Budget 2013 statement
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20 March 2013
Mr Deputy Speaker, this is a Budget for people who aspire to
work hard and get on.
It’s a Budget for people who realise there are no easy
answers to problems built up over many years.
Just the painstaking work of putting right what went so badly
And together with the British people we are, slowly but
surely, fixing our country’s economic problems.
We’ve now cut the deficit not by a quarter, but by a third.
We’ve helped business create not a million new jobs, but one
and a quarter million new jobs.
We’ve kept interest rates at record lows.
But Mr Deputy Speaker, despite the progress we’ve made,
there’s much more to do.
Today, I’m going to level with people about the difficult
economic circumstances we still face and the hard decisions required to
deal with them.
It is taking longer than anyone hoped, but we must hold to
the right track.
And by setting free the aspirations of the nation, we will
Our economic plan combines monetary activism with fiscal
responsibility and supply side reform.
And today we go further on all three components of that plan:
monetary, fiscal, and supply side reform.
But we also understand something else more fundamental.
Our nation is in a global race – competing alongside new
centres of enterprise around the world for investment and jobs that can
Building a modern reformed state we can afford.
Bringing businesses to our shores with competitive taxes.
Fixing the banks.
Improving our schools, our skills, our infrastructure, and
For years people have felt that the whole system was tilted
against those who did the right thing: who worked, who saved, who
These are the very people we must support if Britain is to
have a prosperous future.
This is a Budget for those who aspire to own their own home;
who aspire to get their first job; or start their own business;
A Budget for those who want to save for their retirement and
provide for their children.
It is a Budget for our Aspiration Nation.
Mr Deputy Speaker, the forecast from the independent Office for Budget
Responsibility today reminds us of the economic challenge at home and
But it also reminds us that job creation and employment
remain brighter spots.
Since the Autumn Statement, the OBR has revised down again
its forecast for global economic growth and sharply revised down its
forecast for world trade.
Growth in the US and Japan was flat in the last quarter,
while the eurozone shrank by 0.6 per cent – the largest fall since the
height of the financial crisis.
The problems in Cyprus this week are further evidence that
the crisis is not over, and the situation remains very worrying.
I can confirm that people sent to Cyprus to serve our
country, in our military or government, will be protected in full from
any tax on their deposits.
The OBR have today sharply revised down their future growth
forecast for the eurozone, and expect it will remain in recession
throughout this year.
In their words, the “underlying situation remains very
I will be straight with the country: another bout of economic
storms in the eurozone would hit Britain’s economic fortunes hard
40 per cent of all we export, we export to the eurozone.
There is a huge effort across this government to grow
Britain’s trade with the fast growing parts of the world – and exports
to Brazil, India and China are up almost two thirds.
UK firms now export more goods to non-EU countries than to EU
countries: the first time this has happened in over two decades.
But we are still very exposed to what happens on the
Indeed last year, domestic demand was actually stronger than
forecast; but it was the weakness of net trade that helps account for
much of the weakness in GDP.
As the OBR make clear, “the unexpectedly poor performance of
exports is more than sufficient on its own to explain the shortfall”.
GDP for last year has turned out to be a little higher than
the OBR forecast in December, but this year, their output forecast is
reduced to 0.6 per cent growth.
Despite the recession in the eurozone, the OBR’s central
forecast today is that we avoid a second quarter of negative growth
here in the UK.
While less than we would like, our growth this year and next
year is forecast by the IMF to be higher than France and Germany.
It is a reminder that all western nations live in very
challenging economic times.
The OBR then expect the recovery to pick up to 1.8 per cent
in 2014, 2.3 per cent in 2015, 2.7 per cent in 2016 and 2.8 per cent in
Crucially, jobs are being created.
Indeed, in the words of the OBR, the picture on employment
“continues to surprise on the upside” in this forecast.
Mr Deputy Speaker, when we started the unavoidable task of
reducing the size of the public sector workforce, some in this House
expressed doubts that the private sector would be able to make up the
I’m glad to report to the House, that their lack of
confidence in British businesses has proved misplaced.
It is a tribute to the energy and enterprise of British
companies that for every one job lost in the public sector in the last
year, six jobs have been created in the private sector.
The employment rate has been growing faster than in the US
and three times as fast as in Germany.
