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HM Treasury 1

21 March 2000

BUDGET 2000 - PRUDENT FOR A PURPOSE:

WORKING FOR A STRONGER AND FAIRER BRITAIN

New measures to build a stronger and fairer Britain are at the heart of the Budget delivered by Chancellor Gordon Brown today.

The Budget takes further steps to encourage work, improve productivity and protect the environment based on a platform of stability and fiscal prudence. It provides additional support for Britain's hard working families, cuts child poverty, helps pensioners and delivers substantial new resources for schools and hospitals, improving transport and tackling crime.

By April 2001, when personal tax and benefit measures from this and previous Budgets have come into effect, on average, households will be £460 a year better off, and families with children will be £850 a year better off. The tax burden on a single earner family on average earnings with two children will be the lowest since 1972.

Key measures in Budget 2000 include:

• the largest ever package of spending on the NHS with an immediate £2 billion boost in the coming year including extra revenue from tobacco taxes and spending set to rise by 6.1 per cent over the next four years, the longest period of sustained high growth in the history of the NHS;





• an extra £1 billion for education, £285 million for tackling crime and £280 million for transport.

• new Action Teams matching the unemployed to job vacancies and a new Job Grant to ease the transition from welfare into work;

• a £4.35 a week increase in the under-16 child credit in the Working Families' Tax Credit and income-related benefits, and a 50p per week increase in the Children's Tax Credit, helping to lift 1.2 million children out of poverty;





• a further £50 increase in the winter fuel payment to £150 every year for every 60-plus household;





• road fuel and most alcohol duties are increased in line with inflation and tobacco duties are raised by 5 per cent in real terms. VED is cut by £55 for 2.2 million cars;





• major reforms to capital gains tax to strengthen incentives for entrepreneurial investment and permanent 40 per cent capital allowances for small and medium-sized firms; and





• promoting e-commerce through 100 per cent first-year capital allowances for small enterprises investing in information and communications technology equipment and a £60 million package to get more small firms on-line and deliver more services on-line.

DELIVERING ECONOMIC STABILITY

The Government is delivering a platform of stability based on low inflation and sound public finances. As a result of a continuing commitment to stability and prudence, today's Budget:

ensures that the Government remains on track to meet its two strict fiscal rules;

locks in the fiscal tightening over the next two years to an even greater extent than projected in Budget 99;

sets firm overall limits for public spending for the period of the 2000 Spending Review from 2001-02 to 2003-04;

introduces a Budget package to promote enterprise and work and release extra resources to tackle child and pensioner poverty; and

releases substantial new resources for key public service priorities.

PROVIDING STRONG PUBLIC SERVICES

As a result of prudent management of the public finances, the Government has been able to deliver the investment that is needed in Britain's public services.

Budget 2000 sustains and increases that investment for the next four years. The 2000 Spending Review, to be completed in July, will provide for:

growth in current spending of 2½ per cent a year in real terms in the three years to 2003-04, in line with the Government's neutral view of the economy's trend rate of growth; and

more than doubling net capital investment, continuing to tackle the legacy of underfunding of Britain's public infrastructure.

Within the firm overall totals set by this Budget, spending will be focused on the public's priorities.

Today's Budget announces the largest ever package of spending on the National Health Service matching new resources with more reforms:

an extra £2 billion for the NHS for the year from April including extra resources from the rise in tobacco taxes;

6.1 per cent average annual real terms growth over the next four years - the longest period of sustained high growth in the history of the NHS; and

a 50 per cent cash increase in NHS spending over the 5 years from the beginning of the first Comprehensive Spending Review - 35 per cent in real terms - equivalent to a rise in NHS cash spending per household from £1,850 in 1998-99 to £2,800 in 2003-04.

Improving standards and performance in the NHS:

tomorrow, the Prime Minister will make a statement to Parliament on the work he and the Health Secretary will lead over the next few months to reform and modernise the Health Service.

