Budget 2011 statement by the Chancellor of the Exchequer
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Issued 23 March 2011
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Mr Deputy Speaker,
Last year’s emergency Budget was about rescuing the nation’s
finances, and paying for the mistakes of the past.
Today’s Budget is about reforming the nation’s economy, so
that we have enduring growth and jobs in the future.
And it’s about doing what we can to help families with the
cost of living and the high oil price.
We understand how difficult it is for so many people across
our country right now.
That we are able now to set off on the route from rescue to
reform, and reform to recovery, is because of difficult decisions we’ve
Those decisions have brought economic stability.
And without stability there can be no sustainable growth or
Without stability governments have to keep coming back to
their citizens for more – more taxes and more spending cuts.
In Britain, we do not have to do that today.
We inherited a record budget deficit.
But we have set out a credible, comprehensive plan to deal
We have had to undertake difficult measures.
But we have already asked the British people for what is
needed, and today we do not need to ask for more.
So this is not a tax-raising Budget.
But nor can we afford a giveaway.
Taken together the measures I will announce today are
fiscally neutral across the period.
This is a Budget built on sound money.
A Budget that encourages enterprise.
That supports exports, manufacturing and investment.
That is based on robust independent figures.
A Budget for making things not for making things up.
Britain has a plan.
And we’re sticking to it.
In recent months, many other countries have seen their
ratings downgraded and their borrowing costs soar.
Our country’s fiscal plans have been strongly endorsed by the
IMF, by the European Commission, by the OECD, and by every reputable
business body in Britain.
And for anyone who questions whether this matters in the real
world, to real businesses and families, consider this.
Market interest rates in Greece are 12.5%, in Ireland they
are close to 10%, in Portugal and Spain they are 7% and 5%.
Today our country’s market interest rates have fallen to
We have a higher deficit than Portugal, Greece and Spain, but
we have virtually the same interest rates as Germany.
This is our powerful monetary stimulus to our recovering
Stability. Credibility. Lower interest rates.
This is what we’ve achieved.
But stability is not enough.
So today, in addition to the Red Book, we are publishing the
Plan for Growth.
For this Budget confronts the hard truth that has been
ignored for too long.
Britain has lost ground in the world’s economy and needs to
In the last decade, other nations have reduced their business
tax rates, removed barriers to enterprise, improved education systems,
reformed welfare and increased exports.
Sadly the reverse has happened in Britain.
We gambled on a debt-fuelled model of growth that failed.
With the state now accounting for almost half of all income,
we simply cannot to go on like this.
Britain has to earn its way in the modern world.
Mr Deputy Speaker, I turn now to the forecasts.
Last November I told the House that the recovery was going to
be more challenging than recoveries from recessions in recent decades.
That is inevitable when we’ve had the sharpest fall in output
since the 1930s, the highest budget deficit in peacetime, and the
largest banking crisis in our entire history.
But I said that thanks to the course we have set, the
independent forecast was for our economy to grow in each of the next
five years, for unemployment to peak this year and then fall and for
employment to rise through this Parliament.
That remains the case in the independent forecast published
Those forecasts have been drawn up by the Office for Budget
This important change has transformed the way Budgets are put
So instead of Chancellors fixing the figures to fit the
Budget, they now have to fix the Budget to fit the
Yesterday, the legislation to put the Office for Budget
Responsibility on a permanent, statutory and independent footing
received Royal Assent.
I am sure that the whole House will want to thank Robert
Chote, Steve Nickell, Graham Parker, and their whole staff for the very
professional job they are doing.
Let me start with their growth forecasts.
It has been known for Chancellors in recent years to rattle
these off at great speed in the hope that no one will keep up.
I will not do that.
Although average quarterly growth this year is set to be
higher than was previously forecast, the annual forecast for 2011 has
been revised to 1.7%.
This the OBR attributes specifically to the weaker than
expected final quarter of last year, the rise in world commodity prices
and the higher-than-expected inflation in the UK.
However, the OBR point out that the effect, in their words,
“creates scope for slightly stronger growth in later years” than
So while they expect real GDP growth of 2.5% next year, they
forecast it will then rise:
To 2.9% in 2013;
To 2.9% in 2014;
Followed by 2.8% in 2015.
The European Commission has also this month published its
These show that the UK is forecast to grow more strongly in
the coming year than Spain, Italy, France, the average for the Eurozone
and the average for the EU.
All countries have to steer a course between two central
The risk of a European sovereign debt crisis on the one hand
and on the other the risk that comes from rising global commodity
Food prices around the world have increased by nearly 50%
since the beginning of last year.
Oil has risen 35% rise in just 5 months.
That is why the OBR expect inflation to remain between 4 and
5% for most of this year, before dropping to 2.5% next year and then to
2% in two years time.
I have today written to the Governor of the Bank of England
to confirm that the inflation target for the Monetary Policy Committee
will remain at 2%, as measured by the Consumer Prices Index.