And so despite the weaker GDP, at this Budget the OBR have
now revised up further their forecasts for employment.
Compared to this time last year, the OBR now expect 600,000
more jobs in 2013 – and there will be 60,000 fewer people claiming
We’ve seen more people in work than ever before – including a
record number of women.
A quarter of a million fewer workless households than two
And the unemployment rate is lower than when we came to
Mr Deputy Speaker, the deficit continues to come down.
We have taken many tough decisions to bring that deficit down
– and we will continue to do so.
The deficit has fallen from 11.2 per cent of GDP in 2009-10,
to a forecast of 7.4 per cent this year.
That is a fall of a third.
It then falls further to 6.8 per cent next year, 5.9 per cent
5 per cent in 2015-16.
Then 3.4 per cent the following year – reaching 2.2 per cent
These numbers all exclude the transfer of the Royal Mail
pension fund to the government which reduces the deficit still further
for this year alone.
Borrowing then falls from £108 billion next year and falls
again to £97 billion in 2014-15.
Then £87 billion in the last year of this Parliament.
Before falling again to £61 billion and £42 billion in the
following two years.
And to ensure complete transparency, the OBR publish the
numbers without the APF cash transfers.
They show, that on that measure too, borrowing is just
forecast to fall.
We committed at the start of this Parliament to a fiscal
mandate that said we would aim to balance the cyclically adjusted
current budget over the following rolling five years.
I can confirm that the OBR says we are on course to meet our
fiscal mandate – and meet it one year early.
However, the likelihood of meeting the supplementary debt
target has deteriorated.
Public sector net debt is forecast to be 75.9 per cent of GDP
79.2 per cent next year, and 82.6 per cent the year after.
85.1 per cent in 2015-16.
85.6 per cent in the year after.
Before falling to 84.8 per cent in 2017-18.
In response, there are those who would want to cut much more
than we are planning to – and chase the debt target.
I said in December that I thought that with the current weak
economic conditions across Europe that would be a mistake.
We’ve got a plan to cut our structural deficit.
And our country’s credibility comes from delivering that
plan, not altering it with every forecast.
And that’s why interest rates remain so low.
Our judgement has since been supported by the IMF, the OECD
and the Governor of the Bank of England.
I don’t propose to change that judgement three months later.
Mr Deputy Speaker, I’ve also had representations at this Budget for
measures that would add £33 billion a year extra to borrowing on top of
the figures I’ve announced.
It’s from people who seem to think that the way to borrow
less is to borrow more.
That would pose a huge risk to the stability of the British
economy, threaten a sharp rise in interest rates and leave the burden
of debts to our children and grandchildren.
I will not take that gamble with the future of this
Mr Deputy Speaker, the spending reductions we promised have
been more than delivered.
Welfare reforms have been legislated for and are taking
And here’s a clear sign of progress: the proportion of
national income spent by the state has fallen from 47.4 per cent three
years ago to 43.6 per cent today; and it’s on course to reach 40.5 per
cent at the end of the period.
We’ve set out the deficit plan – and we’re delivering that
Taken together, the measures I will announce today are
fiscally neutral overall.
Ask the British people and they’ll tell you: our problem as a
country is not that we’re taxed too little but that the government
spends too much.
I agree with them.
So the tax cuts in this Budget aren’t borrowed; they are paid
That’s our way – and it’s the only responsible way to lower
Mr Deputy Speaker, it is the central plank of our economic
plan that a tough and credible fiscal policy creates the space for an
active monetary policy.
Recovering from the financial crisis has exposed the
shortcomings of conventional monetary tools.
We in Britain have had to innovate and develop new tools.
So have other countries.
I confirm today that the Asset Purchase Facility will remain
in place for the coming year.
We are now actively considering with the Bank of England
whether there are potential extensions to the successful Funding for
Lending Scheme that will boost lending still further.
And we are also setting out our plans for lending from our
new Business Bank.
But I want to make sure that an active monetary policy plays
a full role in supporting the economy.
So I am today setting out an updated remit for the Monetary
Alongside it, we’re publishing a review of the monetary
This Budget confirms the primacy of price stability and the
inflation target in Britain’s monetary policy framework.
The updated remit reaffirms the inflation target as two per
cent as measured by the twelve month increase in the Consumer Prices
The target will apply at all times.