For education Budget 2000 provides:

an immediate additional boost for education of £1 billion, starting from this April: more money for schools and for helping young people to stay on at school.

For tackling crime:

an additional £285 million for the fight against crime. Police, courts and prisons will benefit from new spending of £185 million on capital projects. Another £100 million will be available for modernised policing across the UK, helping the police to attract and retain good officers and to make the best use of the latest technology tools which they need to cut crime and catch offenders.

For transport:

an additional £280 million to accelerate the modernisation of Britain's transport infrastructure.

Further allocations from the £2.7 billion Capital Modernisation Fund will be announced in due course.

INCREASING EMPLOYMENT OPPORTUNITY FOR ALL

The Government aims to deliver employment opportunity for all - the modern definition of full employment - through a strategy that will help people to move from welfare to work, make work pay, and ease the transition into work. Its ambition is that by the end

of the decade Britain will have a higher percentage of people in employment than ever before.

Budget 2000 takes further steps towards ensuring that everyone who is able to work has the chance to do so. Budget 99 announced a range of measures to reward work including a cut in the basic rate of income tax to 22p from April 2000, the lowest basic rate of tax for 70 years, and a major reform of National Insurance Contributions taking 1 million employees out of NICs altogether by April 2001.

Today's Budget will deliver:

a new £40 million programme of Action Teams from Autumn 2000 which will help to match unemployed people to suitable vacancies in nearby labour markets in 20 of Britain's communities suffering from the highest unemployment and lowest employment, along with additional support in the 15 Employment Zone areas;

a national extension and intensification of the New Deal 25+ from April 2001, building on the principles of the New Deal for 18-24s;

a new Job Grant of £100 to ease the transition from welfare to work from Spring 2001. This will build on the Income Support run-on for lone parents announced in Budget 99 and replace the Jobfinder's Grant and Jobmatch. Also to ease the transition to work, the Budget announces a four-week Income Support for Mortgage Interest run-on and simplified rules for the Housing Benefit Extended Payments Scheme. Together these will provide support of up to £400 for people moving into work;

extended choices available to lone parents on Income Support so that, from April 2001, all lone parents on Income Support with children over the age of five will be required to meet with a specialist personal adviser who will guide them through their choices - including help to try work, help to move into part-time or full-time work and the opportunity to undertake education and training;

additional support for working families with a £4.35 a week increase in the under-16 child credit in the Working Families' Tax Credit (WFTC) from June 2000, on top of the £1.10 a week increase above indexation in the under-11 credit from April 2000. These increases will be matched in the Disabled Person's Tax Credit (DPTC) and income-related benefits. The under-16 child allowance in Income Support will rise by £4.35 a week from October 2000;

50p a week more will be added to the Children's Tax Credit when it is introduced in April 2001, so that it will be worth up to £442 a year, more than twice the value of the married couple's allowance which it replaces;

confirmation of a 0.3 percentage point reduction in employers' NICs from April 2001, thereby ensuring that all revenue from the climate change levy is recycled back to business; and a further 0.1 percentage point reduction from April 2002 to ensure that the revenues from the new aggregates levy are recycled to the business community;

a new employment tax credit from April 2003 to make work pay. To be brought in alongside the integrated child credit, the employment tax credit will extend the principle of the Working Families' Tax Credit to people without children. Paid through the wage packet, it will complement the National Minimum Wage and the New Deals; and

a package of measures to tackle the multi-billion pound hidden economy, implementing proposals made by Lord Grabiner QC. From the end of May, claimants will be able to phone a confidential helpline to get advice on how to move from the hidden economy, together with help on getting work, registering as a business and how to become self-employed. For those who fail to respond, tougher penalties, sanctions and requirements will be imposed from 1^st January 2000.