I can also confirm that the Asset Purchase Facility set up by
my predecessor will remain in place.
One cause of current instability is the conflict inside
The whole House will praise the courage and professionalism
of our armed forces, who are trying to bring that conflict to an end
and save lives.
And I can confirm that the additional cost of military
operations will be met entirely from the Treasury reserve.
The House will also know that last week I authorised for the
UK to take part in a co-ordinated G7 currency intervention in support
of the Japanese Yen.
Our hearts go out to the Japanese people – and this is one
way we can help.
It is still too early to say what lasting impacts the
earthquake and tsunami will have on the world economy.
But this is an opportunity for me to report that we had
already decided to rebuild the UK’s foreign currency reserves, which
are at a historically low level.
We will purchase a range of high-quality assets – though
unfortunately, with the price of gold now at record highs, we will not
be able to replenish the gold reserves sold at record lows.
I turn now to the fiscal forecasts for our debt and deficit.
Borrowing to fund the deficit this year is now set to come in
at £146 billion, below target.
Then fall to £122 billion next year.
Then £101 billion the year after.
Then £70 billion in 2013-14.
Then £46 billion.
And £29 billion by 2015-16.
Inflation has had its impact but crucially the OBR assess
that next year’s structural deficit remains the same as forecast last
In other words, the size of the task of repairing Britain’s
finances is unchanged.
Our national debt, as a share of our national income, is
forecast to be 60% this year, before peaking at 71%, and then starting
to fall – reaching 69% by the end of the period.
This leads me to one of the central tasks of the OBR.
That of assessing the Government’s performance against its
stated budget goals – in an open and independent way, so that we avoid
repeating the disastrous experience of the so-called golden rule.
Our fiscal mandate is to achieve a cyclically-adjusted
current balance by the end of the rolling five year forecast period –
which is currently 2015-16.
We have supplemented that with a fixed target for debt: so
that debt should be falling as a proportion of GDP by the year 2015-16
I can report to the House that the OBR confirm that on their
central forecast we will meet both these objectives – a balanced
structural current budget and falling national debt by the end of the
Indeed, the forecast remains that we will meet both these
objectives one year earlier.
But, Mr Deputy Speaker, I said at the start that stability
and fiscal responsibility was not enough.
Our country has to compete if we are going to create growth
Britain has fallen behind many others in the world in the
We’ve dropped from 4th to 12th place in the global
And growth in our country has been so unbalanced.
Consider this staggering truth – during the boom years before
the bust, private sector employment actually fell in a region as
important as the West Midlands.
So today’s Budget is an urgent call to action for
Private sector growth must take the place of government
Prosperity must be shared across all parts of the UK.
Yes, we want the City of London to remain the world’s leading
centre for financial services, but we should resolve that the rest of
the country becomes a world leader in advanced manufacturing, life
sciences, creative industries, business services, green energy and so
This is our vision for growth.
Difficult decisions and major reforms are needed to make it
But the alternative is to accept Britain’s economic decline
and a continuing fall in living standards for our population.
And that is not an alternative anyone in this House should be
prepared to accept.
This Budget sets for Britain these four economic ambitions.
That Britain should:
- Have the most competitive tax system in the G20;
- Be the best place in Europe to start, finance and grow a
- Be a more balanced economy, by encouraging exports and
- And have a more educated workforce that is the most
flexible in Europe.
Let me set out the measures now that will achieve these
Here’s the truth – Britain used to have the 3rd lowest
corporate tax rate in Europe. It now has the sixth highest.
At the same time, our tax code has become so complex that it
recently overtook India to become the longest in the world.
Many people from Adam Smith to Nigel Lawson have set
out the principles of good taxation.
This Government declares these principles again today for the
Our taxes should be efficient and support growth.
They should be certain and predictable.
They should be simple to understand and easy to comply with.
And our tax system should be fair, reward work, support
aspiration and ask the most from those who can most afford it.
In July last year, we set up the Office of Tax Simplification
to provide independent advice on how to reduce the complexity of the
I want to thank Michael Jack and John Whiting for the work
they have done.
Following their recommendations, I can announce today that
this Budget abolishes no fewer than 43 complex reliefs.
This includes the ‘millennium gift aid system’ – which we
won’t need for another 989 years.
I have decided not to follow their advice to abolish the
Community Investment Tax Relief – and instead I encourage people to
take it up.
But this Budget at a stroke removes over 100 pages from our
tax code and begins the work of simplification.
In the last Budget, I announced that from next month welfare
payments and public service pensions would be up-rated in line with the
Consumer Prices Index.
I said at the time we should also consider up-rating the tax
system in the same way.
So from April 2012, the default indexation assumption for
direct taxes will move to CPI.
There will be protection through this Parliament for those
eligible for age-related, married couple and blind person’s allowances
– and for employers National Insurance Contributions.
The increase in the personal tax allowance already announced
will vastly exceed anything lost through employee NICs up-rating, and
that’s even before any further increases in that allowance.