But as we’ve seen over the last five years, low and stable
inflation is a necessary but not sufficient condition for prosperity.
The new remit explicitly tasks the MPC with setting out
clearly the tradeoffs it has made in deciding how long it will be
before inflation returns to target.
To ensure a fuller communication between the Bank and the
Treasury, I am changing the timing of the open letter system so that
when inflation is above target, the Governor will write to me on the
day the minutes of the next MPC meeting are published to allow for a
more substantive exchange of views.
The new remit also recognises that the Monetary Policy
Committee may need to use unconventional monetary instruments to
support the economy while keeping inflation stable.
And it makes clear that the Committee may wish to issue
explicit forward guidance, including using intermediate thresholds in
order to influence expectations on the future path of interest rates.
For example, that is what the US Federal Reserve has now done
– making a commitment to keep interest rates low while unemployment is
high, provided inflation is not expected to rise too much.
This can help the economy because it gives families planning
their futures, and businesses wondering whether to invest, more
confidence that interest rates will stay lower for longer.
So I am asking the MPC to provide an assessment of how
intermediate thresholds might work in Britain, and to give that
assessment in its August 2013 Inflation Report.
That Report will be the first issued under the Governorship
of Mark Carney.
Whether intermediate thresholds are used will be an
operational matter for the independent MPC.
I can confirm Mervyn King and Mark Carney have both seen the
new remit and they have both agreed it.
Mr Deputy Speaker, active monetary policy can only operate
freely when securely anchored by credible fiscal policy.
That is the next component of our economic plan.
We have instituted new public spending controls in
When money is short, we make no excuses for the rigorous
financial management we have run across Whitehall.
Let me be clear with the House: that is one of the reasons
why we have got forecast borrowing falling in this year and next.
The traditional splurge of cash by departments at the end of
the financial year, just to get the money spent, has been curtailed.
And thanks to the tough financial control of my RHF the Chief
Secretary, government departments are forecast to underspend their
budgets by more than £11 billion this year.
If you want to bring borrowing down, then you have to control
spending – and that is what we have done.
Now we want to ensure departments have budgets that are more
closely aligned to what they actually spend.
So both next year and the year after, we will reduce resource
departmental expenditure limits by the equivalent to a 1 per cent
reduction for most departments.
The schools and health budgets will remain protected –
because our promise to our NHS is a promise we will keep.
Local government and police allocations for 2013-14 have
already been set out and will not be affected.
We also deliver in this coming year on this nation’s
long-standing commitment to the world’s poorest to spend 0.7 per cent
of our national income on international development.
We should all take pride, as I do, in this historic
achievement for our country.
As previously, the DfID budget will be adjusted to ensure we
don’t spend more than 0.7 per cent.
Mr Deputy Speaker, departmental budgets have yet to be set
for the year 2015-16, which starts before the end of this Parliament.
This will done in the Spending Round that will be set out on
I said last Autumn that we would require around £10 billion
of savings for that Spending Round.
I confirm today that we will instead be seeking £11.5 billion
of current savings.
We’ve got to go on making difficult decisions so Britain can
live within its means.
And because we make those decisions – we can get our deficit
down and focus on our nation’s economic priorities.
Total Managed Expenditure for 2015-16 will be set at £745
How the savings will be achieved will be a matter for the
Spending Round, but existing protections apply.
We’re also taking steps to help all departments achieve the
Together, my RHFs the Chief Secretary and the Minister for
the Cabinet Office have indentified that a further £5 billion of
savings in efficiency and cutting the cost of administration can be
This will go a huge way towards delivering the Spending Round
in a way that saves money but protects services.
So too will action on pay.
The Government will extend the restraint on public sector pay
for a further year by limiting increases to an average of up to 1 per
cent in 2015-16.
This will apply to the civil service and workforces with Pay
Local government and devolved administration budgets will be
adjusted accordingly in the Spending Round.
We will also seek substantial savings from what is called
These are the annual increases in the pay of some parts of
the public sector.
I think they are difficult to justify when others in the
public sector, and millions more in the private sector, have seen pay
frozen or even cut.
I know that is tough but it is fair.
In difficult times with the inevitable trade off between
paying people more and saving jobs, we should put jobs first.