FAIRNESS FOR FAMILIES AND COMMUNITIES

The Government is committed to building a fairer and more inclusive society in which everyone has the opportunity to benefit from higher living standards. Budget 2000 takes further steps to support families and tackle child poverty, help pensioners, promote savings and ensure a fair and efficient tax system.

Supporting families and tackling child poverty

The Government's ambition is to halve child poverty by the end of the decade as it moves forward with its commitment to abolish child poverty within 20 years. By April 2001, when personal tax and benefit changes from this and previous Budgets have come into effect:

1.2 million children will be lifted out of poverty;

a family with two children on half average earnings will be £2,600 a year better off as a result of the measures announced in this and previous Budgets. A similar family on Income Support will be £1,500 a year better off; and

the tax burden on a typical family on average earnings with two children will be at its lowest since 1972.

In total, the Government will be spending an extra £7 billion a year on support for children through the tax and benefit system by 2001.

In addition to the increases in Working Families' Tax Credit and Children's Tax Credit, Budget 2000 announces:

help for low-income mothers staying at home with their new born child by allowing working parents, from May 2001, to make a new application for WFTC or DPTC on the birth of a child in order to get any extra help to them immediately to reflect their changed circumstances, and by ensuring that mothers who previously worked at least 16 hours a week and receive statutory maternity payments are not disqualified from getting help through WFTC or DPTC. This means that low-income working families could benefit by as much as £30 in the early weeks after a child is born;

another £100 increase for the Sure Start Maternity Grant - which all low-income families can receive - taking it to £300 from Autumn 2000. Taken with the Budget 99 increase in the Grant from this April, this represents a three-fold increase since 1997;

a new integrated child credit which will bring together the different strands of child support in the WFTC, Income Support and the Children's Tax Credit into one seamless children's payment, built on the foundation of universal Child Benefit. To be introduced in 2003, this new system will create a transparent system of child support. The integrated child credit will be paid to the carer in welfare and in work and will be administered by the Inland Revenue. Further details are set out in a separate Treasury paper published today (see Notes for Editors); and

a network of local children's funds to fund local projects providing local solutions to the problem of child poverty. Proposals are being worked up alongside the 2000 Spending Review to support voluntary and community sector organisations that work with children in poverty along the themes of economic disadvantage, isolation and access, aspirations and experiences and children's voices. Initial consultations identified the need for investment at the most local level in order to make the most impact on children's lives. Further consultation will take place over the coming months to establish how the local funds will work in practice.

Support for pensioners

An additional £6.5 billion will be spent on pensioners over the course of this Parliament as a result of the measures announced in this and previous Budgets. This additional spending means that the average pensioner household is receiving an extra £400 a year and a 75- year-old pensioner on the minimum income guarantee will receive £950 more per year from April 2001 than in April 1997. A couple will receive £1,350 more.

Budget 2000:

builds on the fivefold increase in the winter fuel payment in Budget 99, with a further increase from £100 to £150 each year for every household with someone over 60 - 8.5 million people in total;

doubles the lower capital limit attached to the minimum income guarantee (MIG) so that pensioners can now have up to £6,000 savings without MIG entitlement being affected. The upper limit has been increased from £8,000 to £12,000. This means that pensioners who have managed to save something for their retirement can still qualify for extra support; and

announces the Government's intention to look at opportunities to develop the MIG to reward further pensioners who have made some provision for their retirement. The Department of Social Security and the Treasury will examine for the long term whether, through an income taper or other measures, the MIG can be used to boost the incomes of pensioners who have some pension or earned income of their own. Further proposals will be published by the Secretary of State for Social Security.

In addition, the Pre-Budget Report announced free TV licences for pensioners aged 75 and over from November 2000.

Support for savings

The Government is seeking to create an environment which promotes savings opportunity for all with its savings strategy based on the principles of fairness, flexibility and transparency. Budget 2000 announces that the Government has decided to retain the current £7,000 ISA subscription limit for a further year in 2000-01, rather than reduce it to £5,000.

