Wednesday March 12, 01:55 PM
UK BUDGET Full text of Darling's speech
LONDON (Thomson Financial) - Mr Deputy Speaker, the core purpose of this Budget is stability - now
and in the future.
And its core values are fairness and opportunity, founded on
stability and strength.
Mr Deputy Speaker,
in every country in 2008, every government has one
aim - to maintain stability through the world economic slowdown.
Britain with its central role in the world's financial system is no
exception.
With low inflation. Record (LSE: REC.L - news) levels of employment. And unemployment at
its lowest level for a generation.
And with the action taken last year to curb inflation, Britain is
better placed than other economies to withstand the slowdown in the
global economy.
Mr Deputy Speaker, this year's Budget is a responsible Budget that
will secure stability in these times of global economic uncertainty.
And we will do everything in our power to maintain stability -
keeping inflation and interest rates low and maintaining our record
of growth.
While other countries have suffered recessions, the British economy
has now been growing continuously for over a decade - the longest
period of sustained growth in our history.
Because of the changes made by this Government to entrench stability
and increase the flexibility and resilience of our economy, I am able
to report that the British economy will continue to grow through this
year and beyond.
Even in today's difficult and uncertain times, we are determined that
we will not be diverted from our long-term aim - to equip our country
for the challenges of the future, confront climate change and to end
child poverty in this generation.
Mr Deputy Speaker, this Budget is about equipping Britain for the
times ahead. Making sure that everyone - no matter what their
circumstances - can exploit their potential.
It (Frankfurt: A0MLX5 - news) 's about building a fairer society, offering more opportunity, a
fair Britain in which everyone can succeed.
Mr Deputy Speaker, throughout the world economies have benefited from
the globalisation of trade and investment, which has delivered strong
world growth.
Here in Britain, our openness, our global reach, our history of
scientific invention and creative success, make us uniquely placed to
succeed in the global economy.
But with the benefits of globalisation we see too how problems in one
part of the world can quickly spread to another.
Turbulence in global financial markets - which started in the
American mortgage market - has affected all economies from the United
States to Asia, as well as Europe.
We have seen significant disruption across many credit markets: with
a number of them barely functioning at all.
And since the turn of the year, global stock markets have also been
affected. This poses a major risk to the world economy.
And so we welcome yesterday's commitment by the world is central
banks including, the Bank of England to address these concerns.
Here, the action we took last autumn to support Northern Rock (LSE: GB0001452795.L - news) and
protect depositors and savers mean that - despite seeing the worst
period of financial disruption for a generation - we have maintained
confidence and stability in the banking system.
Mr Deputy Speaker, between the early 1970s and the mid 1990s the UK
was one of the least stable economies in the G7. Today we are the
most stable.
In the past our economy suffered from high unemployment and high
inflation but today unemployment is lower than in Germany, France and
Italy.
Welfare reform makes work pay and encourages people off benefits. The
strengthened competition regime has increased the flexibility of
product and labour markets, backed by fair employment laws.
So, the reforms we have made since 1997 - independence for the Bank
of England and tough fiscal rules - mean that Britain is now more
resilient and better prepared to deal with future shocks. And is
better equipped to meet the challenges of rapid global change.
We are developing new strengths in the industries of the future -
creative industries account for 7 per cent of the economy;
pharmaceuticals account for a quarter of the UK's research and
development.
Ours is the only major industrial economy to see an increasing share
of trade in global services - from 7 per cent a decade ago to 8-1/4
per cent today.
In knowledge-intensive services, the UK is second only to the United
States. High-tech manufacturing has grown by 30 per cent in the last
ten years.
Driven by improved productivity, the UK's GDP per head - the average
income for every man, woman and child - has gone from the lowest
amongst the group of seven leading industrial economies in the early
1990s to being second only to the United States last year.
Mr Deputy Speaker, right across the world, countries have lowered
their forecasts for growth in the coming year.