This will bring coherence to the tax and benefit system, and
we look at moving indirect taxes onto the same basis when the fiscal
But there is one further step we should now undertake that
will dramatically simplify the tax system.
For decades, we have operated Income Tax and National
Insurance as two fundamentally different taxes and forced businesses
large and small to operate two completely different systems of
administration, with two different periods and bases of charge.
The resulting anomalies are legion.
And it imposes totally unnecessary costs and complexity on
employers, and costs the taxpayer in the extra burden it places on HM
Revenue & Customs.
So I am announcing today that the Government will consult on
merging the operation of National Insurance and Income Tax.
I am not proposing we extend National Insurance to
pensioners, or to other forms of income, or that we abolish the
Our purpose is not to increase taxes, it is to simplify them.
And this huge task will therefore require a great deal of
consultation and take a number of years to complete.
But it is time we took this historic step to simplify
dramatically our tax system and make it fit for the modern age.
Making our tax system more competitive is another challenge
for the times we live in.
Again, let’s face facts.
Other countries are quite deliberately making their tax
systems more competitive, and attracting multi-national companies away
from the UK.
We could stand there and do nothing.
But increasing the living standards of every hard pressed
family in the country depends on keeping those companies, and the jobs
and the investment and the tax revenues that come with them, here in
So we will go ahead with the highly competitive tax rate on
profits derived from patents in industries like pharmaceuticals.
We will fundamentally reform the complex rules for Controlled
Foreign Companies and make them more territorial.
We will introduce new rules that effectively apply an
ultra-competitive 5.75% rate on overseas financing income.
That will give us a far more attractive system than France,
America or Germany.
I want Britain to be the place international businesses go
to, not the place they leave.
But today I want to do even more.
So I can today announce that from April this year corporation
tax will be reduced not just by 1% as I previously announced but by 2%.
And it will continue to fall by 1% in each of the following
three years – taking our corporate tax rate right down to 23%.
16 per cent lower than America, 11 per cent lower than France
and 7 per cent lower than Germany – the lowest corporation tax rate in
Let it be heard clearly around the world – from Shanghai to
Seattle, and from Stuttgart to Sao Paolo: Britain is open for
And to ensure that this is not a net tax cut for banks, I am
adjusting the bank levy rate next year to offset its effect.
In each and every year of this Parliament our permanent bank
levy raises more than the one-year bonus tax of the last Parliament.
The most competitive tax system in the G20 is the first of
our economic ambitions.
The second is that Britain becomes the best place in Europe
to start, finance and grow a business.
Again, let’s face facts: we are not that today.
In the last decade, countries like Germany, Denmark, Finland
and the Netherlands have all overtaken us in the international rankings
That is not surprising when the total cost of regulation
imposed on business since 1998 is almost £90 billion a year.
So in today’s Plan for Growth we take action:
- £350 million worth of specific regulations will go –
including the Equality Act’s costly dual discrimination rules;
- Lord Young’s recommendations on health and safety laws will
be implemented in full;
- The no-win no-fee legal services that prey on employers
will be restricted;
- Existing regulation will be scrutinised by the public.
And from April, we are going to impose a moratorium exempting
all businesses employing fewer than ten people – and all genuine
start-ups – from new domestic regulation for the next three years.
We will take this fight against regulation to Brussels, where
my RHF the Prime Minister is this week recruiting other European allies
to ensure our continent doesn’t price itself out of the world.
And we are going to tackle what every government has
identified as a chronic obstacle to economic growth in Britain, and no
government has done anything about: the planning system.
Councils are spending 13 per cent more in real terms on
planning permissions than they did five years ago, despite the fact
that applications have fallen by a third.
Yes, local communities should have a greater say in planning,
but from today:
- We will expect all bodies involved in planning to
prioritise growth and jobs;
- We will introduce a new presumption in favour of
sustainable development, so that the default answer to development is
- We will retain existing controls on greenbelt – but we will
remove the nationally imposed targets on the use of previously
- And we will allow certain use class changes, introduce time
limits on applications and pilot for the first time ever auctions of
planning permission on land.
Cumbersome planning rules and bad regulation stand in the way
of new jobs.
So too does the shortage of finance.
Small businesses are the innocent victims of the credit
That is why we have agreed with the banks a 15% increase in
the availability of credit to small businesses.
But the lack of start-up capital has been a long standing
problem in the British economy.
Too often we have the great ideas in Britain but it’s other
countries that exploit them.
So today I announce sweeping changes to improve the
generosity, the simplicity and the reach of the Enterprise Investment
From April this year, income tax relief will increase from
20% to 30%.
Next year we will double the amount that any individual can
invest through the EIS, increase the size of company that can qualify
for investment – and raise the limit on the amount that can be invested
in a company by 400%.