A fair and efficient tax system

The Budget increases the rate of tobacco duties by 5 per cent in real terms from 6pm today. The revenue raised from this real increase will go towards investment in the National Health Service;

the Government will consult on a new structure for betting and gaming duty to ensure that the betting and racing industries have the tax structure which they need to thrive in the fast developing e-commerce environment and that revenue is protected;

to make the tax system fairer for women, VAT on women's sanitary protection will be cut to 5 per cent from January 2001;

Budget 2000 announces new rates for Stamp Duty on property transactions, with the rate for transactions over £250,000 rising from 2.5 per cent to 3 per cent and the rate for transactions over £500,000 rising from 3.5 per cent to 4 per cent. Only 5 per cent of residential transactions in the UK pay rates at above 1 per cent. Over a third of transactions remain exempt because they fall below the £60,000 threshold;

changes to air passenger duty will help to produce a fairer duty structure under which millions of passengers on economy and tourist flights within the UK and Europe will pay less duty than at present. From November 2001, the duty on flights within the European Economic Area (EEA) will be reduced from £10 to £5. In addition, all flights from the Scottish Highlands and Islands will be free from duty. The duty on economy flights to other destinations will remain at £20. The rate for club and first class fares for destinations in the EEA will remain at £10, but rise from £20 to £40 for other destinations; and

duty on spirits has been frozen for the third year running, while other alcohol duties will rise in line with inflation.

MEETING THE PRODUCTIVITY CHALLENGE

In boosting Britain's productivity performance and closing the gap with its major competitors, the Government is seeking to make Britain the most competitive environment for business in the world. Its long-term economic ambition is that Britain will have a faster rise in productivity than its main competitors over the next decade, as it closes the productivity gap.

Significant steps have already been taken to increase competition, enterprise, innovation, skills and long-term investment. These include a new Competition Act, cuts in corporation tax (including the new 10p rate from April 2000 benefiting 270,000 businesses), the new all-employee share ownership plan, support for small and medium-sized enterprises (SMEs) including the new Small Business Service (SBS) and the new R&D tax credit, and measures to boost skills across the economy.

Since 1997, the Government has cut the average corporation tax bill for small companies by nearly 25 per cent.

In addition, Budget 2000 announces:

further reforms to capital gains tax from April 2000 to strengthen the incentives for business investment. The business assets taper will be shortened from 10 years to 4 years, and the percentage thresholds for qualifying business asset shareholdings of 5 per cent (if the shareholder works full-time in the company's business) and 25 per cent (otherwise) will be reduced. In unquoted trading companies, all shareholdings will qualify for the business assets taper, and in quoted trading companies all employee shareholdings will qualify, as will other shareholdings above a 5 per cent threshold;

permanent 40 per cent first-year capital allowances for SMEs, meaning that over 99 per cent of all businesses will have qualified for this tax relief for the entire Parliament;

further steps to support e-commerce and achieve the Government's aim to make the UK the best environment in the world for e-commerce by 2002. In addition to new discounts for the electronic filing of tax returns, the Budget includes the introduction of 100 per cent first-year capital allowances for small enterprises investing in information and communications technology (ICT) equipment for the next three years. Plus, a £60 million package to help SMEs understand what getting on-line means for their business; help to get more of them on-line and then help to get the right services once they are on-line;

an increase from 10 to 15 in the number of employees in small companies eligible for the new Enterprise Management Incentives (EMI) scheme to be introduced in April 2000. EMIs will help recruitment and retention of key employees by small higher-risk companies by offering access to tax-advantaged share options worth up to £100,000 (at the time of option grant). Final details are also announced of the new all-employee share ownership plan, R&D tax credit, and Corporate Venturing tax relief from April 2000;

a new £1 billion target umbrella fund to help finance enterprise growth across the regions over 3 to 5 years. Regional priorities will be decided jointly by a new Small Business Investment Taskforce of the SBS and the Regional Development Agencies (RDAs). The fund will significantly enhance access to early-stage venture capital for growth potential businesses wherever they are located in the UK, using public resources more effectively to lever in private sector investment;

the Secretary of State for Trade and Industry will shortly announce a new clusters fund to enable RDAs to co-finance business incubators and small scale infrastructure to encourage innovation and develop the growth stars of the future;

following Don Cruickshank's review of competition in banking published yesterday, the Government will bring forward a package of measures designed to reduce prices and improve services for consumers and SMEs and promote innovation in banking. There will be:

