HM Treasury, Pre-budget Report 1999: Nov 1999
Stability and Steady Growth for Britain
The Government's central economic objective is to achieve high and stable levels of growth and employment. It has set the following long-term economic ambitions for the next decade:
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from a platform of stability, Britain will have a faster rise in productivity than its main competitors, as it closes the productivity gap;
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school and college leavers will gain the highest possible qualifications they can with the majority going on to higher education for the first time;
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there will be a higher percentage of people in employment than ever before; and
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child poverty will be reduced by half, as the Government moves towards its aim of abolishing child poverty in Britain within the next 20 years.
A continued commitment to stability and steady growth is necessary to ensure the best public services for Britain. The Government wants to hear what you think. A comments slip is attached to this leaflet. Alternatively, you can e-mail views to budget@hm-treasury.gov.uk A stable economy... The Government has taken the long term action necessary to create a stable economy and avoid a return to the damaging boom and bust of the past. The Bank of England has responsibility for setting interest rates in the best long-term interests of the economy, while the public finances are controlled according to two strict fiscal rules. The Government is pursuing policies to ensure stability across the UK, including action to promote housing market stability with recent increases in stamp duty and ending mortgage interest tax relief from April 2000. As a result:
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inflation is historically low and expected to remain close to its 21/2% target;
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the public finances are under firm control, with the Government on track to meet both its fiscal rules;
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economic growth has been stronger than expected and is forecast to rise from 13/4% in 1999 to 21/2-3% in 2000 and 21/4-23/4% in 2001 and 2002; and
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the number of people in work has risen by 700,000 since May 1997 to a record level.
Opening employment opportunity to all... Employment opportunities should be open to all. The Government's welfare to work policies have already helped 145,000 young people into jobs, with youth and long-term unemployment reduced by half. Tax and benefit reforms and the National Minimum Wage are increasing work incentives and making work pay. As announced in Budget 99, a new 10p rate of income tax was introduced in April 1999 (with the previous 20p rate withdrawn), and the basic rate will be cut to 22p from April 2000. The new Working Families Tax Credit, introduced in October, will boost the incomes of up to 1.4 million low and middle income families by an average of £24 a week. Together with the minimum wage and other reforms, it guarantees a minimum income of £200 a week for families with a full-time earner, and no family earning under £235 a week will pay net income tax. The PBR announces further measures to help people into work, including:
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more help for the unemployed aged 25 and over, through New Deal 25 Plus - extending to the over 25s the principles of the New Deal for under 25s;
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a new national network of job-broking call centres harnessing new technology to match people with jobs;
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enhancing the New Deal for lone parents, including inviting those on Income Support with children aged 3 and over to participate;
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a new Intermediaries Fund to support organisations in the most deprived inner cities, working to help the most disadvantaged into work; and
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nationwide extension of the Intensive Gateway approach preparing 18-24 year olds for work.
Raising productivity... The Government wants to create a more entrepreneurial Britain where enterprise is open to all. Britain's productivity performance has been poor, showing a substantial gap of up to a third with countries such as the US, France and Germany. This gap reflects long-standing weaknesses such as an unstable economy, weak competition, poor skills and low investment. Addressing these and raising Britain's productivity to match that of other economies offers the prospect of significant increases in living standards. Building on measures already introduced, including cutting corporation tax rates to the lowest of any major industrialised country, abolishing payable tax credits which favoured dividends over investment, and extending capital allowances for small and medium sized firms to encourage investment, the PBR sets out the next stage of reforms to meet the productivity challenge:
The productivity gap
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capital gains tax reforms to strengthen the incentives for entrepreneurial investment;
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a new £10 million package to boost enterprise skills in schools, and a £30 million package of measures to boost enterprise among disadvantaged groups and in deprived areas;
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further details of the new Research and Development tax credit to stimulate investment by small and medium-sized companies, and of Enterprise Management Incentives and Corporate Venturing Tax relief, to promote entrepreneurship and investment in high-tech companies; and
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the new All Employee Share Ownership scheme, proposed in Budget 99, to encourage workers to take a stake in the success of their companies.
Fairness for families and communities... The Government is committed to building a fairer and more inclusive society in which everyone can contribute to and benefit from economic prosperity. The Government attaches priority to supporting families with children and is committed to abolishing child poverty within 20 years. Measures already being introduced include the Working Families Tax Credit, higher levels of child benefit and the new Children's Tax Credit from April 2001 (following the withdrawal of the married couples allowance in April 2000). Together these measures will lift around 800,000 children out of poverty. The Government is also ensuring fairness for pensioners, including this winter's fivefold increase in the winter fuel payment to £100 for every pensioner household. Further measures to build a fairer society and ensure a fair tax system include:
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free TV licences for people aged 75 and over from autumn 2000;
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extending the 10p income tax rate to savings from April 1999;
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a new Children's Fund to support voluntary and community organisations in their work with children in poverty; and
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a new tax package to encourage giving to charities.
There is a strong ongoing health case for increases in tobacco taxes, but decisions on increases will be taken Budget by Budget. Revenues from any real increases will be spent on the NHS. The Government is also taking measures to crack down on tobacco smuggling, including cigarette pack marks. Protecting the environment... Growth must take place in a way which ensures effective protection of the environment. Global threats such as climate change must be limited, hazards such as poor air quality must be reduced and things that people value such as wildlife and the landscape should be protected. The Government is committed to meeting its environmental targets. Following Budget 99, the PBR:
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provides further details of the new climate change levy on the business use of energy, with an accompanying cut in employers NICs and increased support for energy efficiency measures; and,
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announces that decisions on petrol and diesel duties will in future be determined on a Budget by Budget basis, taking into account the Governments economic and social objectives, as well as the UKs environmental commitments. Revenues from any increases above inflation will go to a ring-fenced fund for modernising public transport and improving roads.
The public sector spends £350 billion a year: £6,000 for every man, woman and child in the UK. £100 billion a year is spent on education and the health service. A similar amount is spent on ensuring pensioners, families and children, people with disabilities and the unemployed get the help at the time of their lives when they most need it through the social security budget.
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