And next week my RHFs the Prime Minister and Business
Secretary will launch ‘Start-Up Britain’, a new campaign by
entrepreneurs for entrepreneurs, supported by many of Britain's most
successful firms, that will help people start and grow businesses.
Today we can add to that help.
From 6th April this year I am doubling the size of
Entrepreneurs Relief to £10 million.
Let Britain be the home of enterprise in an age when people
can invest all over the world.
It’s time too that we ended the uncertainty around the
taxation of non-domiciles.
They are very welcome in this country, but I’ve always
believed that they should pay something in return for their special tax
The last government followed our advice and introduced a
£30,000 charge for those who had lived here for seven years.
I think we can ask more from those who’ve been here even
longer, so I’m increasing the charge to £50,000 for non-doms who have
been in the country for 12 years.
This will raise over £200 million in the coming years.
But in return – and to encourage investment in our country –
I am removing the tax charge when non-doms remit foreign income or
capital gains to the UK for the purpose of investing in a British
And we will introduce a statutory residence test.
To end the speculation and uncertainty, and to provide
stability, I confirm that I will be making no further changes to the
taxation of non-domiciles in this Parliament.
In an age when businesses and capital and people can
increasingly move anywhere, high tax rates can do real damage.
That’s true for high corporate taxes.
It’s true for high personal tax rates too.
They crush enterprise, undermine aspiration and often
undermine tax revenues as people avoid them.
I am clear that the 50 pence tax rate would do lasting damage
to our economy if it were to become permanent.
That is why I regard it as a temporary measure.
Just as my Labour predecessor, the RHM for Edinburgh South
West, did when he introduced it.
I’ve said before that now wouldn’t be the right time to
remove it, when we’re asking others in our society on much lower
incomes to make sacrifices.
For we’re all in this together.
But I think it’s sensible to see how much revenue it actually
I’ve asked HMRC to find out the truth when the
self-assessment forms start coming in.
Of course, taxation must be fair. It’s right that the
wealthiest should pay more than others.
And it’s especially wrong when they avoid taxes.
I’ll have more to say later on tax avoidance and evasion, but
there’s one area that needs extra work in the coming months, and that’s
on the taxation of very high value property, where evasion and
avoidance are widespread and some of the wealthiest are not paying
their fair share.
So as well as reviewing revenues from the 50p tax rate, we
will also be redoubling our efforts to find ways of ensuring that
owners of high value property cannot avoid paying their fair share.
Help for small businesses. A boost for enterprise. Reforms to
planning. Cuts to existing regulations and a moratorium on new ones.
All part of our ambition to make Britain the best place in
Europe to start, grow and finance a business.
Our third ambition is to encourage investment and exports as
a route to a more balanced economy for Britain.
In the Plan for Growth we publish today, we set out specific
measures we can take to help a wide range of businesses.
In life sciences, where we will radically reduce the time it
takes to get approval for the clinical trials.
In our digital and creative industries, where we will improve
the intellectual property regime.
In our professional and business services, one of our unsung
success stories, we will reform our burdensome money laundering regime,
promote the UK as the global centre of legal arbitration, and launch a
new trusted business visa service.
Our retail sector includes many small shop keepers anxious
about the impact of coming business rate rises.
The last government planned that the current rate relief
holiday for small businesses should end in October this year.
I don’t think that would be right.
So I can announce that, at a cost to the Exchequer of £370
million, I will extend the rate holiday for small businesses for
another year – to October 2012.
We will also take action to help the construction industry.
Stamp Duty will now be levied on the mean value of the houses
being purchased within a portfolio – not the bulk cost.
And Real Estate Investment Trusts will be simplified to
But average mortgage deposits are close to 30% and this puts
home ownership beyond the reach of many many families.
This is not fair.
So I can announce that – from the proceeds of this year’s
bank levy – we will fund a £250 million commitment to first-time
A new shared equity scheme, First Buy, will be available for
first-time buyers who want to purchase a newly built property, but who
cannot afford the high deposits.
This will help 10,000 families get on to the housing ladder
for the first time.
The previous government intended to end the temporary changes
to the Support for Mortgage Interest scheme next January – instead we
will extend it for another year.
That will reduce mortgage arrears for around 100,000
Mr Deputy Speaker, manufacturing is crucial to the
rebalancing of our economy.
Over the last decade, the share of the economy accounted for
by financial services increased by over two thirds – while
manufacturing’s share fell by almost a half.
Under this Government manufacturing is now growing at a
record rate – and 14,000 more jobs have been created in the sector in
the last 3 months.
To help this continue, the Government announces plans today
- Make our export promotion more entrepreneurial and create
new export credits to help smaller businesses;
- Launch Britain’s first Technology and Innovation Centre for
- And fund a further nine new university centres for
Science is one area where Britain already has an advantage
over many other countries – and it is central to our future as a place
to create businesses.
That’s one reason why I protected the science budget from
cuts last year.