• better services for SMEs. The Secretary of State for Trade and Industry and the Chancellor have referred the provision of banking services to SMEs to the Competition Commission;





• lower prices and wider choice in money transmission. The Chancellor has announced that the Government will legislate to open up access to payment systems and oversee access charges. Meanwhile, the Government will be exploring with the Office of Fair Trading what measures can be taken within existing powers. It will expect banks to increase transparency about charges, base charges on economic costs, and open up money transmission systems to new entrants; and





• more information for consumers and better redress for grievances. The Chancellor has asked the Financial Services Authority to consider Cruickshank's specific proposals for improvements, to consult widely, and report to him within three months on how they propose to respond.

Paul Myners, Chairman of Gartmore Investment Management, will look at whether there are factors discouraging institutional investors from investing in smaller firms. He will shortly be launching a consultation exercise and will report back with recommendations by the next Budget;

pilots for the New Entrepreneur Scholarships announced last year to help budding entrepreneurs from deprived areas turn their ideas into thriving businesses will be introduced in Cornwall, London and Manchester; and

changes to the work permits system to enable UK employers to recruit skilled people from overseas where there are skills shortages - including in IT - and to enhance the UK's image as an attractive location for talented overseas students and entrepreneurs.

PROTECTING THE ENVIRONMENT

Further action to tackle climate change, improve air quality, regenerate our cities and protect our countryside is announced in today's Budget. These measures demonstrate the Government's commitment to protecting the environment and promoting sustainable economic growth.

Tackling climate change and improving local air quality

• Reforms to Vehicle Excise Duty (VED) to help reward and encourage the use of more environmentally-friendly vehicles. The reduced rate of VED for existing small-engined cars will be extended to cars with engines up to 1,200cc from next March, giving a £55 cut to an additional 2.2 million cars;





• under a new graduated VED system, 95 per cent of new cars will pay up to £70 a year less than under the current rates. From March 2001, all new cars will be placed into one of four VED bands, based on their rate of carbon dioxide emissions. There will be discount rates within each band for cars using cleaner fuels and a small supplement for diesel cars to reflect their higher emissions of local air pollutants;





• a package of reforms to lorry VED, including the introduction of 44-tonne lorries meeting Euro II emissions standards at a favourable VED rate will help increase the efficiency of haulage operations and reduce congestion;





• from April 2002, a revenue neutral reform of company car taxation will encourage the take up of vehicles which have lower carbon emissions and use environmentally-friendly fuels, while removing any incentive to drive unnecessary extra miles;

• a 1p per litre cut in duty to help incentivise the use of environmentally-friendly ultra low sulphur petrol and a freeze on the duty rate for road fuel gases. Other road fuel duties are increased in line with inflation from 6pm today;





• refinements to the design of the climate change levy to increase further its environmental effectiveness whilst protecting the competitiveness of UK firms; and





• further encouragement for emissions trading which offers scope to reduce UK carbon emissions in a cost-effective way, and put the UK at the forefront in developing an international emissions trading market.

Together the measures aimed at reducing greenhouse gases will form an integral part of the Government's climate change programme putting the UK on track to meet its Kyoto target and moving beyond that towards its domestic goal of a 20 per cent cut in carbon dioxide emissions.