In Japan, growth is forecast to be 1.4 per cent, in the Euro area and
the United States 1.6 per cent, and in Canada, 1.8 per cent.
And even the fastest growing markets: China, India and Brazil, which
have enjoyed record growth in recent years, are expected to slow.
Despite the slowdown in the world economy, in 2007 the British
economy grew by 3 per cent - the fastest growth of any major economy.
This year my forecast is that - as growth in the world economy slows
further - growth in the British economy will be between 1-3/4 and
2-1/4 per cent in 2008 - but faster than Japan, the US and the Euro
area.
I expect growth to shift towards companies and exports with growth
rising to 2-1/4 to 2- 3/4 in 2009 and 2-1/2 to 3 per cent by 2010.
So Mr Deputy Speaker, my forecast shows the UK economy will continue
to grow throughout this period of global uncertainty - a view
supported by the Bank of England, the International Monetary Fund and
the Organisation for Economic Co-operation and Development.
Mr Deputy Speaker, in the past, inflation has overshadowed many
Budgets. From the 1970s until the early 1990s, the British economy
suffered through the failure of successive governments to deliver
economic stability.
Mr Deputy Speaker, we have seen recent increases in world food, fuel
and energy prices.
The reforms we have made since 1997 mean we can be confident about
the inflation outlook. There will be no return to the inflation
rates of the early 1990s.
As is happening in many countries because of commodity prices,
inflation in the UK will rise in the short term as higher oil and
food prices feed through into domestic inflation.
But inflation is forecast to return to target in 2009 and remain on
target thereafter.
The success of the Monetary Policy Committee and the resilience of
the UK economy is clear. Energy prices have tripled since 2002, but
over this period inflation has averaged just 2 per cent and growth
has averaged 2-3/4 percent.
To provide certainty, and to build on this foundation of stability, I
am today writing to the Governor of the Bank of England to re-confirm
that the inflation target for the Monetary Policy Committee remains 2
per cent on a CPI (NYSE: CPY - news) basis - entrenching our commitment to low
inflation.
And the discipline we have shown on pay in the public sector will
support the Bank of England in maintaining low and stable inflation.
The reforms we made, this hard-won stability, means that - whereas in
previous decades the UK economy suffered more than other economies in
the face of global economic downturns - we enter this period of
uncertainty, better placed than any other major economy.
Mr Deputy Speaker, our fiscal policy, like our monetary policy is
designed to support stability.
It is founded on tough fiscal rules, underpinned by the Code for
Fiscal Stability and forecast on the basis of cautious assumptions
audited by the independent National Audit Office.
Our fiscal rules - to keep debt low and stable and to borrow only for
investment over the economic cycle - deliver sound public finances in
the medium term.
They protect public investment and allow fiscal policy to support
monetary policy at the right time to sustain economic stability and
growth.
Over the past ten years at all times we have taken the action
necessary to meet our fiscal rules.
The disciplines we have imposed mean that borrowing is much lower
than it was before 1997 - and so too is debt.
And between 1979 and 1997 borrowing was 3.4 per cent of national
income.
Since 1997 it has averaged just 1.2 per cent.
And debt which - at the start of the economic cycle in 1997 - was
43.3 per cent has now fallen to 36.6 per cent of GDP.
It is precisely our commitment to this discipline and stability that
gives us the flexibility now to respond to the global economic
challenges we face today.
Given the fundamental strength of our public finances, it is right to
allow fiscal policy to support monetary policy over the period ahead
in helping to maintain stability in the face of the global downturn.
For environmental reasons we will increase fuel duty by 1/2 pence per
litre in real terms from 2010.
Fuel duty is due to rise again in April but because I want to support
the economy now and help business and families I will postpone that
increase until October.
Mr Deputy Speaker, I can tell the House with our Budget projection
for the current budget balance in 2007/08 will come in at 8 billion
stg as forecast.
And our projection for net borrowing at 36 billion stg is 1.4 billion
stg lower than forecast at the time of the Pre-Budget Report.