I can tell the House that I have been able to find, again
from this year’s extra bank levy, an additional £100 million to invest
this year in new science facilities at:
- The Babraham Research Campus in Cambridge;
- The Norwich Research Park for environmental and life
- And the International Space Innovation Centre at Harwell;
- The National Science and Innovation Campus at Daresbury.
But if Britain is really to become a home of innovation then
we want research and development to take place not just in our great
universities, but in our smaller businesses too.
One of our greatest high tech innovators, James Dyson, has
urged me to increase the support they get.
I have listened to him, and gone even further than he
From April this year the small companies Research and
Development Tax Credit will rise to 200% – and from next year it will
rise again to 225%.
We also want to encourage manufacturers to invest in the
latest machinery and technology.
So I propose to double the limit on the capital allowances
for short life assets from four years to eight years.
And the allowance for the renovation of business premises in
assisted areas – which was due to expire next year – we will extend for
a further five years.
Supporting the private sector across the whole of the United
Kingdom is central to our economic ambitions.
Savings in the Transport Department mean that we can also
afford £200 million of additional investment in our regional railways.
We will go ahead with the £85 million Ordsall Chord scheme,
linking Manchester’s Victoria and Piccadilly stations and significantly
reducing journey times between Liverpool and Leeds.
We can commit to – and I know many HMs have been calling for
this – the Swindon to Kemble redoubling scheme. And this will
complement our electrification of the Great Western Main Line to Wales.
And we can find another £100 million to help councils repair
the winter potholes on our roads.
Helping all parts of our country succeed is also the purpose
behind the new Enterprise Zones we launch today.
Mr Deputy Speaker there has been reports that we would be
able to fund 10 new Enterprise Zones.
Today I confirm that instead we will fund instead 21 new
Businesses will get up to 100% discount on rates, new
superfast broadband and the potential to use enhanced capital
allowances in zones where there is a strong focus on manufacturing.
In return for radically reduced planning restrictions, we
will let local authorities keep all business rate growth in their zone
for a period of at least 25 years to spend on development priorities.
The first ten Enterprise Zones will be in urban areas of
highest need but also potential. In:
- Birmingham and Solihull;
- Greater Manchester;
- The Tees Valley:
- The Bristol area;
- The Black Country;
- Derbyshire and Nottinghamshire;
- And Sheffield.
Tomorrow, my RHFs the Prime Minister and Deputy Prime
Minister will announce some of the specific locations of these new
And I confirm that a further Zone will be located in London –
where I have asked the Mayor to choose a suitable site.
A further ten Enterprise Zones will be announced in the
I want Local Enterprise Partnerships all over the country to
come forward with proposals.
Responsibilities are devolved in Northern Ireland, Scotland
and Wales, so we will work with the administrations so that they too
can enjoy the benefits of this policy.
In Northern Ireland, tomorrow the Treasury will publish a
paper on how we help their private sector to grow.
To deal with the unique issues posed by the Irish Republic’s
business tax regime, it considers the case for Northern Ireland having
an even lower rate of corporation tax than the rest of the
I look forward to engaging with all parties there on the way
There is one other particular issue that affects a specific
part of our country.
And that is the very high water bills for customers in the
South West, because of the geography there, particularly for those on
So we will come forward with public money to help bring their
Mr Deputy Speaker, let me turn now to opportunity presented
by the green energy revolution – and our determination to be the
greenest government ever.
We’ve already announced our ambitious Renewable Heat
Incentive and support for low emission cars, and changes to the company
car tax regime today increase that support.
Our Green Deal to reduce the energy bills for homes will be
introduced next year, and I now confirm that we will act to incentivise
and encourage its take up.
We are pioneering new Carbon Capture and Storage technology
with £1 billion already provided – and future projects will be funded
out of general spending rather than a complex new levy.
But we need to take two further, bold steps if we are to make
the green energy revolution a reality.
First, as I have long-argued, investment in green energy will
never be certain unless we bring some stability to the price of carbon.
Today we become the first country in the world to introduce a
carbon price floor for the power sector.
The price will start at around £16 per tonne of carbon
dioxide in 2013 and move to a target price of £30 per tonne in 2020.
This will provide the incentive for billions of pounds of new
investment in our dilapidated energy infrastructure.
To ensure customers get a fair deal, we will closely follow
developments in the energy sector in the light of the OFGEM review
published on Monday.
At the same time I am extending the Climate Change Agreements
to 2023, and increasing the Climate Change Levy discount on electricity
for those who sign up from 65% to 80% from April 2013.
This will help our most energy intensive industries.
Green taxes will increase as a proportion of our total tax
revenues, as we promised.
The second bold step we take today is the creation of the
Green Investment Bank, to support low-carbon investment where the
returns are too long-term or too risky for the market.
We’ve already committed a billion pounds to it.
Today I commit two billion pounds more, funded from asset sales and
underwritten by the Treasury.
This will enable the Green Investment Bank to start operation
one year earlier than planned – in 2012.
It will leverage an additional £15 billion of private sector
investment in green projects over this Parliament.