Regenerating our cities and protecting our countryside

• The introduction of a new aggregates levy from April 2002 to tackle the environmental costs associated with quarrying and encourage the use of recycled materials. All of the revenues will be returned to business through a cut in employers' NICs and a new Sustainability Fund to help deliver environmental benefits to the local communities affected by quarrying;





• an extension of the reduced rate of VAT for the installation of energy saving materials to all homes which will help people insulate their homes and improve energy efficiency in the domestic sector;

• the introduction of capital allowances to underpin the Government's Affordable Warmth Programme which will support the installation of high efficiency central heating systems in up to one million low rent houses;





• a possible relief for stamp duty for new developments on brownfield land. The Government will consult with interested parties on how this measure might be best targeted to help meet the Government's objective to encourage better use of brownfield land;





• new relief from stamp duty for some Registered Social Landlords to encourage social housing provision and make better use of the existing housing stock;





• implementation of the £1 per tonne rise in the standard rate of landfill tax will increase the incentive for waste producers to minimise waste and seek more environmentally-friendly alternatives to landfill; and





• further discussions on a possible voluntary package of measures to reduce the environmental impacts of the use of pesticides.

HOW THE BUDGET AFFECTS UK HOUSEHOLDS

The measures in this and previous Budgets support the Government's objectives of promoting and rewarding work, while giving extra support to pensioners and families with children. By April 2001, when personal tax and benefit measures from this and previous Budgets have come into effect:

• all households on average £460 a year better off;





• households with kids on average £850 a year better off;





• the tax burden on a single-earner family on average earnings with two children will be the lowest since 1972.

Living standards

• For a single-earner family with 2 children on £25,000, real living standards will have risen by 10 per cent over the Parliament.

• As a result of WFTC, for a single-earner family with 2 children on £12,500, real living standards will rise by 20 per cent this year, the biggest annual rise for 25 years.

Supporting working families

• A single-earner family with 2 children on £25,000 will be £370 a year better off.





• A single earner family with 2 children on £12,500 will be £2,600 a year better off.

• No family with someone in full-time work will get less than £214 a week, over £11,000 a year.

Tackling poverty

• The poorest two-child family on income support will be £1,500 a year better off.





• 1.2 million children will be lifted out of poverty.





• For a 75-year-old pensioner on the minimum income guarantee, annual income in April 2001 will be over £950 a year higher than in 1997. For a 75-year-old couple it will be £1,350 higher.

NOTES FOR EDITORS

1. Household distributional facts: £25,000 is average (male) earnings projected for 2000.

2. Tackling Child Poverty and Making Work Pay - Tax Credits for the 21^st Century is published today. It describes the new tax credits (both employment tax credit and integrated child credit) in more detail. It's the sixth in the Modernisation of Britain's Tax and Benefit series. The full text can be found on the Treasury website (see site address below) or from the Public Enquiry Unit on 020 7270 4558.

3. For further details of the announcements made in today's Budget see the Treasury's website: www.hm-treasury.gov.uk/. More details are also included in separate press notices and Budget notes (BN) referred to below:

Joint HM Treasury/departmental:

HMT/DETR 1 Budget sets Britain on road to better transport and environment

HMT/DH 1 A modern NHS - fairness for families and communities

Inland Revenue and Customs & Excise:

REV/C&E 1 Further help for small business

BN1A Helping small employers: increase in quarterly payments limit for PAYE

BN1B Improvements to EIS and VCTs

BN1C Corporate venturing scheme

BN1D Extra discount for employers paying tax credits

REV/C&E 2 A more competitive environment for business

BN2A Group relief rules

BN2B Modernisation of rules for chargeable gains of companies

BN2C Company gains on substantial shareholdings: a new

rollover relief

BN2D Double taxation relief for companies

BN2E Tax relief on mobile phone licences and IRUs

BN2F Loans with interest rates linked to profits

BN2G Capital gains: simpler procedures for companies

BN2H Overseas life assurance business

BN2I Quarterly payments of corporation tax

BN2J Withholding tax on international bond interest abolished

BN2K Controlled foreign companies (CFCs) - fairer and more

effective rules

BN2L Life & general insurance companies and Lloyd's members

BN2M Rent factoring

REV/C&E 3 £400 million a year boost for charitable giving

REV/C&E 4 Climate change levy

Inland Revenue:

