earlier than planned. I will increase by £50 a year above inflation the child element of the child tax credit for families on low and middle income from April next year. That means that a family with two children earning up to £28,000 a year will be over
£130 a year better off. To make further progress, we will spend a further £125 million over the next three years targeting help on those who need it most and where the challenges are the hardest, developing new approaches that help families in the long term. Taken together, these measures mean that even at a time when we need to take difficult decisions we are investing a further £765 million next year and then a further £950 million the following year to take 250,000 more children out of poverty.
Today I am publishing analysis on what further steps we intend to take to eradicate child poverty, and I believe that further action is also now needed to help vulnerable groups deal with rising energy prices. We want to see the 5 million customers on prepayment meters given a fairer deal and energy companies increase their support to vulnerable customers. We will work with the companies to take forward further action on a voluntary and on a statutory basis to underpin this as necessary and we will legislate when it is necessary to do so. Energy companies currently spend around £50 million a year on social tariffs. I want to see this rising to at least £150 million a year in the period ahead.
We are committed to helping people who need the help most. We are also committed to encouraging more people to save. There are now over 17 million people with individual savings accounts and, from this April, we are increasing the annual individual savings account investment limit to £7,200, while the amount that can be held in cash will rise to £3,600. Parents have now opened over 2.4 million child trust fund accounts, saving more for their children’s future.
But we can go further. So I can also announce that the Government will launch the savings gateway nationally with the first accounts available from 2010. By contributing to these accounts, we will offer incentives to save to up to 8 million more people on low incomes. Ending child poverty, encouraging saving, raising ambition and providing greater opportunity—that is the objective of this Budget.
For business, my Budget provides continuing stability and certainty and introduces new opportunities for entrepreneurs and also maintains the three critical factors contributing to the strength of the UK’s business environment, ensuring that we remain one of the best places in the world to do business. We will continue to promote open and competitive markets, by removing barriers to trade across the world through bilateral and multilateral trade negotiations, including the conclusion of the Doha development agenda.
Our goal is, and will continue to be, to maintain the most competitive corporation tax rate of any major economy. We already have the lowest corporation tax rate in the G7 and a competitive and simplified tax regime is essential, which is why we cut the main rate of corporation tax in 1997 and again in 1999. And from next month the main corporation tax rate falls again from 38 per cent. to 28 per cent.
The UK is one of the best places in the world to do business. We remain committed to consultation with business to maintain a stable business tax regime that remains responsive to business needs and is internationally competitive. Underlining our commitment to maximising
the economic recovery of the UK’s oil and gas reserves, I can also confirm reforms to the North sea oil fiscal regime to help incentivise investment and support production.
But today, I want to do more to support small and medium enterprises, now and in the longer term. Thirteen million people work in those enterprises and there are over 750,000 more small and medium firms than there were in 1997. The new capital gains tax regime will come in next month including the entrepreneurs relief that I announced in January. That will benefit over 80,000 businesses and investors in the next year alone: 90 per cent. of them will continue to pay capital gains tax at 10 per cent., one of the lowest rates in the world. This Budget continues a programme of tax simplification. I am today announcing further steps to help small companies simplify their tax calculations.
Especially at this time, we need to do more to help small and medium enterprises to get access to the finance that they need. To help them in the current conditions, I can therefore announce that funds available through the small firms loan guarantee scheme will be increased by £60 million for the coming year. I am from next month extending the scheme to all small and medium firms. I am also increasing the amount of investment on which tax relief is available under the enterprise investment scheme from £400,000 to £500,000 and the employee share limit for tax relief under the enterprise management incentive scheme will increase from £100,000 to £120,000. The Secretary of State for Business, Enterprise and Regulatory Reform will consult with radical new proposals to impose a limit on the amount of regulation that can be imposed by Whitehall Departments. I will also provide a capital fund of initially £12.5 million specifically to encourage more women entrepreneurs.
There is also more I can do to ensure that small and medium firms win more business from the public sector, so we will take immediate steps to give firms better access to Government contracts and help them with their cash flow. I am asking Anne Glover, the chief executive of Amadeus Capital Partners, to look into what other barriers we can remove and the practicality of also setting a goal for small and medium enterprises to win 30 per cent. of all public sector business in the next five years. I believe that that could help promote enterprise in one of our most innovative and dynamic areas of the economy. I also believe that we can help support them grow their businesses, which will create new jobs and opportunities.
We welcome the contribution made by people born outside the UK who choose to come and work here. They are an important and central contributor to our economy’s growth and prosperity. They pay their taxes on their earnings here; they also pay tax on the money they bring into this country from abroad. But for those non-domiciled individuals or families who have chosen to make Britain their home, I believe that it is right and fair that they should, after seven years, pay a reasonable charge to maintain the right to be taxed differently from other UK residents. Beyond that, as I have said before, we will not seek to charge UK tax on offshore income or capital gains that are not brought into the UK. This new charge will be implemented from April. There will be no further changes to this regime for the rest of this Parliament or the next. [Interruption.]
