• locks in economic stability as a platform for long-term sustainable growth... inflation is on target, interest rates have fallen to 51/2% from a peak of 71/2% last year and stronger output growth is forecast for next year. The public finances are on track to meet the Government's strict rules and an extra £40 billion will be invested in health and education over the next three years;

• helps to raise productivity through a better deal for enterprise and investment...a new 10p corporation tax rate for small businesses, increased employee share ownership, tax credits to boost Research and Development and a new Small Business Service will help small firms;

• increases employment opportunity with a better deal for working families... a new 10p rate of income tax this year and a cut in the basic rate to 22p next year to reward work and ensure working families are better off. There will be a new minimum income guarantee of £200 per week for working families with children and a full-time earner ­ no family earning less than £235 per week (£12,000 pa) will pay any income tax overall;

• builds a fairer society, with a better deal for families with children...a new Children's Tax Credit, worth £416 a year, will provide increased support for children. A £1 billion pensioners' package will increase the winter allowance to £100 and introduce a minimum guarantee on tax; and

• protects the environment... measures include a climate change levy to improve energy efficiency and a reduction in vehicle excise duty for small cars.

Budget 99 locks in the economic stability that the Government's new economic framework has delivered. The Bank of England's Monetary Policy Committee has responsibility for setting interest rates to keep inflation on target and there are strict rules to control the public finances. As a result:

• inflation is forecast to remain at the target level of 21/2%;

• interest rates peaked at 71/2% last year, compared with 15% in the late 1980s and early 1990s. Mortgage rates are the lowest for 33 years;

• public finances are on track to meet the strict fiscal rules: following a cumulative reduction in borrowing of £29 billion over the last two years, the current budget will be in surplus over the economic cycle;

• the Government will invest an extra £40 billion in education and health over the next three years, as announced in the Comprehensive Spending Review;

• growth will be lower this year, following slower world growth, but stronger growth is forecast for next year; and

• employment is up by over 400,000 since May 1997: long-term and youth unemployment have fallen by 50%.

The Government is taking further steps to increase the sustainable rate of growth by raising productivity, increasing employment opportunity and building a fairer society.

Closing the productivity gap of approaching 40% with the USA and over 20% with France and Germany would help to increase growth, jobs and living standards. The UK has in the past invested less in:  

• Research and Development (R&D): the US invests 50% more as a share of GDP than the UK in business R&D;

• new capital equipment: investment per person is 40% higher in Germany;

• the basic skill levels of the workforce: 22% of adults in the UK have poor literacy skills, 50% more than in Germany.

The Productivity Gap

Note: Output per worker 1996 Source: OECD

Budget 99 delivers a better deal for business and enterprise. It builds on steps that have already been taken to: increase investment; promote innovation; strengthen competition; and improve skills:

• for small businesses, a new 10p corporation tax rate and 40% capital allowances to encourage investment and growth;

• a new Research and Development tax credit to encourage small business investment in R&D;

• a new Employee Share Ownership scheme to encourage employees to take a stake in the success of their companies;

• a new Small Business Service to support growing small firms; and

• big discounts from 2000 on training costs through Individual Learning Accounts.

Employment opportunities are being increased by making work pay ­ allowing people to keep more of each pound they earn as they move into work and up the earnings ladder. And by ensuring that people have the skills they need to move from welfare into work.

Budget 99 will deliver a better deal for working families by:

• building on the steps already taken to make work pay ­ including the Working Families Tax Credit which will be introduced in October 1999 and the National Minimum Wage which will be introduced in April 1999 by:

• introducing a new 10p rate of income tax on the first £1500 in April 1999, halving the tax bill for 1.8 million people;

• a cut in the basic rate of income tax to 22p from April 2000 so that working families are better off;

• guaranteeing a minimum income of £200 per week for working families with a full-time earner;

• ensuring that, from October this year, no family earning less than £235 a week will pay any income tax overall;

• cutting national insurance contributions for low-paid self-employed and employees, with higher paid self-employed paying a fairer share; and

• a £60 a week in-work payment to people over 50 moving back to full-time work;

• extending the Welfare to Work initiative which has already benefited over 350,000 people through the New Deal.

Working families and children gain most

Note: Change in average annual disposable income as a result of Budget 99 measures. Source HM Treasury.

An economy in which a significant proportion of the population is unable to fulfil its potential will be poorer and less productive. The Government is committed to building a fairer society and to ensuring that growth takes place in a way that is fair to today's and future generations by protecting the environment.

Budget 99 will deliver a better deal for families with children through:

• a new Children's Tax Credit in April 2001, worth up to £416 a year, in place of the married couples allowance for those aged under 65;

• a £1.1 billion investment package to provide wider access to computers, modern Accident and Emergency services in the NHS and safer communities;

• a £1 billion package for pensioners, increasing the winter allowance to £100 and giving a minimum guarantee on tax; and

• protecting the environment by: a climate change levy to improve business energy efficiency; a reduction to £100 in vehicle excise duty for cars with small engines in June 1999; raising road fuel duties by 6% in real terms; a major reform of company car taxation; and an increase in the landfill tax to promote better waste management.

Over the next three years Budget 98 and Budget 99 measures will:

• help families with children: a family on average earnings will be £460 a year better off (including after the removal of mortgage interest relief). Poorer families will also benefit, with 700,000 children taken out of poverty; and

• reward work: a single earner on average earnings will be £360 better off, following cuts in their tax and national insurance bill. Any family on less than £235 a week will not pay any income tax overall from October 1999.

The public sector spends £349 billion a year: £6,000 for every man, woman and child in the UK. 

A £100 billion a year is spent on education and the health service. A similar amount is spent on ensuring pensioners, families and children, disabled people and the unemployed get the help at the time of their lives when they most need it through the social security budget.

Where taxpayers' money is spent

Note: Public expenditure figures total of 349bn pounds for 1999-2000. Source: HM Treasury

Where taxes come from

Note: 1999-2000 figures, following Budget 99, including excise duty increase in tobacco by 5% above inflation. Source: HM Treasury

Over the next three years, starting this April, additional money will be invested in modernising public services. Tough targets have been set to improve performance. Spending on Education and health will grow at twice the rate of other services.  

By 2001 around £2,000 a year will be spent on education for every household to ensure more children are able to read and write well by the age of 11 and more young people stay on at school or college to gain good qualifications:

• nursery provision will be expanded;

• spending on school buildings and equipment will double;

• class sizes for children aged between 5 and 7 will be reduced;

• high quality teaching will be promoted; and

• over 700,000 more students will be able to enter further and higher education.

By 2001 over £2,300 a year will be spent on our National Health Service for every household to develop modern, prompt and convenient health care services for all:

• hospitals will be modernised;

• more nurses and doctors, including GPs, will be employed; and

• waiting lists will be reduced to 100,000 below the level the Government inherited.

Other priorities include:

• tackling crime by investing more in front line policing;

• investing £9 billion a year in better public transport and a modern road and rail network which will help the environment;

• investing £4 billion a year in warm, safe housing;

• investing £11/2 billion a year in science to help turn today's ideas into tomorrow's world-beating products; and

• improving efficiency throughout the public sector by setting challenging improvement targets.

For more information on the Budget or the Government's spending plans visit the Treasury's internet site http://www.hm-treasury.gov.uk  or contact the Treasury's Public Enquiry Unit on 0171 270 4558

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