Debt too this year is forecast to be lower than the Pre-Budget Report
at 37.1 per cent.
As a result of decisions in this and recent Budgets that come into
effect this year - including a reduction in the main rate of income
tax from 22 to 20 pence - fiscal policy is able to provide real
support to the economy this year.
This is a responsible approach - within the disciplines of our fiscal
rules - that will help entrench the resilience of the UK's economy.
So borrowing next year, which peaked at 7.8 per cent of national
income by 1993, equivalent to 110 billion stg today, next year will rise
to 43 billion stg, some 2.9 per cent of national income, less at its
peak than the average level of borrowing between 1979 and 1997.
Because of the decisions taken in this Budget it will fall to 2.5 per
cent, then 2 per cent, then 1.6 per cent and then 1.3 per cent by
2012/13, supporting stability and resilience in the economy. That is
38 billion stg and then 32 billion stg, 27 billion stg and 23 billion stg by
2012/13.
Even taking into account the turbulence in financial markets and the
support we are providing to the economy now, the current balance this
year is in line with my forecast at Pre-Budget Report minus 8
billion stg.
Next year it will be minus 10 billion stg, then minus 4 billion stg,
returning to a surplus in 2010 of 4 billion stg, then 11 billion stg and
then 18 billion stg by 2012/3, forecast to meet the Golden Rule over the
economic cycle.
And so Mr Deputy Speaker, the Budget shows that we are meeting our
first fiscal rule - the Golden Rule - with the current budget in
surplus over the economic cycle.
In the previous 2 cycles the then Governments failed to meet the
Golden Rule; in the cycle from 1986 to 1997 they failed by a margin
of 240 billion stg and in the cycle from 1977 to 1986 by 140 billion stg.
In the past, the then Government borrowed to fund the immediate
pressures of the day with no long-term return to the taxpayer.
Today our fiscal discipline means that over the cycle we will borrow
only to invest.
Vital investment - in transport, schools and hospitals - has been
protected and increased.
So whereas in 1996-7 public sector net investment was 5.4 billion stg,
over the forecast period it is set to rise further from 33 bln stg next
year to 37bn stg in 2010 - the highest in three decades.
Borrowing for investment within the fiscal rules, means that we will
meet our second fiscal rule - the Sustainable Investment Rule. In
each year and over the cycle.
This year debt will be lower than the US, Euro area and Japan.
Debt levels are forecast to be 38.5, 39.4, 39.8, 39.7 and 39.3 per
cent of GDP by 2012/13. Every year lower than in 1997.
Mr Deputy Speaker, in the 18 years between 1979 and 1997 investment
increased by only 20 per cent in cash terms and reached a low of just
0.3 per cent as a share of national income.
But by 2011, I can tell the House that investment will have increased
by 500 per cent since 1997 and will have trebled as a share of
national income.
Mr Deputy Speaker, by 2011 we will have seen the longest sustained
expansion of investment in public services since 1945.
It is an achievement to be rightly proud of.
And we remain committed to continued investment in these public
services.
And building on the platform of stability provided by the new fiscal
rules, successive Spending Reviews delivered sustained increases in
spending addressing the backlog of underinvestment in public
services.
Mr Deputy Speaker, public spending grew by 3.6 per cent a year in
real terms between 1997 and 2007.
Following the Comprehensive Spending Review last October, public
spending in the coming three years will grow by 2.2 per cent,
building on past increases and underpinned by our stretching value
for money reforms.
In 10 years, spending on health has almost doubled; spending on
education is up by 58 per cent.
As a result waiting lists are down; school standards are up.
Transport spending is now 90 per cent higher. More people are using
public transport than ever before.
Aid for the world's poorest countries has doubled in real terms.
The Defence Budget has seen the longest period of increased spending
in a generation.
This year we again expect to spend over 2 billion stg more supporting
our troops on the front line. Including around 900 million stg on
military equipment.