However, there is one area of pay where we should be more
Today is also the tenth anniversary of the start of the Iraq
The awarding of a posthumous Victoria Cross to Lance Corporal
James Ashworth this week reminds us of the courage and sacrifice that
all who serve in our armed forces are still making to defend our
We will exempt our military from changes to progression pay.
We are also accepting in full from 1st May this year the
Armed Forces Pay Review Body’s recommended increase in the so-called X
Factor payment made to military personnel to recognise the particular
sacrifices they make.
And I can also announce that further awards from the LIBOR
banking fines have gone to good military causes, with money for Combat
Stress to help veterans with mental health issues and funds for
Christmas boxes for all our troops on operations this year and next.
Those who have paid fines in our financial sector because
they demonstrated the very worst values are paying to support those in
our armed forces who demonstrate the very best of British values.
Mr Deputy Speaker,
Ultimately as a country we will not be able to spend more on
the services we all value, from our NHS to our armed forces, or invest
in our infrastructure, unless we go on tackling the growth of spending
of welfare budgets.
The public spending framework introduced by the previous
government divided government spending into two halves: fixed
departmental budgets and what is called Annually Managed Expenditure.
Except in practice it was annually unmanaged expenditure –
and it includes almost the entire welfare budget as well as items like
debt interest and payments to the EU.
I can tell the House that according to the OBR forecast
today, the European Budget deal secured by my RHF the Prime Minister
has saved Britain a total of £3.5 billion.
We will now introduce a new limit on a significant proportion
of Annually Managed Expenditure.
It will be set out in a way that allows the automatic
stabilisers to operate – but will bring real control to areas of public
spending that had been out of control.
We will set out how more detail on how this new spending
limit will work at the Spending Round.
All decisions, on welfare, pay and departments are tough.
And they affect many people.
But if we didn’t take them then what is a difficult situation
for them and for the whole country would be very much worse.
Mr Deputy Speaker, active monetary policy and a responsible
fiscal policy are two components of our economic plan.
We also need supply side reform – to throw the full weight of
our efforts behind the entrepreneurial forces in our society.
Our fundamental overhaul of the planning laws are now helping
homes to be built and businesses to expand.
Our reform of schools, universities and apprenticeships is
probably the single most important long-term economic policy we’re
Our support for European free trade agreements with India,
Japan and the US is a priority of our foreign policy.
And we’re building the most competitive tax system in the
We now need to do more.
First, we can provide the economy with the infrastructure it
We’re already supporting the largest programme of investment
in our railways since Victorian times – and spending more on new roads
than in a generation.
We’re giving Britain the fastest broadband and mobile
telephony in Europe.
And the Treasury is now writing guarantees to major projects
from supporting the regeneration of the old Battersea Power Station
site to building the new Power Stations of tomorrow.
We’ve switched billions of pounds from current to capital
spending since the spending review.
But on existing plans, capital spending is still due to fall
back in 2015-16.
I don’t think that’s sensible.
So by using our extra savings from government departments, we
will boost our infrastructure plans by £3 billion a year from 2015-16.
That’s £15 billion of extra capital spending over the next
Because by investing in the economic arteries of this
country, we will get growth flowing to every part of it.
And public investment will now be higher on average as a
percentage of our national income under our plans than it was in the
whole period of the last Government.
In June, we will set out long term spending plans for that
long term capital budget.
And we will use the expertise of Paul Deighton, the man who
delivered the Olympics and who now serves in the Treasury, to improve
the capacity of Whitehall to deliver big projects and make greater use
of independent advice.
The second thing we can do to support enterprise is to give
our great regional cities and other local areas much greater control
over their economic destiny - and back sectors that are global
Private sector employment has been growing more quickly in
the North East, North West and Yorkshire than across the country as a
But we can do more.
So I accept Michael Heseltine’s excellent idea of a single
competitive pot of funding for local enterprise.
I also fully endorse the report of Doug Richard to make the
most our apprenticeships.
We have the second largest aerospace industry in the world.
For the first time in forty years we manufacture for export
more cars than we import.
Our agritech business is at the global cutting edge.
We’re backing international successes like these with £1.6
billion of long-term funding for the industrial strategy the Business
Secretary launched this week.
And today we build on our new tax reliefs coming in this year
for the creative industries like high-end television and animation with
new support for our world-class visual effects sector.
