HMT1 9 March 1999 BUDGET 99: A BETTER DEAL FOR THE PEOPLE OF BRITAIN A Budget which offers a better deal for the people of Britain was delivered by Chancellor Gordon Brown today. Securing a stronger economic future for the country, the Budget makes targeted tax cuts to put work, enterprise and families first, and provides extra resources for schools and hospitals. The Budget continues to lock in the economic stability secured by the Government, meeting its promise to make work pay through a new 10p rate of tax and continued reform of the NICs system. A package of measures will help widen opportunity and fairness for all and will take 700,000 children out of poverty. Further action is being taken to create the right conditions to boost productivity and allow business to thrive and grow, and the biggest environmental package so far will safeguard the quality of life for future generations. The Chancellor said: "This Budget offers a better deal for Britain. It continues to lock in sound public finances, and promotes enterprise, giving business the opportunities to compete and invest for the future. It fulfills our promises to the British people to make work pay, to cut taxes for working families, to support children, to provide extra money for key public services, and to protect the environment." Locking in stability Budget 99 continues to lock in the economic stability created by the Government's tough decisions and robust new macroeconomic framework: - the Government's two strict fiscal rules will be met comfortably; - the Budget measures are able to provide an extra #6 billion support for the economy over the next three years, as a result of the strengthening underlying fiscal position; - delivering the #40 billion extra for health and education, allocat ed in the CSR. Boosting productivity Budget 99 delivers a better deal for business and enterprise, by increasing investment, promoting innovation, strengthening competition and improving skills: - for small businesses, a new 10p corporation tax rate and 40 per cent capital allowances to encourage investment and growth; - a new R&D 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; - big discounts from 2000 on training costs through Individual Learning Accounts. Increasing opportunity for all Budget 99 will make people better off, support families and reward work with: - a new 10p rate of income tax on the first #1500 in April 1999, halving the tax bill for 1.8 million people; - a major reform of national insurance - removing 900,000 low-paid people from the system; - cutting the basic rate of income tax to 22p from April 2000, the lowest basic rate of tax for 70 years - to reward work and ensure working families are better off; - guaranteeing a minimum income of #200 per week for working families with a full time earner; - a New Deal for the Over 50's, with a #60 a week in-work payment to people over 50 moving back to work. Building a fairer society Modernising taxes to direct help to people who need it most - especially families and children - removing 700,000 children from poverty: - a new Children's Tax Credit for families with children in April 2001, worth up to #416 a year; - a #1 billion package for pensioners, increasing the winter allowance to #100 and giving a minimum guarantee on tax; - a 3 per cent real increase in child benefit to at least #15 and #10 a week from April 2000; - cracking down further on tax avoidance and evasion - so everyone pays a fair share; - extra #1.1 billion for schools, hospitals and safer communities through the Capital Modernisation Fund. Protecting the environment Budget 99 includes the biggest ever package of tax reforms to protect the environment, including: - a new climate change levy in April 2001 to encourage energy efficiency in business, brought in on a revenue-neutral basis, with no overall increase in the taxation burden on business; - a long-term, revenue-neutral reform of company car taxation to remove the incentive to drive additional business miles, and encourage the take-up of more fuel efficient vehicles; - a reduction in Vehicle Excise Duty to #100 for cars with the smallest engine sizes; - increases in landfill tax to promote sustainable waste management. HOW THE BUDGET AFFECTS UK HOUSEHOLDS Together with the measures announced in the last Budget, Budget 1999 delivers gains to over 20 million UK households, including 7 million families with children and 7 million pensioner households. Over three years, UK households will see their incomes rise by an average #380 a year. The Budget particularly directs resources at children. On average families will be #740 a year better off. The Budget rewards work. The average gain to working households is #450 a year. Children and working families gain the most Some typical households are affected as follows: - A single-earner married couple on average earnings of #20,000 a year with children will gain #460 a year, even allowing for the abolition of MIRAS. - The same couple on earnings of #30,000 a year will gain #275. - A single person working full-time on the national minimum wage will gain #300 a year. NOTES FOR EDITORS 1. All figures for gains given relative to indexation, and all in 1999 equivalent prices. Measures included are those announced in the 1999 and 1998 Budgets and taking effect over the three years from 1999-00, plus the impact of the national minimum wage. 2. The data underlying the chart is contained in the table below. It is based on Family Expenditure Survey data uprated to 1999-2000 levels of earnings and expenditure. All households Working Households Households with children Average (#pa) [380] [450] [740] 3. The table shows the change in annual net household income from the major direct tax, National Insurance, and benefit measures announced in the Budget which take effect in 1999-2000, 2000-01 and 2001-02. Also included are the effects of those measures which were announced in the March 1998 Budget and have not yet taken effect. 4. Households are divided into income quintiles after ranking them according to equivalised disposable income. Equivalisation standardises on spending power, by taking into account the size and composition of households in order to recognise differing demands on resources. The effect of all measures is given as in a full year. 5. Households have been classified in the following way: - Households with children are households where there is at least one child. - Working households are households where at least one adult is working full- time, part-time or is self-employed. HM TREASURY PRESS OFFICE Press enquiries to: 0171 270 5238 Non-media enquiries to: 0171 270 4558 If you have access to the Internet you can find this news release at http://www.hm-treasury.gov.uk. Other Treasury material can also be found at this address. # = pounds sterling