Mr Deputy Speaker, I want to take this opportunity to pay tribute to
our service men and women in Iraq and Afghanistan, and their
families.
We are deeply proud of the bravery, professionalism, and courage they
display in serving our country.
Mr Deputy Speaker, this has been an exceptional commitment to
improving public services. By 2010-11 we will have seen the longest
sustained expansion of investment in public services in recent
history.
In 1997 the annual cost of servicing our national debt was 9 per cent
of public spending.
But today it is 5 per cent of total public spending. Freeing up an
extra 23 billion stg each year to invest in public services - around
half the entire budget for schools.
In the early 1990s as much as three quarters of all new public
spending went on debt and social security costs. The figure is now
just a third of that - allowing us to target spending where it is
needed.
We have turned welfare into work and borrowing into wealth creation.
And it is essential that we continue to help everyone who can work to
do so.
So Mr Deputy Speaker, we will bring forward further proposals to
reform housing benefit to ensure that work pays.
From April 2010 all long-term recipients of incapacity benefit will
attend work capability assessments.
These reforms will continue to free up resources for investment.
And it is right that like any other organisation, the public sector
is as efficient as possible and that it delivers value for money.
Over the last year public sector employment has fallen. At the same
time, private sector employment has grown strongly leading to record
levels of employment, underlining the resilience of the British
economy.
All departments have now published plans which will deliver another
30 billion stg in savings each year from 2010/11.
All of these savings will be reinvested in services.
And we will examine all major spending areas to identify where
further reform could be made to deliver better value for money and
maintain the improvement of public services.
Mr Deputy Speaker the Prime Minister has made clear, spending must be
matched by reform. Reform remains vital. It's not optional - it's
essential. It's common sense.
Since 1997 we have responded to peoples' expectations for better
public services after decades of underinvestment and neglect.
We have driven up standards, developed a greater diversity of
providers, tackled failing services, thereby ensuring that maximum
benefit was gained from investment.
10 years ago there were 600 schools in which less than a quarter of
pupils gained at least five good GCSEs. Today there are fewer than
50.
Compared to 1997, 10 per cent fewer people die from cancer each year
thanks to faster and better treatment and more specialist doctors.
But the test for public services in the future is not whether they
are better than before or simply good enough. It is whether they are
as good as they can be.
So, if the focus of the past decade was on repairing the old; the
focus of the next will be on developing genuinely world-class
services.
After a decade of hugely increased investment, we will continue our
spending at a sustainable rate alongside our wider objectives for the
economy and public services.
This Budget therefore confirms the spending plans set out in last
year's Comprehensive Spending Review, and makes an assumption for
continuing real growth in public spending after 2011 at a rate of 1.9
per cent a year.
That will allow departmental resources to continue to grow at broadly
the same rate as in the next three years.
Now, Mr Deputy Speaker, I want to turn to the steps that we need to
equip Britain for the future.
There is no greater moral imperative than to make sure that every
child has the highest aspiration and ambition.
And the best possible opportunity to go as far as they have to the
talent to go. Not some children, but every child.
If we are to build a fairer future for our children then we must
eradicate child poverty in Britain.
Between 1979 and 1997 the number of children living in poverty has
doubled.
Since then Mr Deputy Speaker, I can report that there are 600,000
fewer children in relative poverty, and we have halved the number of
children in absolute poverty.
We have set ourselves an ambitious target to eradicate child poverty
by 2020 and to halve it by 2010. And today I want to do more to
deliver that ambition.
I will help their families to escape permanently the cycle of
deprivation that blights too many lives.
Central to this is helping more parents into work.
We want to demonstrate our commitment to supporting parents, through
a contract in which Government undertakes to provide the support that
families need to move into work and the other side of this contract
we look to families to make a commitment to improve their situations
where they can.
From October 2009, we will change the rules for Housing and Council
tax benefit so that parents are better off in work than on benefits.