To help small firms, we’ll increase by fivefold the value of
government procurement budgets spent through the Small Business
We will fund the proposal to make growth vouchers available
to small firms seeking advice on how to expand.
And we’re putting new controls on what regulators can charge,
and giving the Pensions Regulator a new requirement to have a regard
for the growth prospects of employers.
Mr Deputy Speaker, a vital sector for our economy, and a cost
of doing business for everyone, is energy.
Creating a low carbon economy should be done in a way that
creates jobs rather than costing them.
The granting of planning permission yesterday at Hinkley
Point was a major step forward for new nuclear.
Today, with the help of my HF the Energy Minister, we also
announce our intention to take two major carbon capture and storage
projects to the next stage of development.
We’ll support the manufacture of ultra low emission vehicles
in Britain with new tax incentives.
The HM for Stoke on Trent Central has argued passionately and
in a non-partisan way about the damage energy costs are doing to his
city’s famous ceramics industry – and he’s persuaded me.
So we will exempt from next year the industrial processes for
that industry and some others from the Climate Change Levy.
And in the Spending Round we will provide support for energy
intensive industries beyond 2015.
For the North Sea we will this year sign contracts for future
decommissioning relief, the expectation of which is already increasing
But I also want Britain to tap into new sources of low cost
energy like shale gas.
So I am introducing a generous new tax regime, including a
shale gas field allowance, to promote early investment.
And by the summer, new planning guidance will be available
alongside specific proposals to allow local communities to benefit.
Shale gas is part of the future.
And we will make it happen.
Mr Deputy Speaker, we can help companies grow and succeed by
building infrastructure, backing local enterprise and supporting
But nothing beats having the most competitive business tax
system of any major economy in the world.
That is what this government set out to achieve.
That is what we’re delivering.
The accountants KPMG do a survey of investors that ranks the
most competitive tax regimes in the world.
Three years ago, we were near the bottom of that table.
Now we’re at the top.
But in this global race, we cannot stand still.
So today, we step up the pace.
Our Seed Enterprise Investment Scheme offers generous
incentives to investors in start ups.
My HF for Braintree and David Young have done a great job
helping promote it around the country.
They have asked me to extend the CGT holiday – and I will.
Employee ownership helps create an enterprise culture.
So we’re making our new employee shareholder status more
generous, with NICs and income tax relief.
And we’re introducing capital gains tax relief for sales of
businesses to their employees.
Companies that look after their employees, and help them
return to work after periods of sickness, will get new help through the
tax system too.
And we’re going to double to £10,000 the size of the loans
that employers can offer tax free to pay for items such as season
tickets for commuters.
This is a great idea from my HF for Witham, and I’m happy to
put it into practice.
My HR for Enfield North and others have put forward proposals
to help investment in social enterprises.
I have listened and we will introduce a new tax relief to
encourage private investment in these social enterprises.
Research and development is absolutely central to Britain’s
So today I’m increasing the rate of the above the line R
& D credit to 10 per cent.
Along with our new 10 per cent corporation tax rate on
profits from patents coming in next month, this will help make us one
of the most internationally attractive places to innovate.
I also want Britain to be the place where people raise money
Financial services are about much more than banking.
In places like Edinburgh and London, we have a world beating
asset management industry.
But they are losing business to other places in Europe.
We act now with a package of measures to reverse this decline
– and we will abolish the schedule 19 tax which is only payable by UK
Many medium sized firms and start-ups use the Alternative
Investment Market to raise funds to help them grow.
Many observers of the British tax system complain that it has
long biased debt financing over equity investment.
So today I am abolishing altogether stamp duty on shares
traded on growth markets such as AIM.
In parts of Europe they’re introducing a financial
Here in Britain we’re getting rid of one.
From April next year, this will directly benefit hundreds of
medium-sized UK firms, lowering their cost of capital and supporting
jobs and growth across the UK.
Mr Deputy Speaker, we also out compete the world with our
headline rate of corporation tax.
In Germany, the corporate tax rate is 29 per cent.
In France it is 33 per cent.
In the United States its 40 per cent.
Here in Britain we’ve cut corporation tax from the 28 per
cent we inherited to 21 per cent next year.
But I want to go further.
Today, I want us to send a message to anyone who wants to
invest here, to create jobs here, that Britain is open for business.