I can also confirm today that from 2015-16, and subject to
our overall debt target being met, we will allow the Green Investment
Bank to borrow and invest in a better future.
So a Green Investment Bank with its resources trebled. A new
Carbon Price floor. New capital allowances for manufacturing. New
support for homebuilders and first-time home buyers.
An economy where the growth happens across the country and
across all sectors.
That is our ambition.
And leads me to this fourth ambition.
To create a more educated workforce that is the most flexible
Britain’s working age population has lower skills than the
populations of America, Germany and France.
That’s probably the biggest problem facing our economy in the
That’s why we’re undertaking far-reaching reform of our
schools and universities, and funding a Pupil premium and additional
early years support for our most disadvantaged children in poverty.
That is why we commissioned Alison Wolf’s impressive report.
The Government is committed to funding new University
Technical Colleges which will provide 11-19 year olds with vocational
training that is among the best in the world.
The curriculum is being developed in close co-ordination with
both local universities and leading employers – and I commend Ken Baker
for getting these new colleges up and running in our manufacturing
To date the Government has announced that it will fund 12 new
University Technical Colleges.
I can tell the House we will provide funding to double that
number to at least 24.
We will also deal directly with the challenge of youth
unemployment that has been on a steady rise for the last seven years,
and give people direct contact with the work place.
Instead of 20,000 young people benefiting from our new work
experience scheme, as we planned, we will increase that number fivefold
– to 100,000 places over the next two years.
In Austria, Germany and Switzerland around one in four
employers offer apprenticeships.
In England fewer than one in ten do.
That’s got to change. Last year, my RHF the Schools
Minister published a Skills Strategy and confirmed the largest ever
expansion in adult apprenticeships.
Today, I am funding another 40,000 apprenticeships for young
There are currently only 1,500 higher level apprenticeships
across the whole of England. This Budget provides for 10,000
That brings a total of 250,000 more apprenticeships over the
next four years, as a result of this Government’s policies.
A Government backing what works, real training, secure jobs,
Mr Deputy Speaker, we shouldn’t talk about those at the start
of their working life – without also talking about those who are coming
to the end of their working lives and looking to retirement.
I am very proud that it was this Coalition Government that
took the decision to re-link the basic state pension to earnings – and
guarantee its increase through a triple lock.
This would simply not have been affordable – as Adair
Turner’s report argued – without an increase in the State Pension Age.
The State Pension Age is set to rise to 66 by 2020.
I can tell the House that we will now seek – hopefully with all-party
support – a new, more automatic mechanism for future increases in the
State Pension Age based on regular, independent reviews of longevity.
This is another major reform that will help Britain live
within her means.
We also need to make sure that our public service pensions
are both fair to those who give their working lives to help others, and
fair to the taxpayers who have to fund them.
Today we publish the result of our consultation on the
discount rate, which shows that a more appropriate rate would be
inflation plus GDP growth.
This reinforces our case for increasing the employee
contributions by an average of 3 percentage points.
Indeed, the new discount rate could be used to justify
further contribution rises.
As part of the wider reforms, I am not proposing to ask for
more than the 3 percentage point average.
John Hutton has now completed his final report, which looks
at the pension benefit.
I am sure Members in all parts of this House will want to
thank him for a very impressive piece of work.
I confirm today that the Government accepts Hutton’s
recommendations as a basis for consultation with public sector workers,
unions and others.
There should be no cherry-picking on either side.
I believe this House should also recommend similar changes to
the pensions of MPs.
And we should also address the state pension system, which
has become unbelievably complex.
If people can’t work out what they’re going to get in
retirement, or how much will be clawed back by the means-tests – then
they can’t work out what they need to save.
So the Pensions Minister, the Pensions Secretary and I have
worked together to develop options including a new single-tier pension.
It would be simple; it would be based on contributions; it
would be a flat-rate, so people know what to expect.
And it would cost no more than the current system.
We currently estimate this new single-tier state pension
would be worth around £140 per week.
It will not apply to current pensioners – and it will take
years fully to come into effect.
As with the other major reforms I have announced today to
simplify our tax system, improve our economic performance and reform
our public sector pensions – this Government is doing the right thing
for the long term.
The most competitive corporate taxes.
The best place to start-up and run a business.
An investing, exporting, greener more balanced economy.
A better educated workforce.
A fairer pensions system.
These are our ambitions for Britain.
With the measures to match.
Mr Deputy Speaker, let me now turn to personal taxes and
And let me start by noting that a society should not just be
judged by the strength of its economy, but also the compassion of its
The Culture Secretary and I have been working on a series of
substantial reforms that will support giving, from the largest
donations to the coins collected in the charity bucket.
First, we will dramatically simplify the administration of
Instead of asking charities to submit a written record of
every donation made, we will by 2013 pay for a much easier online
Second, we will encourage wealthy people in our society to
give even more.
