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The importance of our public services, on which we all depend, becomes even clearer in these difficult times. We have made our choice to continue investing in our public services, which underpin the health and strength of our nation now and in the future. In the past 10 years, that investment has seen an extra 40,000 doctors, 41,000 teachers and over 70,000 nurses. But just as every family
are looking closely at their own budget to ensure that they get the best value for money, so too should the Government.
Since 2004, the Government have identified and made £26.5 billion in efficiency savings while continuing to invest to improve schools, hospitals and other public services. In November, I announced plans to find an extra £5 billion of efficiency savings in 2010-11, on top of the £30 billion in this spending review period. Some have argued that we should cut public services immediately, rather than invest and grow our way out of the recession. I believe that would be the wrong thing to do. I can confirm that we are able to secure these savings that year while increasing investment, as planned, for local health services by over 5 per cent. and for schools by over 4 per cent.
Yesterday, we published the reports of the five independent reviews I set up last year. They have identified extra efficiencies from 2011 that rise to a further £9 billion of additional savings a year by 2013-14. They include efficiencies in public sector back-office functions and IT, improved procurement and better collaboration, and innovation at a local level. This will allow us to protect front-line services, while keeping current spending growth, in real terms, at an average of 0.7 per cent a year from 2011-12 onwards.
Capital spending is equally important to the future of our country. Over the past five years, this investment has transformed services. There are 61 major hospital schemes, 140 new schools and improved transport links including the modernisation of the west coast main line. It is essential to help create jobs, boost the recovery and deliver economic success in the long term. I intend that capital investment will continue at historically high levels to 2012, as we prepare for the Olympic games in Britain. After that, public sector net investment will be at 1Â1/4 per cent. of GDP by 2013-14, twice as high as it was in 1997. Indeed, the efficiency savings we are making will help us direct more money to continue to support investment that everyone in this country depends on. We have set ourselves a central goal of realising up to £16 billion of property and other asset sales in the three years from 2011-12, with the proceeds raised being used for new capital investment.
As a result of the measures I have announced today, I can afford to make further investment in the future of this country. These funds will be invested now, to help ensure we seize the opportunities that will come from a world economy that is expected to double in size. I have already announced today £3 billion-worth of extra support to help people find work quickly, with a new guarantee for young people. There will also be £1 billion to help us combat climate change, by supporting low-carbon industries and green collar jobs. There is close to £1 billion to help home owners, meet future housing supply and allow the construction industry to recover quickly, and there is £2.5 billion for business, to encourage investment in the industries and high-paid, high-skilled jobs of the future—sectors such as advanced manufacturing, the creative industries and the low-carbon technologies: all essential if we are to prepare for the future.
A successful economy needs a strong financial sector. We do not want to throw away the many advantages that come from our position as a world centre for
finance. I intend that we retain that position. Hundreds of thousands of jobs across the United Kingdom depend on it. We need to build trust in the banking system and harness the strengths of the financial services sector for the benefit of society. Crucial to that is financial regulation. I will publish shortly a Treasury paper with my recommendations for wide-ranging reform. It will propose action to reform corporate governance and remuneration at banks to avoid undue risk taking; to improve the regulation of capital and liquidity, so banks do not over-extend themselves; to increase transparency to achieve a single set of accounting rules so that we can see the risks that banks are taking; as well as to regulate all important institutions including hedge funds. It will also propose action to reduce the impact of the failure of financial firms. It will protect and support consumers and improve efficiency and competition in the financial markets as well as strengthening regulators’ powers. All these steps will, in turn, complement the agreement that we reached in London earlier this month to restore trust in the global financial system.
Strengthening the banking system is crucial to the recovery and to the economy, but the strength of our economy and the health of our society also depend on meeting the long-term demand for housing in this country. I have two measures that will help achieve that. First, we want to work with the industry to help tackle the restraints that house builders say could prevent them from acting now to increase housing supply. This will give construction firms more certainty and help them meet housing demand more effectively. Secondly, lack of finance now is affecting house builders and preventing the long-term investment that we need. So today I can announce £500 million of extra financial support. This will kick-start building on housing projects that have been stalled because of the credit crunch, and will deliver thousands of new homes. As part of that support, we are providing £100 million for local authorities to build new energy-efficient housing.
I have one further announcement to make about housing for one particular group. The whole country and the House are united in admiration for the courage and professionalism of our armed forces, but I want to ensure that that admiration is reflected in the quality of their accommodation, so I am bringing forward £50 million to accelerate the modernisation programme for that housing to ensure that this happens.