As a result, a working family with one child on the lowest income
will gain up to 17 stg a week. Mr Deputy Speaker this measure will lift
150,000 more children out of poverty.
And I can do more to help all children and hard working families.
In 1997 Child Benefit for the first child was 11 stg a week. I can tell
the House that from April 2009, I will increase Child benefit for the
first child to 20 stg a week - a year earlier than planned.
I will increase by 50 stg a year above inflation the child element of
the Child Tax Credit for families on low and middle income from April
next year.
This means that a family with two children, earning up to 28,000 stg a
year, will be over 130 stg a year better off.
To make further progress we will spend a further 125 mln stg over the next
three years targeting help to those who need it most and where the
challenges are the hardest, developing new approaches that help
families for the long-term.
Taken together these measures mean that, even at a time when we need
to take difficult decisions, are investing a further 765 million
stg next year and then a further 950 million stg 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 further action is 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 to increase their support to
vulnerable customers.
We will work with the companies to take further action on a voluntary
and statutory basis - to underpin this as necessary we will
legislate.
Energy companies currently spend around 50 million stg a year on social
tariffs. I want to see this rising to at least 150 million stg a year
over the period ahead.
Mr Deputy Speaker, the Government is 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
Accounts investment limit to 7,200 stg with the amount that can be held
in cash rising to 3,600 stg.
And parents have now opened over 2.4 million Child Trust Fund
accounts saving more for their children's future.
We must go further.
So I can also announce that the Government will launch the Saving
Gateway (NYSE: GTW - news) nationally with the first accounts available to savers from
2010. By contributing to these accounts we will offer incentives to
save to up to 8 million people on lower incomes.
Ending child poverty, encouraging saving, raising ambition and
providing greater opportunity.
Mr Deputy Speaker, for business, my Budget provides continuing
stability and certainty and introduces new opportunities for
entrepreneurs - the three critical factors contributing to the
strength of the UK's business environment.
Ensuring that the UK remains one of the best places in the world to
do business, we will continue to promote open and competitive markets
- including by removing barriers to trade across the world through
bilateral and multilateral trade negotiations including the
conclusion of the Doha development agenda.
Mr Deputy Speaker, our goal is, and will continue to be, to maintain
the most competitive corporation tax rate of any major economy. We
have the lowest corporation tax rate in the G7.
A competitive and simplified tax regime is essential.
That 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 30
per cent to 28 per cent.
Mr Deputy Speaker, the UK is one of the best places in the world to
do business. We are committed to consultation with business to
maintain a stable business tax system that remains responsive to
business' needs and 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 fiscal regime to help incentivise investment and support
production.
But today I also want to do more to support Small and Medium
Enterprises now and in the longer term.
13 million people work in Small and Medium Enterprises. And there
are over 750,000 more firms than in 1997.
The new Capital Gains Tax rate will come in next month including the
entrepreneurs' relief I announced in January.
And that will benefit over 80,000 businesses and investors in the
next year alone - 90 per cent 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.
Mr Deputy Speaker, especially at this time we need to do more to help
Small and Medium Enterprises get access to the finance they need.
To help them in 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.
And I am from next month extending the scheme to 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 stg to
500,000 stg, and the employee share limit for tax relief under the
Enterprise Management Incentive Scheme will increase from 100,000 stg to
120,000 stg.
The Secretary of State for Business and Enterprise will consult on
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 stg to
specifically encourage more women entrepreneurs.
There is 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 to help them with their cashflow.
And I am asking Anne Glover, Chief Executive of Amadeus Capital
Partners (PGHN.SW - news) , to look into what other barriers we can remove and the
practicality of 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 this could help promote enterprise in one of our most
innovative and dynamic areas of the economy.
I believe we can help support them grow their businesses, creating
new jobs and opportunities.
Mr Deputy Speaker, 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 taxes on their earnings here and also pay tax on money they
bring into the 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 7 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 is 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.