The Gift Aid benefit limits will be increased from £500 to
£2,500 so that charities and museums can say thank you properly.
We will consult in the coming year on how to encourage the
donations of pre-eminent works of art and historical objects to our
nation in return for a tax deduction.
And we will introduce from April next year this major change
to our inheritance tax system.
If you leave 10 per cent or more of your estate to charity,
then the Government will take 10 per cent off your inheritance tax
Let’s be clear. No beneficiaries will be better
Just the charities. To the tune of £300 million.
I want to make giving 10% of you legacy to charity the new
norm in our country.
The third reform we make to the charitable taxes is not about
the biggest donations, but the smallest.
We will introduce a new scheme where Gift Aid can be claimed
on small donations, up to a total of £5,000 a year per charity, without
the need for donors to fill in any forms at all.
That means Gift Aid on the contents of the collecting tin and
the street bucket.
100,000 charities will benefit to the tune of £240 million.
Together, these represent the most radical and most generous
reforms to charitable giving for more than twenty years.
Do the right thing for a charity, and the Government will do
the right thing by you.
It’s a big help for the Big Society.
But our charity does not extend to those in our society who
seek to avoid paying their fair share of taxes.
Tax avoidance and evasion mean that we have to ask more from
And that is not fair.
Unfortunately, not enough has been done in recent years to
tackle this injustice. HMRC estimate that £14 billion was lost through
avoidance and evasion in 2008.
Today we publish our new strategy paper on Tackling Tax
Avoidance and we take specific measures to shut down the open abuses
that have been allowed to continue for too long.
We will close down three forms of Stamp Duty Land Tax
avoidance, tighten capital gains rules for companies – and end the
practice of disguised remuneration, which sees highly paid employees
offered tax-free, lifetime loans that are never repaid.
And we’re going to tackle the exploitation of low value
consignment relief that has left our high street music stores fighting
a losing battle with warehouses in the Channel Islands.
In total, on the numbers audited by the independent OBR, the
tax avoidance measures in this Budget raise around £1 billion a year –
that’s £4 billion over the Parliament.
We are doing more today to clamp down on tax avoidance than
in any Budget in recent years.
And that gives us more resources, in a fiscally neutral
budget, to help those families who do pay their taxes – but who are
struggling with the daily cost of living.
We have already taken steps to help from this April.
I am glad to report that following measures in my Budget last
year, every local authority in England has chosen to freeze council tax
in the coming year.
Compared to the amount council tax could rise by, this freeze
will save a family in an average band D property £72 a year.
In two weeks time the child tax credit for lower income
families will increase by an additional £255.
I can confirm today that in the coming year all workers in
the armed forces, prison service, NHS, teachers and civil servants
earning £21,000 a year or less will receive a pay uplift of £250.
As I said last year, the National Insurance rate rise which
the last Government announced will have to go ahead.
But because we have increased the threshold, it will actually
be cheaper to employ people on incomes of less than £21,000 than it is
That’s how we’ve stopped Labour’s jobs tax.
And anyone earning less than £35,000 a year will also be
better off because in 14 days’ time the personal income tax allowance –
the amount people can earn tax free – will go up by £1,000.
That’s the largest rise in history.
That means in real terms around £160 extra per year, or £200
in cash terms, for 23 million taxpayers.
The Coalition Agreement commits this Government to real
increases in the personal allowance each and every year.
And sets this country the goal that no one earning less than
£10,000 should be caught in the income tax net.
This Budget today takes another step towards that valuable
I can confirm that from April next year the personal tax
allowance will increase by a further £630, to £8,105.
That’s another real increase of £48 extra per year, or £126
in cash terms.
Together with this year’s rise, a total of £326 extra money
each year for those working hard to pay for their family’s needs.
And it means, just ten months into office, this coalition
Government has taken 1.1 million low paid people out of tax altogether.
And one more thing.
Last year, we restricted the allowance increase to basic rate
taxpayers. This year we have not.
The result is that there will be no more people pulled into
the higher rate tax band as a result of this Budget.
Mr Deputy Speaker, let me turn to excise duties.
First, Air Passenger Duty.
We hoped we could replace the per passenger tax with a per
We have tried every possible option, but have reluctantly had
to accept that all are currently illegal under international law.
So we will work with others to try to get that law changed.
In the meantime, we are consulting today on how to improve
the existing and rather arbitrary bands that appear to believe that the
Caribbean is further away than California.
We will also seek to bring private jets, which pay no duty at
all, into the scope of taxation.
The wealthiest should not escape the tax the ordinary
holidaymaker has to pay.
And I can tell the House that with the hefty duty rise last
year, and with the cost pressures on families, we think it would be
fair to delay this April’s Air Passenger Duty rise to next
Let me turn to duties on alcohol.
We have already announced plans to increase duty on the
strongest beers and cut in half the duty paid on low alcohol beers.
Beyond that I can tell the House I have no further changes to
announce to the rates of alcohol duty put in place by the previous
As usual these changes will come in at midnight on Sunday.