Last October, I said that I would also consider a scheme that claimed to raise an additional £2.8 billion from people who are non-domiciled. On closer examination, it was clear that the sums that did not add up—not for the first time, given the source from which that representation came—and I rejected it. We will continue, though, to be vigilant against tax avoidance, and we are publishing today further measures to ensure fairness for all taxpayers.
If we are to compete in the future, it is essential to do even more to drive up standards in education and improve skills. Increased spending on education has benefited children right across the United Kingdom. We have cut the number of underperforming schools dramatically in the last decade and building on last year’s spending review will raise standards even further to create greater opportunities for children.
So the Secretary of State for Children, Schools and Families will be investing £200 million to bring forward by a year to 2011 the Government’s aim for no schools to have fewer than 30 per cent. of its pupils achieving five A* to C GCSEs, including English and maths. We will also extend the successful London Challenge model to enable the best head teachers to turn round low-performing schools, to create new trusts and federations around successful schools and, in areas of greatest need, to drive forward a faster expansion of our academies programme. As a result, by 2011, we will ensure that every school is an improving school meeting the standards that we have set.
I can announce today that we will commit £10 million over the next five years, which, alongside contributions from the Wellcome Trust and private sector, will create a £30 million Enthuse Science fund. That will give every science teacher in secondary and further education access to high-quality professional development, helping to improve the science on offer in today’s schools.
To improve skills, the spending review last year increased the amount of money for adult training. Extra funding will enable nearly 3 million adults to gain new, high-level skills by 2011. Today I can also announce an extra £60 million over the next three years to provide new opportunities for people to gain the skills they need to enter the labour market, to remain in and progress through work. That includes additional apprenticeships with leading employers to help tackle skills gaps and shortages.
By 2010, we will be spending over £6 billion a year supporting British science and innovation. Tomorrow, the Secretary of State for Innovation, Universities and Skills will publish the science and innovation White paper, which will include proposals for a further education innovation fund to help support businesses to develop their innovative potential.
If we are to compete in the future, not only do we have to have the best business environment and higher skills levels, but we also need good transport links to make up for decades of under-investment. In the last 10 years, we have doubled the amount of money that we spend on transport—£7 billion on the west coast main line to cut journey times—and public transport usage is at a 25-year high.
Last November, following the Government’s investment of £6 billion, we saw the completion of the channel tunnel rail link and the opening of the St. Pancras
international station. This week, terminal 5 opens at Heathrow. Today, I can announce new measures at Heathrow and other airports to ensure greater use of biometric technology to speed up the time that it takes passengers to get through immigration control. Government funding for Crossrail is now secure and that will support economic growth not just in London but in the whole of the United Kingdom by adding an estimated £20 billion to national income. That will help London retain its position as the world’s pre-eminent international financial centre.
We are spending more on public transport, and we also need to spend more to reduce congestion and improve transport links. If we are to remain competitive over the next 20 to 30 years, we need to take more radical steps to reduce congestion on our roads. We do need more capacity on the roads, but we cannot build our way out of all the problems we face.
Last week, the Secretary of State for Transport announced further measures to ease congestion. In addition, she has made available funding to develop local schemes to tackle congestion in the short term. In the longer term, though, road pricing could reduce congestion in the future, as well as helping to meet our wider environmental obligations, so I am setting aside new funding to develop national road pricing, inviting tenders to test road-pricing technology, with the results expected next year.
Just as we need good transport links, we also need to make sure that we have more housing to meet the rising demand for homes as well as to support our growing economy. Since 1997, as a result of historically low mortgage rates, we have seen 1.5 million more home owners. Already, we have helped 95,000 families into new homes through shared ownership and shared equity schemes. We will now spend £8 billion more on new, affordable and social housing over the next three years. That will enable the Housing Corporation to develop 70,000 new affordable homes each year over the next three years.
But I want to go further. From this April, key workers, such as teachers and nurses, and first-time buyers will be able to borrow money from new shared equity schemes. Up until now, those were available only to people who could afford three quarters of the price of their new home. I am now extending the scheme to help those able to afford half the price of their new home. I can also announce that, from today, stamp duty on shared ownership homes will not be required until buyers own 80 per cent. of the equity in their home.
It is precisely at this time that we need to do more to promote longer-term stability for home owners and mortgage holders. Already, the reforms we have introduced have created much greater stability with consistently low mortgage rates for home owners. However, the uncertainty in the financial markets is having an impact on mortgage lenders here in the UK, so I want to take measures that will keep mortgage rates low and stable.
In 2006, 30 per cent. of mortgages agreed in the UK—£100 billion of lending—were funded through secondary funding markets. Current conditions in these mortgage markets are extremely difficult because of the financial turbulence in global markets. In some countries, those markets are closed. It is, however, imperative that lenders have access to stable and
low-cost funding so that mortgage rates can come down as soon as possible. We want to bring together investors and lenders with the Treasury, the Bank and the Financial Services Authority to find market-led solutions to strengthen these funding markets further.