Last October I said that I would consider a scheme to which claimed
to raise an additional 2.8 billion stg. On closer examination it was
clear that the sums that did not add up. Not for the first time given
the source. And I have rejected it.
We will continue 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 to improve skills. Increased
spending on education has benefited children across the UK.
We have cut the number of underperforming schools dramatically in the
last decade.
And building on last year's Spending Review, we will raise standards
even further. To create greater opportunity for all children.
And so the Secretary of State for Children, Schools and Families will
be investing 200 mln stg 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 5 A*-C GCSEs, including English and Maths.
We will extend the successful London Challenge model, enable the best
head teachers to turn round low performing schools, create new trusts
and federations around successful schools, and in areas of greatest
need drive forward a faster expansion of our Academies programme.
And as a result, by 2011, we will ensure that every school is an
improving school meeting the standards we have set.
And I can announce today that we will commit 10 million stg over the
next five years - which alongside contributions from the Wellcome
Trust and private sector will create a 30 million stg Enthuse Science
fund.
This will give every science teacher in secondary and further
education access to high quality professional development helping
improve the science offer to today's children.
And to improve skills, the Comprehensive Spending Review increased
resources for adult training. Extra funding will enable nearly 3
million adults to gain new, higher-level skills by 2011.
And today I can announce an extra #60 million over the next three
years to provide new opportunities for people to gain the skills
needed to enter the labour market, to remain in work, and progress in
work.
This includes additional apprenticeships with leading employers to
help tackle skills gaps and shortages.
Mr Deputy Speaker, by 2010 we will be spending over 6 billion stg a year
supporting British science and innovation.
And tomorrow also the Secretary of State for Innovation, Universities
and Skills will publish the Science and Innovation White paper.
Including proposals for a Further Education Innovation Fund to help
them support businesses to develop their innovative potential.
If we are to compete in the future, not only do we need to have the
best business environment and higher skills levels, we also need good
transport links to make up for decades of underinvestment.
In the last ten years we have doubled the amount we spend on
transport. 7 billion stg on the West Coast Mainline to Glasgow cut
journey times. Public transport usage is at a 25 year high.
Mr Deputy Speaker, last November (Frankfurt: A0S9N7 - news) , following the Government's
investment of 6 billion stg, saw the completion of the Channel Tunnel
rail link, with the opening of the St Pancras international station.
This week the new Terminal 5 opens at Heathrow.
Today I can announce new measures at Heathrow and other airports to
ensure that a greater use of biometric technology speeds up the time
it takes passengers to get through immigration control.
Good for business. Good for Britain.
Government funding for Crossrail is now secure; this will support
economic growth not just in London but in the whole of the United
Kingdom by adding an estimated 20 billion stg to national income.
This will help ensure that London retains its position as the world's
pre-eminent international financial centre.
We are spending more on public transport. But we also need to reduce
congestion and improve transport links.
If we are to remain competitive over the next 20 to 30 years, we have
to take more radical steps to reduce congestion on our roads.
We need more capacity on our 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, road pricing could reduce congestion as well as
helping to meet our wider environmental obligations.
So I am setting aside new funding to develop the technology that
could underpin national road pricing, inviting tenders to test this
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 new homes as well
as to support our growing economy.
Since 1997, as a result of historically low mortgage rates we have
seen one and a half million more home owners.
Already we have helped 95,000 families into new homes through shared
ownership and shared equity schemes. And we will spend #8 billion on
new, affordable and social housing over the next three years.
This will enable the Housing Corporation to deliver 70,000 new
affordable homes each year by 2010/11.
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.
Until now these were only available to those 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 of the price of their new
home.
And 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.
Mr Deputy Speaker, 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 funding markets are extremely
difficult because of financial turbulence in global markets.
In some countries these 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 will 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.
Mr Deputy Speaker, I also want more people to have the choice of long
term fixed rate mortgages. These protect borrowers from risks and
still allow them flexibility to move, or 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.