So in April 2015 we will reduce the main rate of corporation
tax by another 1 per cent.
Britain will have a 20 per cent rate of corporation tax – the
lowest business tax of any major economy in the world.
That’s a tax cut for jobs and growth.
We will have achieved in one Parliament in these difficult
times the largest reduction in the burden of corporation tax in our
And with it we will achieve major simplification of our
business tax system.
By merging the small company and main rates at 20p, we will
abolish the complex marginal relief calculations between them, and give
Britain a single rate of corporation tax for the first time since 1973.
As with previous reductions in the corporate tax rate, I do
not intend to pass the benefit onto to the banking sector – so I will
offset this reduction by increasing the Bank Levy rate next year to
0.142 per cent.
Mr Deputy Speaker,
Britain is moving to low and competitive taxes.
But we should insist people and business pay those taxes, not
aggressively avoid them or evade them.
That’s the right way to succeed in the global race.
Today, I am unveiling one of the largest ever packages of tax
avoidance and evasion measures presented at a Budget.
The details are set out in this Red Book.
They include agreements with the Isle of Man, Guernsey, and
Jersey to bring in over a billion pounds of unpaid taxes.
New rules to stop the abuse of partnership rules, corporate
tax losses and offshore employment intermediaries.
That’s another two billion pounds.
This year we’re giving Britain its first ever General
And we will name and shame the promoters of tax avoidance
My message to those who make a living advising other people
how aggressively to avoid their taxes is this:
This Government is not going to let you get away with it.
And this year, we are leading international action on tax
avoidance, through our Presidency of the G8, with the OECD and at the
We want the global rules governing the taxation of
multinational firms to be updated from the 1920s when they were first
written, and made relevant to the global internet economy of the twenty
This is the right and fair thing to do.
Mr Deputy Speaker, a tax system where people and businesses
pay what is expected of them is part of the glue that holds society
So too is the expectation that those who work hard, who play
by the rules, who save for their future and try to be independent of
the state are not undermined but supported.
So to the working parents struggling with the costs of
childcare, and the mother wondering whether it makes financial sense to
get a job, we offer this:
Tax free childcare.
The plans were set out yesterday.
New tax-free childcare vouchers for working families: 20 per
cent off the first £6,000 of your childcare costs for each child.
And increased childcare support for those low income working
families on universal credit.
And for those who aspire to put aside money for their
retirement: we offer this.
A simple, flat rate pension accessible to everyone and worth
£144 a week.
Any one pound you save, will be a pound you can keep.
We’re bringing forward the introduction of the new Single
Tier Pension to 2016.
It will help the low paid, the self-employed and millions of
women most of all.
Of course, if there’s no longer the old state second pension,
there’s no longer anything to contract out of.
For employers that means paying the same employer national
insurance as those without defined benefit schemes.
Private sector employers can adjust their pension benefits to
accommodate the extra cost;
Public sector employers will have to absorb the burden, as is
always the case with tax changes.
Any spending review in the next Parliament will, of course,
take the £3.3 billion cost into account.
As we have already made clear, public sector employees, and
the relatively small number of private sector employees in defined
benefit schemes, will from 2016 pay more national insurance then they
So they will pay the same rate of national insurance as the
rest of the working population, and in return, they will get a larger
state pension than before.
For example, someone who is 40 years old when the single tier
pension is introduced, and who has always been contracted out, will pay
an extra £6,000 in national insurance over the rest of their working
life – and in return get an extra £24,000 in state pension over the
course of their retirement.
That’s a fair deal.
And it’s a progressive pension reform.
We’ve also made clear before that the extra £1.6 billion
raised in employee national insurance will not be kept by the Treasury.
Mr Deputy Speaker, there’s another group of savers I want to
talk about today.
I am proud to be part of a government that has helped
compensate the policy holders of Equitable Life who had suffered a
But we’ve not extended help to those who bought their With
Profits Annuity before 1992.
Now we can.
I’d like to acknowledge the work of my HF for Harrow East on
behalf of these people.
We will make ex-gratia payments of £5,000 to those elderly
policyholders; and we’ll make an extra £5,000 available to those on the
lowest incomes who are on pension credit.
We’re not doing this because we’re legally obliged to; we’re
doing it because quite simply it’s the right thing to do.