Let me turn next to the targeted help for business, which will help build on the strengths of our economy. A sustained and strong recovery depends on companies of all sizes making the most of the new global opportunities that await them. A more competitive exchange rate will help exporters, but it is also vital to our recovery that Britain and other countries remain open to free trade. It is essential that the Export Credits Guarantee Department gives businesses the support that they need, and I intend to report back shortly on how the support can be improved.
I have a number of proposals to encourage investment. There is, at the moment, less incentive to explore and extract oil from the North sea because of prevailing prices. So I am bringing forward incentives to encourage smaller fields to be brought into production, which could lead to an extra 2 billion barrels of oil and gas that would otherwise remain under the North sea. The incentives will also remove fiscal barriers, so that the
North sea can become a hub for energy of the future—gas storage, carbon capture and offshore wind. I want to say more about that shortly.
I want other industries to invest, too. Businesses already benefit significantly from the annual £50,000 investment allowance, which was announced two years ago. I want to go further to promote investment now. So for this year, I will double the main capital allowance rate to 40 per cent. That will encourage firms to bring forward investment, in particular those companies in the growth sectors that will deliver the rewarding jobs of the future. It will mean enhanced tax relief to support investment of up to £50 billion this year. That includes £10 billion of investment in the vital communications sector.
It is vital as well to ensure that the entire country and economy benefit from the digital age. So I am allocating extra funding for digital investment to help extend the broadband network to almost every community. That will allow us to deliver the vision set out in the “Digital Britain” report—making sure that everyone can benefit from this communications revolution and creating thousands of skilled jobs.
Next, Government can and should do more to buttress the strength and capability that we need for our economic future. On Monday, the Government published a new industrial framework, the aim of which was to remove the barriers holding back innovative and fast-growing companies and to help markets work better.
To support that industrial activity and strategy, I can announce the setting up of a £750 million investment fund to help the country seize the opportunities ahead. The new fund will provide financial support, focusing on emerging technologies and regionally important sectors in, for example, advanced manufacturing, digital and biotechnology. It will encourage exports, support inward investment, promote research and development and harness commercially our world-class science base. It will complement the two new city region pilots in Manchester and Leeds, which will also have a major role in promoting economic investment.
Green technology will be one of the great growth sectors in the world economy in the next few years. In preparing for the future, Britain’s economic recovery must be sustainable and protect the environment. These efforts also have the potential to create thousands of high-tech businesses and hundreds of thousands of high-skilled jobs.
Climate change is one of the biggest challenges our world faces—and we in Britain are setting the lead. We are ahead of every other major developed country in progress against our Kyoto targets. Today, I am presenting the world’s first ever carbon budget, which commits this country to cutting its carbon emissions by 34 per cent. by 2020. Those budgets will give industry the certainty needed to develop and use low-carbon technology—cutting emissions and creating new businesses and jobs. They are a landmark step, which point the way to the vital decisions that must be made at the Copenhagen climate change summit later this year.
Saving energy is the easiest and cheapest way to cut carbon emissions—and it also saves people and business money. Over the past 12 months, we have helped around 1 million homes improve central heating or insulation.
Today, I can announce £435 million of extra support to develop energy efficiency measures for homes, businesses and public buildings.
As well as saving energy, we need cleaner energy. We must build on Britain’s status as a world leader in offshore power generation. However, I am aware that the credit squeeze is holding back major offshore wind projects. I want to lift the barriers—through £525 million of new financial support over the next two years for offshore wind, funded through the renewables obligation. The potential is enormous and I am confident that this will lead to major projects getting the go-ahead quickly, providing enough electricity to meet the needs of up to 3 million households. We need to support all forms of renewable energy. I can also announce that renewable and other energy projects in the UK stand to benefit from up to £4 billion of new capital from the European Investment Bank.
Coal, oil and gas will continue to be major sources of energy for the foreseeable future. Clean technologies, such as carbon capture and storage, are vital to ensure that we can produce power from those sources without damaging the environment. I am determined that this country’s research and technological expertise is used to make us world leaders in this area as well. So I can announce that a new funding mechanism will be used to finance at least two, and up to four demonstration projects. The new generation of power plants could be even more efficient by using the heat produced in the generation of power. To encourage the use of combined heat and power technology, I will exempt those projects from the climate change levy from 2013, which will bring forward over £2.5 billion in investment.
I can also announce that, through £405 million of new funding, we will encourage low-carbon energy and advanced green manufacturing in Britain to drive up the application of new technology as well as to invest in small-scale projects. In particular, that will help us strengthen the supply chain right across these sectors and build on the expertise that we have in this country.