This is not the case in other countries, such as Denmark where the
majority of homeowners take out long-term fixed rate mortgages.
I want to see more flexible and affordable long-term fixed rate
mortgages for 10, 20 or even 25 years.
And I am today publishing the findings of the 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 it will help more people get on - and stay on - the housing
ladder.
So, I will seek views on how we can deliver - drawing on
international experience - the right framework for the UK to achieve
affordable, long term fixed rate mortgages. I will report back at the
Pre-Budget Report.
Mr Deputy Speaker, the best way to improve long term affordability
and stability is to build more homes. That is why we are committed to
3 million 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 homes.
Mr Deputy Speaker, we are determined to take decisions now for the
long-term future of our country.
Helping to improve affordability, supporting long-term stability for
homeowners, and meeting the needs of future generations.
And our greatest obligation to future generations must be to tackle
climate change.
Britain has been at the forefront of international action. We are one
of the few countries meeting 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 stg environment fund to work with
the United States, Japan and other countries as well as the World (WRGR.TA - news)
Bank to fund clean technologies in developing countries, and
adaptation to climate change.
Britain is 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 international partnerships.
We need to do more and we need to do it now. Few doubt the science.
The need to take action is urgent.
There will be catastrophic economic and social consequences if we
fail to act.
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 an established target to reduce carbon emissions by at least
60 per cent by 2050.
I believe that we should go further.
That is why we have asked the Climate Change Committee to advise us -
whether as part of an international agreement - we should raise our
target to 80 per cent.
And if we are serious about reaching demanding targets then every
department in Government, every public sector body, every business,
every one of us needs to play its part.
And to ensure 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 here too for business, 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, transport, in our business and in our homes.
But I believe that there are three key steps we can take now.
Firstly, working in Europe we have helped 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 companies can
generate. Companies get allocations for credits to help them adapt.
If we want to encourage investment in low carbon technology in energy
renewables and in nuclear, for example, and to make industry more
carbon efficient we need to go further.
So in the next phase, instead of auctioning 7 per cent, I want to see
auctioning of 100 per cent of these allowances for energy generators.
Last year's Energy White paper committed us to increasing the supply
of renewable energy and the Energy Bill will allow the tripling of
renewable electricity 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. We will introduce
legislation to impose a charge on them if we have not seen sufficient
progress on a voluntary basis.
Legislation would come into force in 2009 and based on other
countries' experience, it could lead to a 90 percent reduction, with
around 12 billion fewer plastic bags in circulation.
The money raised should go to environmental charities.
And 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.
Cavity wall insulation for nearly three million homes. Loft
insulation, more energy efficient appliances and light bulbs.
I can announce #26 million funding next year for a Green Homes
Service to help people cut their carbon emissions and their fuel
bills.
We will roll out smart meters to medium and large companies over the
next five years, providing greater incentives to reduce the amount of
energy they consume.
We already have a target to make new homes zero carbon from 2016. I
believe that we can go further.
And I can announce today that new non-domestic buildings will become
zero-carbon from 2019.
We will consult on achieving that targets with the potential to save
75 million tonnes of carbon dioxide over the next thirty years.
The Climate Change levy, which is the main reason why we have met our
Kyoto targets and which is still opposed by some, will increase in
line with inflation from April.
The third key area we need to take action now is in relation to
transport.
It accounts for nearly a third of our carbon emissions.
We recognise the contribution of aviation to the UK economy. That is
why we support the expansion of Stansted and Heathrow.
I have always been clear that aviation must meet its environmental
costs, and that is why we want aviation in the European Union
Emissions Trading Scheme.
Because emissions from aircraft are forecast to continue to grow, I
am also announcing that revenue from plane duty will be increased by
10 per cent in the second year of operation.
But Britain's 30 million cars, vans and lorries together account for
22 per cent of total carbon emissions.
Over the last 20 years new cars have become 50 per cent more
efficient. And new technology will bring further improvement.
