HMT3 9 March 1999 A BETTER DEAL FOR WORK Further measures to increase employment opportunities for all and to provide a better deal for those in work were announced today by the Chancellor Gordon Brown. The measures include: - A new 10p rate of income tax which will apply to the first #1500 of taxable income from April 1999. The Government has consistently said it would introduce a 10p starting rate of tax when it was economically right to do so. The 10p rate will halve the tax bill for 1.8 million people, take a further 300,000 out of income tax altogether, and boost work incentives while helping to create a fairer and more efficient tax system. - A cut in the basic rate of income tax to 22p from April 2000. This is the lowest basic rate of tax for 70 years. Reducing the basic rate to 22p rewards work and ensures working families are better off. A single person on average earnings will gain #360 a year. - A minimum income guarantee of #200 a week, over #10,000 a year, for every family with a full-time earner. The Working Families Tax Credit (WFTC) will be increased - the adult credit by #2.50 a week and the credit for children aged under 11 by #4.70 a week. This will boost the rewards from work, and provide more support for low-income families with children. No family will pay net income tax on earnings of less than #235 a week, over #12,000 per year. - Reform of national insurance (NICs) to improve work incentives for the lower paid, continuing the recommendations made by Martin Taylor. The earnings threshold for employee NICs will increase in two stages to #87 by April 2001 so that it is aligned with the income tax personal allowance. This will take around 900,000 people out of NICs altogether, while protecting their benefit entitlement. - Self-employed people paying NICs will see the flat rate "entry fee" of Class 2 NICs fall from a weekly payment of #6.35, as it is now, to #2, from April 2000. This dramatically reduces the burden on low earners and encourages business start-ups. In return, the Class 4 rate will go up to 7 per cent paid on earnings over #85 per week. In addition, self-employed women will become entitled to the full rate of Maternity Allowance. This will significantly improve work incentives for the self-employed on low earnings. - A New Deal for the over 50s will provide personalised advice for people over 50 who have been on benefits for more than 6 months, to help them return to work. The programme will be voluntary, and available to people who are economically inactive and on benefits as well as the unemployed. The programme will offer individuals a #750 in-work training grant to help them get accredited training to take up and keep a new job. - As part of this a new Employment Credit for the over-50s will tackle the low levels of in-work income for those over 50 moving from welfare back into work. People who return to full-time work after six months or more on benefits will be eligible for #60 a week for the first year back in work (#40 per week for part-time work). This guarantees a minimum income of #175 per week, #9,000 a year, for the over 50s moving back into full-time work. - In the long term the Government is attracted to the principle of extending the principle of the working families tax credit to all low-income households through an Employment Tax Credit, as part of a better deal for all working people. The Employment Credit for over 50s is the first step in this process. - A better transition to work for lone parents. From October 1999 lone parents will continue to receive Income Support payments in their first 2 weeks in a job. This will help to bridge the gap between benefits and work, removing the financial uncertainty which lone parents often experience when moving into employment for the first time. - Intensifying the gateway in the New Deal for 18-24s, providing extra help for those young people who need it most. Some young people might gain from a more intensive initial gateway at the beginning of the New Deal, to inject greater pace and purpose into their job-seeking activities. The Government will announce pilots to test this, to be paid for through an enlarged Innovation Fund (increased up to #5 million). For those still in the gateway after 3 months, their final month's help will be made more concentrated to reinforce the message that there is no fifth option of continuing on benefits. The Government has already implemented policies to reduce structural unemployment, increase labour market participation and make work pay. The New Deal aims to reattach the long-term unemployed and the economically inactive to the labour force, and give them a fair chance of competing for available vacancies. Reforms to the tax-benefit system to make work pay including new measures in this Budget will also make it more worthwhile for those currently outside the labour force to move into employment. NOTES FOR EDITORS 1. After the introduction of the 10p rate the income tax structure will be 10%, 23% and 40%, moving to 10%, 22% and 40% from April 2000. 2. For further information on WFTC see also HMT 4 3. For further information on NICs see also HMT 9 4. The Employment Credit for the over 50s will be available to unemployed people on Jobseeker's Allowance and to over 50s not participating in the labour force: those on Income Support and disability benefits, and to partners of unemployed or economically inactive benefit claimants in workless households. It will be available in pathfinder areas from October 1999. 5. The extension of Income Support will be available to all lone parents who have been claiming IS for at least 26 weeks prior to finding work and claiming WFTC. 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