On the back of the discovery of oil and gas in the North sea, we became a world leader in every aspect of oil technology and industry. I am determined that we will replicate this success across the renewable energy and low carbon sectors. The steps that we are taking today will help make sure that we meet this ambition. They will also protect our planet and ensure the country’s economic future.
The measures that I have announced today underline our vision of a confident and successful Britain. They offer support for people when they need it, but also hope for the future. They put in place the vital building blocks for recovery and the economic long-term success that we need. Everything that we have done—whether supporting families now, maintaining investment in our public services and putting the nation’s finances on a stable path—is based on our values of fairness and opportunity. Even at this time of global difficulty, we are determined to continue building a fairer society.
In November, I provided help for families and pensioners. Today, I want to do more. Twenty-two million people on middle incomes have seen their income tax go down this month. There is help for millions of families, too—with the child tax credit up by £75 this month and the increase in child benefit paid early. Today I can announce additional targeted measures.
The Government are determined to eradicate child poverty, so, first, I can announce that, from April next year, the child element of the child tax credit will increase by £20. Secondly, children with disabilities need extra help to make the most of their potential, so we will add an extra £100 a year to their child trust fund. For those with severe disabilities, it will be an extra £200 each year. Thirdly, I can announce an increase in statutory redundancy pay from £350 to £380 a week.
I have one further measure, which will help a small number of valued people in this country. Increasingly, grandparents play a big role in family life in looking after grandchildren. To reflect that, we will, for the first time, ensure that those caring responsibilities of grandparents of working age will count towards their entitlement to the basic state pension.
I want also to announce further help for pensioners and savers. Earlier this month, pensioners on modest incomes got the biggest ever increase in pension credit while the basic state pension increased by £4.55 a week. I want to reaffirm today our commitment to increasing the basic state pension by at least 2.5 per cent. So if retail prices index inflation this September is below zero, as we expect, pensioners can be confident that their pensions will rise in real terms.
Last year, because of the steep increase in energy prices, I brought in a one-off increase in the winter fuel allowance. Energy prices are now expected to come down, but to help pensioners even more, I intend to maintain the allowance at the higher level for another year. That is worth £250 for the over-60s and £400 for the over-80s.
The fall in interest rates has been a welcome benefit to the economy and to millions of home owners whose mortgage costs have come down, but this has also reduced the amount of interest paid out on savings, and has particularly hit pensioners who rely on this extra money. There are more than 5Â1/2 million pensioner households in this country who have modest savings of less than £10,000, and I want to help them. For over a decade, the capital disregard on pension credit has been at £6,000 or below. It means that savings above that level reduce the amount of help that households get through the pension credit. I believe that it is now time to increase those limits, which will help compensate modest-income pensioners with limited savings. So from
November of this year, the limit will be raised to £10,000. That will benefit more than 500,000 pensioners on modest incomes, who will gain by an average of £4 a week.
I have one other announcement that I want to make on savings. Tax-free individual savings accounts have been a great success. Eighteen million people have taken them out and have saved in them almost £290 billion. Since they were introduced 10 years ago, the annual limit has been increased only once and it now stands at £7,200. I want to go further, so to help savers on the 10th anniversary of ISAs, I intend to increase the total annual limits to £10,200, of which £5,100 can be saved in cash. The new limit will be introduced this year for all those aged 50 or over and will come in next year for everyone else.
Even in these difficult times, there is fair and targeted help for grandparents and pensioners and to tackle child poverty, encouraging people to save now and in the future. Every country has been hit by this global recession, but we have confidence in Britain’s future and in this country’s strength. You can grow your way out of recession; you cannot cut your way out of it. We have made our choice—to help people now, to build Britain’s future. I commend this Budget to the House.
Provisional Collection of Taxes
Motion made, and Question put forthwith (Standing Order No. 51(2)),
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. 9);
(b) Rates of tobacco products duty (Motion No. 10);
(c) Fuel duties (rates and rebates from Spring 2009) (Motion No. 13);
(d) Amusement machine licences (amounts of duty) (Motion No. 18);
(e) Gaming participation fees (Motion No. 61).— (Mr. Darling.)
Mr. Deputy Speaker: I shall now call upon the Chancellor of the Exchequer to move the motion entitled Amendment of the Law, and it is on this motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate next week.
Budget Resolutions and Economic Situation
Amendment of the law
Motion made, and Question proposed,
That,—
(1) 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
(ii) so far as it is applicable to services, applies to services of every description.— (Mr. Darling.)
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