HM TREASURY 8
17 March 1998
______________________________________________________________
FAIRNESS IN THE BUDGET
To help create a fairer society, Chancellor Gordon Brown today
announced measures to give more help to those who need it, and
to ensure everyone pays their fair share.
As well as encouraging work and enterprise, this is a Budget
with a targeted package of tax and expenditure measures to
improve fairness for:
- Children - including increases in child benefit, together
with increases in income support and Working Family Tax
Credit to help those most in need.
- Families - Introduction of the Working Family Tax Credit
to help make work pay for families on low incomes.
- Women - including the childcare tax credit within the
Working Family Tax Credit to help meet child care costs.
- Future generations and the world in which we live -
including a package of measures for the transport sector
to help reduce both urban air pollution and greenhouse
gas emissions.
- Savings and investment - details announced of the new
savings account.
See HMT PNs 3,9, 10 and 13, and IR PN 2
Paying a fair share
To ensure everyone pays a fair share, the Chancellor announced
today several measures to secure the tax base. (See IR PNs 35
and 40, CE PN 8)
Distributional Effects of the Budget
The Budget delivered today by the Chancellor helps families
with children in particular: by directly targeting money at
children in poverty, and by helping to make work pay.
Helping Children...
This Budget helps to ensure that everyone gets a fair start in
life. Figure 1 (not available in ascii versions) shows the
average percentage gain in disposable income that households
will get over the next two years as the measures announced
today are implemented.
[Figure 1 HMT8-1.GIF]
On average, families will see a real increase in their
disposable income of 100 pounds a year from these changes.
Poorer families will tend to gain more - the poorest 20 per
cent of households will gain an average of 200 pounds a year.
The Budget directs resources at children. Families with
children will gain an average of 300 pounds a year.
Poverty in childhood often leads to poverty in later life.
This Budget helps to tackle child poverty by directing
resources to the poorest households with children. The 20 per
cent of poorest households with children will gain an average
of 600 pounds a year - benefiting the 3.8 million children
living in these households.
...While Rewarding Work
This Budget also puts in place a number of measures which help
to make work pay. These measures mean that the biggest gains
will go to families in work. Figure 2 (not available in ascii
versions) shows how on average working families, and
especially low income working families, will gain most from
the Budget measures.
[Figure 2 HMT8-2.GIF]
The following examples illustrate the increase in disposable
income, over and above inflation, different families will gain
over the next two years from the changes made in the Budget.
Single earner couple with three children earning 12,000 pounds
a year gain 1,540 pounds a year
Two earner couple, two children earning about 25,000 pounds a
year, with 80 pounds a week child care costs, gain 1,210
pounds a year
Indirect Tax Changes - for health and the environment
The Chancellor also announced a number of indirect tax changes
in this Budget - including holding to the commitments he made
in the July Budget to increase road fuel and tobacco duty
above the rate of inflation.
The effect of these indirect tax changes will vary greatly
depending upon the expenditure of individual households. For
example:
- less than 40 per cent of households will be affected by
increase in tobacco duty; and
- less than 70 per cent of households will be affected by
increases in road fuel duty; although under 40 per cent
of the poorest 20 per cent of households will be affected
by these increases.
NOTES FOR EDITORS
1. Figures for gains given are relative to indexation.
2. The data underlying figure 1 is contained in the table
below. It is based on Family Expenditure Data uprated to
1998/99 levels of earnings and expenditure.
All households Households
with children
Poorest 20 per cent 2.60 per cent 5.50 per cent
2nd 20 per cent 1.00 per cent 2.40 per cent
3rd 20 per cent 0.40 per cent 0.80 per cent
4th 20 per cent 0.30 per cent 0.60 per cent
Richest 20 per cent 0.20 per cent 0.40 per cent
Average 0.60 per cent 1.30 per cent
The table shows the percentage change in net household income
from the major direct tax and benefit measures announced in
the Budget which take effect in both 1998/99 and 1999/00. The
changes are relative to indexation. Households are divided
into income quintiles after ranking them according to
equivalised disposable income. Equivalisation takes into
account the size and composition of households in order to
recognise differing demands on resources. All measures
assumed to have full year effects.
3. The data underlying figure 2 is:
All households Working
households
Poorest 20 per cent 2.60 per cent 4.60 per cent
2nd 20 per cent 1.00 per cent 1.50 per cent
3rd 20 per cent 0.40 per cent 0.50 per cent
4th 20 per cent 0.30 per cent 0.40 per cent
Richest 20 per cent 0.20 per cent 0.20 per cent
Average 0.60 per cent 0.60 per cent
The data here is calculated on the same basis as that in
figure 1.
4. For further details see also:
HMT3 Government launches a new deal
for working families: making work pay
HMT9 Women and the Budget
HMT10 A Budget for Children
HMT13 Tax Measures to help protect the
Environment
IR2 Fairness in savings
IR35 Pension schemes: clamping down on tax
avoidance
IR40 Double taxation relief: anti-avoidance
CE8 VAT: crackdown continues on artificial
avoidance
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