Helping with aspiration also means helping those who want to
keep their homes instead of having to sell it to pay for the costs of
That’s what our new cap will deliver – as Andrew Dilnot
It’ll also come in in 2016.
It will be set to protect savings above £72,000, and we’ll
raise the threshold for the means test on residential care from just
over £23,000 to £118,000 that year too.
For decades politicians have talked of doing something for
savers and those who have to sell their homes to pay for care; and yet
nothing has been done.
Until this week.
And I want to do much more.
For unless we fire up the aspirations of the British people,
light the fires of ambition within our nation, we are going to be
out-smarted, out-competed and out-performed by others in the world who
are prepared to work harder for success than we are.
So this Budget makes a new offer to the aspiration nation.
And what symbolises that more than the desire to own your own
Today I can announce Help to Buy.
The deposits demanded for a mortgage these days have put home
ownership beyond the great majority who cannot turn to their parents
for a contribution.
That’s not just a blow to the most human of aspirations –
it’s set back social mobility and it’s been hard for the construction
This Budget proposes to put that right – and put it right in
a dramatic way.
Help to Buy has two components.
First, we’re going to commit £3.5 billion of capital spending
over the next three years to shared equity loans.
From the beginning of next month, we will offer an equity
loan worth up to 20 per cent of the value of a new build home – to
anyone looking to move up the housing ladder.
You put down a five per cent deposit from your savings, and
the government will loan you a further 20 per cent.
The loan is interest free for the first five years.
It is repaid when the home is sold.
Previous help was only available to those who were first time
buyers, and who had family incomes below £60,000.
Now help is available to all buyers of newly built homes on
Available to anyone looking to get on or move up the housing
The only constraint will be that the home can’t be worth more
than £600,000 – but this covers well over 90 per cent of all homes.
It’s a great deal for homebuyers.
It’s a great support for home builders.
And because it’s a financial transaction, with the taxpayer
making an investment and getting a return, it won’t hit our deficit.
The second part of Help to Buy is even bolder – and has not
been seen before in this country.
We’re going to help families who want a mortgage for any home
they’re buying, old or new, but who cannot begin to afford the kind of
deposits being demanded today.
We will offer a new Mortgage Guarantee.
This will be available to lenders to help them provide more
mortgages to people who can’t afford a big deposit.
These guaranteed mortgages will be available to all
homeowners, subject to the usual checks on responsible lending.
Using the government’s balance sheet to back these higher
loan to value mortgages will dramatically increase their availability.
We’ve worked with some of the biggest mortgage lenders to get
And we’re offering guarantees sufficient to support £130
billion of mortgages.
It will be available from start of 2014 – and run for three
And a future Government would need the agreement of the Bank
of England’s Financial Policy Committee if they wanted to extend it.
Help to Buy is a dramatic intervention to get our housing
For newly built housing, Government will put up a fifth of
And for anyone who can afford a mortgage but can’t afford a
big deposit, our Mortgage Guarantee will help you buy your own home.
That is a good use of this Government’s fiscal credibility.
In the Budget Book, we also set out more plans for housing:
- Plans to build 15,000 more affordable homes
- Plans to increase fivefold the funds available for
building for Rent
- And plans to extend the Right to Buy so more
tenants can buy their own home.
Mr Deputy Speaker,
People also have the aspiration to keep more of what they
That’s a difficult aspiration for any Chancellor to help with
– when economic times are tough and money is short.
But we’re doing the hard work to reduce current spending.
We’ve set out a tough package to raise money from tax
And that means that with this Budget we can stick to the path
of deficit reduction, increase capital spending, and still find ways to
Let me turn to duties.
We inherited a fuel duty escalator that would have seen above
inflation increases in every year of this Parliament.
We abolished the escalator and we’ve now frozen fuel duty for
This has not easy.
The government has forgone £6 billion in revenues to date.
But oil prices have risen again.
Families budgets are squeezed.
And I hear those who want me to do more to help them get by.
My HF for Harlow has again spoken up for his hard working
He’s been joined by many other HFs, like the Member for
Argyll and Bute.
We’ve all listened to the people we represent.
Today, I am cancelling this September’s fuel duty increase
Petrol will now be 13 pence per litre cheaper than if we had
not acted over these last two years to freeze fuel duty.