As announced by my predecessor, tobacco duty rates will
increase by 2 per cent above inflation.
However, it is clear that the structure of the tobacco duty
regime is being exploited to produce cheaper cigarettes.
So we will change the regime to narrow the differential
between these lower cost brands and the rest, and between cigarettes
and hand-rolled tobacco.
This will reduce smoking and improve our nation’s health.
These tobacco duty changes will come into effect at 6pm this
I turn now to other excise duties.
Rates of vehicle excise duty will increase by inflation only
– and we will freeze rates for Heavy Good Vehicles to help our
I am also proposing to increase the Approved Mileage
This mileage rate has not increased at all since 2002, making
those who depend on their car for work increasingly worse off.
It will now increase from 40 pence to 45 pence per mile.
And I can tell the House that we will extend this relief to
cover volunteers travelling as passengers – as charities and others
have been calling for over many years.
All other duty rises will remain exactly as planned by the
Except Fuel Duty.
The price of petrol has become a huge burden on families.
In the last 6 months, the cost of filling up a family car
such as a Ford Focus has increased by £10.
This rise has also hit businesses hard, especially small
And it is important that when shocks like the steep rise in
the oil price occur, a responsible government is able to listen and
Let’s be clear about what’s within our control and what is
not – so we don’t raise false hopes.
British Governments are not in charge of the world’s oil
As we’ve seen, events like those in the Middle East can push
the cost of petrol at the pump higher.
But British Governments are in charge of the duty we levy on
And the previous Cabinet put in place before they left office
a new fuel duty escalator that involved seven fuel duty increases.
Three have already taken place, adding just over 3p to the
price of petrol.
The third step on the escalator is due to come into effect
next week, and that would add almost another 5p to the price of a litre
I have made it clear that I would listen to the concerns put
to me by so many people.
Many have suggested that we should use the extra revenues we
automatically get from the North Sea.
It’s true that they go up when the oil price rises, but the
OBR confirms that rising oil prices also cause other tax revenues
across the rest of the economy fall by a similar amount.
I am not prepared to undermine the public finances like
Others in this House have suggested that we create a separate
VAT rate for petrol.
The Treasury has examined this proposal.
It wouldn’t fully offset their 5p rise that’s coming.
It would take six years to come into effect.
And that’s because it turns out to be illegal.
So I have decided to reject this approach and do something
The North Sea Oil tax regime was most recently changed in
2006, when the price of oil stood at $66. It is now almost
double that amount.
That means the oil companies are making unexpected profits on
oil prices that are far higher than those they based their investment
Other oil-producing countries have a tax regime that
automatically regulates returns when prices rise.
We do not – and the North Sea is too mature to introduce such
a regime now.
Instead, we can do something else.
We can introduce a Fair Fuel Stabiliser.
From tomorrow the supplementary charge levied on oil and gas
production will increase from 20% to 32%.
Even after this, profits on a barrel of oil are forecast to
be higher in the next five years than in the last 5 years.
That will raise £2 billion additional revenue.
And we will use the new tax money to do this.
First, we will delay the inflation rise in duty planned for
next week until next year – and also delay the April 2012 inflation
rise until the following summer.
Second, the fuel duty escalator that adds an extra penny on
top of inflation every year will be cancelled – not just for this year,
or next year – but for the rest of this Parliament.
But I don’t want important investment in the North Sea lost.
So if the oil price sustains a fall below $75, and we will
consult on the precise figure, we will reintroduce the escalator and
reduce the new oil tax in proportion.
That is how it will work. No escalator when the oil
price is high. No extra tax on the profits of North Sea oil companies
if the oil price falls and stays low.
It’s a Fair Fuel Stabiliser.
And the result is this for Britain’s hard-pressed families.
I’ve made sure there will be no fuel duty rise this year.
I have cancelled the fuel duty escalator when the oil price
And one final thing.
As well as stopping these fuel duty rises I am today cutting
fuel duty by 1 penny per litre.
This will take effect in petrol stations from 6pm tonight.
I know that by itself this will not end the pressure on
But we’ve done what we can to help.
Help for families.
Help for businesses.
A Government that listens and helps.
Mr Deputy Speaker,
There were some who said that this year my job was to help
families with the cost of living.
There were others who said ‘no’, my task was to back
enterprise, support business and undertake far-reaching reform to help
the economy grow.
It is the central understanding of this Government – and core
to our strategy – that these are not two separate tasks.
They are one and the same thing.
We are only going to raise the living standards of families
if we have an economy that can compete in the modern age.
So this is our plan for growth.
We want the words:
‘Made in Britain’
‘Created in Britain’
‘Designed in Britain’
‘Invented in Britain’
To drive our nation forward.
A Britain carried aloft by the march of the makers.
That is how we will create jobs and support families.
We have put fuel into the tank of the British economy.
And I commend this Budget to the House.
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