I also want more people to have the choice of a long-term fixed mortgage. These protect borrowers from risks and allow them the flexibility to move and to get a new mortgage if rates go down. Today, however, most people in the UK have short-term fixed-rate mortgages for two or three years, leaving them exposed to interest rate rises when their mortgage deal ends. That is not the case in other countries—Denmark, for example—where the majority of home owners take out long-term fixed-rate mortgages. I want to see more flexible and affordable long-term fixed-rate mortgages for 10, 20 or 25 years.
I am today publishing the findings of a review of housing finance in the UK. The conclusions show that long-term fixed-rate mortgages can reduce some of the risks of taking out a mortgage, especially for first-time buyers and lower-income families, and this will help more people get on to and stay on the housing ladder. So I want to seek views on how we can deliver—drawing on international experience—the right framework for the UK to achieve long-term fixed-rate mortgages, and I will report back in the pre-Budget report.
The best way to improve long-term affordability and stability is to build more houses, which is why we are committed to building more homes by 2020. So I can announce that in addition to the 40,000 already under construction, we have, through the review of public sector land, identified sites for 70,000 more houses.
We are determined to take decisions now for the long-term future of our country, helping to improve affordability, supporting long-term stability for home owners, and meeting the needs of future generations, and our greatest obligation to the future must be to tackle climate change. Britain has been at the forefront of international action. We are one of the few countries to meet our Kyoto target. We are working with other countries following agreement in Bali last year to agree tougher global goals after 2012, and the UK will use our £800 million environment fund to work with the United States, Japan and other countries, as well as the World Bank, to fund clean technologies in developing countries and adaptation to climate change.
We are already the leading financial centre for carbon markets, and we are also working with California and other American states to build these markets and strengthen partnerships. We need to do more and we need to do it now, though. Few doubt the science. The need to take action is urgent; the effects if we do not will be catastrophic.
Recognising this threat, we are the first Government anywhere in the world to introduce legal targets compelling us to take action to cut carbon emissions. We have established a target to reduce emissions by at least 60 per cent. by 2050, but I believe that we should go further. That is why we have asked the committee on climate change to advise us on whether, as part of an international commitment, we should raise our target not to 60 per cent. but to 80 per cent. And if we are serious about reaching demanding targets, every
Government, every Department in Government, every single public sector body, every business, every one of us needs to play our part. To ensure that carbon reduction is a central part of our economic objectives, I can tell the House that the first carbon budgets to 2022 will be announced alongside the Budget next year.
Long-term growth must be sustainable. There are huge opportunities there too for businesses, and there could be over a million jobs in our environmental industries within the next two decades. Meeting these long-term challenges will require us to make substantial reductions in emissions across the economy, in energy supply, in transport and in our business and our homes. But I believe there are three key steps that we can take now.
First, working within Europe we have helped to build the emissions trading scheme to curb the amount of carbon produced by generators and large industrial users. The scheme imposes a cap on the amount of carbon that companies can generate. Companies get allocations for credits to help them to adapt. But if we want to encourage investment in low-carbon technology, in energy renewables and in nuclear, for example, and if we want to make the industry more carbon-efficient, we need to go further. So in the next phase, instead of auctioning of just 7 per cent., I want to see auctioning of 100 per cent. of these allowances for electricity generators. Last year’s energy White Paper committed us to increasing the supply of renewable energy, and the Energy Bill now going through Parliament will allow us to triple renewable energy by 2015. We will consult on how to meet our share of the European Union target in the summer.
Secondly, we need to do more to reduce the amount of carbon generated at home and at work. Given the damage that single-use carrier bags inflict on the environment, we want to be able to take action now, so we will introduce legislation to impose a charge on them if we have not seen sufficient progress on a voluntary basis. Legislation will come in in 2009, and on the basis of other countries’ experience it could lead to a 90 per cent. reduction, with around 12 billion fewer plastic bags in circulation. The money raised should go to environmental charities.
Next month we will launch the most ambitious household emissions reduction programme. Energy companies are obliged through the carbon emissions reduction target to give their customers better deals for energy efficiency and therefore cut bills. This means cavity wall insulation for nearly 3 million homes, loft insulation and more energy-efficient appliances. I can announce funding of £26 million next year for a Green Homes service to help people cut their carbon emissions and their fuel bills. We will also extend the use of smart meters to medium and large companies over the next five years to provide them with greater incentives to reduce the amount of energy that they consume.
We already have a target to make new homes zero-carbon from 2016. I believe that we need to go further, and I can announce today that new non-domestic buildings will become zero-carbon by 2019. We will consult on achieving that target, with the potential to achieve 75 million tonnes of carbon dioxide over the next 30 years. The climate change levy, which is the main reason why we have met our Kyoto targets and which is still opposed by the Conservative party, will increase in line with inflation from April.
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