For a Vauxhall Astra or a Ford Focus that’s £7 less every
time you fill up.
Mr Deputy Speaker, there’s another duty escalator – the
annual two percent above inflation increases in alcohol.
We’re looking at plans to stop the biggest discounts of cheap
alcohol at retailers.
But responsible drinkers – and our pubs - should not pay the
price for the problems caused by others.
The sad fact is that we’ve lost 10,000 pubs in the UK over
the last decade.
Many HM’s have raised their concerns with me like my HF for
Bristol North West.
My HF for Burton and Uttoxeter in particular has been a
committed champion of the famous brewing industry that employs many of
I intend to maintain the planned rise for all alcohol duties
– with the exception of beer.
We will now scrap the beer duty escalator altogether.
And instead of the 3p rise in beer duty tax planned for this
year I am cancelling it altogether.
That’s the freeze people have been campaigning for.
But I’m going to go one step further and I am going to cut
beer duty by 1p.
We’re taking a penny off a pint.
The cut will take effect this Sunday night and I expect it to
be passed on in full to customers.
All other duties will remain as previously announced.
Mr Deputy Speaker,
Of course, freezing petrol duty and cutting beer duty will
not transform the finances of any family.
But it helps a little to have some bills that aren’t going
And it helps a lot to be able to keep more of the money you
earn before you pay tax on it.
This Government supports people who work hard and want to get
When we came to office, the personal income tax allowance
stood at under six and a half thousand pounds.
In two weeks time, the allowance will reach £9,440 with the
single largest cash increase in its history.
24 million taxpayers will see their income tax bill cut by an
Over 2 million of the lowest paid will be taken out of tax
In this Budget, the Government reconfirms its commitment to
raising the personal allowance to £10,000.
In fact, we go one better.
Mr Deputy Speaker, we said we would raise the personal
allowance to £10,000 by the end of the Parliament.
Today I can confirm we will get there next year.
From 2014, there will be no income tax at all on the first
£10,000 of your salary.
£10,000 of tax free earning.
That’s £700 less in tax for working families than when this
Government came to office.
Almost three million more of the lowest paid will pay no
income tax at all.
It’s a historic achievement for this government and for hard
working families across the country.
Mr Deputy Speaker, there is one final tax change I want to
tell the House about.
And it’s about jobs.
For in the end, aspiration is about living in a country where
people can get jobs and fulfil their dreams.
The ending of contracting out that I talked about generates
extra employee national insurance revenues for the Exchequer.
I want to put those revenues to good use.
I want to support jobs and the small businesses that create
And I want to do it with a reforming tax cut – in fact it’s
the largest tax cut in the Budget.
The cost of employing people is a burden on small firms.
And it is a real barrier to taking an extra person on.
To help create jobs and back small businesses in this country
I am today creating the Employment Allowance.
The Employment Allowance will work by taking the first two
thousand pounds off the employer National Insurance bill of every
It’s a tax off jobs.
It’s worth up to £2,000 to every business in the country.
And it will mean that 450,000 small businesses – one third of
all employers in the country - will pay no jobs tax at all.
For the person who’s set up their own business, and is
thinking about taking on their first employee – a huge barrier will be
They can hire someone on £22,000, or four people on the
minimum wage, and pay no jobs tax.
98 per cent of the benefit of this new Employment Allowance
will go to SMEs.
It will become available in April next year once the
legislation is passed.
And we’ll also make it available to charities and community
Today this Government is taking tax off jobs.
Mr Deputy Speaker, a new Employment Allowance.
A 20 per cent rate of Corporation Tax.
A £10,000 Personal Allowance.
Major achievements delivered by this Government in difficult
We understand that the way to restore our economic prosperity
is to energise the aspirations of the British people.
If you want to own your own home;
If you want help with your childcare bills;
If you want to start your own business;
Or give someone a job;
If you want to save for your retirement;
And leave your home to your children;
If you want to work hard and get on;
we are on your side.
This is a Budget that doesn’t duck our nation’s problems.
It confronts them head on.
It is a Budget for an aspiration nation.
It is a Budget for a Britain that wants to be prosperous,
solvent and free.
And I commend it to the House.
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Article Published/Sorted/Amended on Scopulus 2013-03-20 15:34:42 in Tax Articles