Today, I am publishing Professor Julia King's review of low carbon
cars in which she examined new technologies which could help cut
carbon emission.
Professor King found that by simply switching to the cleanest cars on
offer, motorists could save 25 per cent of their fuel costs.
She also found that manufacturers needed to be encouraged to bring
new technology to the market.
And I am asking the European Commission today to set a tighter target
which reduces the cap on emissions from cars from 130 grams per
kilometre of carbon dioxide to 100 grams per kilometre of carbon
dioxide by 2020.
The road tax system should do more to support the use of more
carbon-efficient, and therefore less costly cars.
This will help reduce average carbon dioxide levels in new cars.
Firstly, from April 2009, I am proposing a major reform to Vehicle
Excise Duty to encourage manufacturers to produce cleaner cars and by
introducing new bands, there will be an incentive to encourage
drivers to choose the least polluting car.
And as a second stage for new cars, from April 2010 there will be a
new first-year rate based on carbon dioxide emissions of the car.
Cars that emit less than the proposed 130 grams per kilometre
European standard of carbon dioxide emissions will pay no car tax at
all in the first year.
But a higher first year rate will be introduced on the most polluting
cars.
Cutting taxes for those who cut carbon emissions.
But it is right that if people choose to buy a more polluting car
that they should pay more in the first year to reflect the
environmental cost.
The changes will provide a real incentive to manufacturers and
motorists.
We must encourage sustainable biofuels. Therefore the biofuel duty
differential will be replaced by the Renewable Transport Fuel
Obligation.
I am also reforming capital allowances for business cars to increase
the incentive to move to lower emitting cars.
Mr Deputy Speaker, today is no smoking day. From 6 pm today the duty
on tobacco will rise, adding 11 pence to the price of a packet of 20
cigarettes and 4 pence to the price of five cigars.
And to help people to stop smoking, we are continuing the 5 per cent
reduced rate of Value Added Tax on smoking cessation products beyond
30 June this year.
Mr Deputy Speaker, as incomes have risen, alcohol has become more
affordable.
In 1997, the average bottle of wine bought in a supermarket was #4.45
in today's prices. If you go into a supermarket today, the average
bottle of wine will cost about #4.
From midnight on Sunday, alcohol duty rates will increase by 6 per
cent above the rate of inflation. Beer will rise by 4p a pint, cider
by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle.
Alcohol duties will increase by 2 per cent above the rate of
inflation in each of the next four years.
Mr Deputy Speaker, it is only because I have taken these decisions on
alcohol and on closing tax loopholes that I am able to provide
additional support for families and lift more children out of
poverty.
And it also why I am now able to make two further announcements
whilst still meeting our fiscal rules.
As the House will know, the basic rate of income tax will fall by 2
pence in April.
Charities play a vital role. We will therefore implement a
transitional rate of 22 per cent, to allow them to continue to claim
gift aid at the current rate, delivering #300 million worth of relief
and will give charities the certainty they need for the next years.
I said that one of the key features of this Budget is fairness. I
also want to do more to help older people especially this year.
Mr Deputy Speaker, we are spending 11 billion stg more in real terms per
year on pensions with over half this extra money going to pensioners
on the lowest incomes.
From this April, as a result of changes made last year, a further
600,000 pensioners will be taken out of paying income tax.
The pension Credit now guarantees a minimum income of 124 stg per week
from April.
Before 1997 there was no Winter Fuel Allowance.
For this year I have decided to help pensioners who are facing
pressures such as higher energy bills. I will raise the winter fuel
payment for over 60s from 200 stg to 250 and for the over 80s from 300
stg to 400 stg. 9 million pensioner households will be better off.
CONCLUSION
Mr Deputy Speaker, this is a reponsible Budget to secure Britian's
stability in the face of global uncertainty.
I have made my choice.
Reponsible decisions not irresponsible, unfunded promises.
Fairness and opportunity for everyone in Britian.
To secure a strong, sustainable future.
And I commend it to the House.
ENDS
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