REV 1 Inland Revenue tax rates and allowances for 2000-01

REV 2 Tax and NICs reform for working families

REV 3 Boosting productivity and fairness: employee share ownership

REV 4 Capital gains tax cuts to boost business investment

REV 5 Stamp duty

REV 6 Protecting the environment: reform of company car taxation

REV 7 Boost for ISA savers

REV 8 One million low income homes to get cheaper, better heating

REV 9 Encouraging employers to provide childcare

REV 10 Helping to get it right

REV 11 Construction Industry Scheme

REV 12 Modernising and simplifying capital allowances

REV 13 Tax treatment of expenditure on films: clarificatory measures

REV 14 Double taxation relief for branches of EU/EEA residents

REV 15 Capital gains tax - countering avoidance using trusts

REV 16 Petroleum revenue tax: misuse of safeguard relief

Customs & Excise:

C&E 1 Reform of betting duty

C&E 2 Spirits duty frozen for the third year running

C&E 3 Tobacco increases to underpin anti-smoking strategy

C&E 4 Air passenger duty slashed for most travellers

C&E 5 Tackling the environmental costs of quarrying

C&E 6 Good news for all householders - VAT slashed on energy saving

C&E 7 VAT cut for women's sanitary products

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HMT/DETR 1

21 March 2000

BUDGET SETS BRITAIN ON ROAD TO BETTER TRANSPORT AND ENVIRONMENT

Budget measures to boost the transport network and benefit the environment were set out by Chancellor Gordon Brown today.

Budget 2000 will help underpin the Integrated Transport strategy by providing additional funding to improve the transport network, creating incentives for cleaner vehicles, reducing congestion and boosting the competitiveness of the UK haulage industry.

£280 million for additional transport spending, a £55 cut in Vehicle Excise Duty (VED) rates for 2.2 million smaller cars, and reductions of up to £70 in the VED rates for 95 per cent of new cars are amongst the measures announced by the Chancellor today.

MORE MONEY FOR ROADS AND PUBLIC TRANSPORT

In his November Pre-Budget Report, the Chancellor announced that he would consider the appropriate rate of fuel duties on a Budget-by-Budget basis, taking into account all the relevant economic, social and environmental factors.

Given the increase in oil prices from $23 a barrel to $30 since the Pre-Budget Report, the Chancellor has decided for this Budget that, other than the automatic inflation rise of around 2 pence a litre, there will be no increase in road fuel duties.

The Chancellor also recognised the case for investment in the road network and public transport system, and has therefore made £280 million available for additional transport expenditure across the UK to tackle congestion hot-spots and modernise public transport. Every region will benefit from new investment in its transport infrastructure. The Deputy Prime Minister will shortly announce details of projects this money will support.

INCENTIVES FOR CLEANER CARS AND FUELS

Budget 2000 announces a range of measures which will encourage the take-up of more environmentally-friendly models of car, and ensure that the less cars pollute, the less tax their owners will pay:

• from 1^st March 2001, the reduced rate of Vehicle Excise Duty (VED) for existing cars will be extended from the current threshold of 1,100cc to cars with engines up to 1,200cc: giving a £55 cut to owners of an extra 2.2 million smaller cars;

• also from March 2001, all new cars will go into one of four bands based on their rate of CO2 emissions, with 95 per cent of new cars paying up to £70 less under this new VED system than under the rates for existing cars;

• the VED rates for existing cars will not rise in real terms, and will be frozen for a year until the extension of the reduced rate on 1^st March 2001. In total, the changes to car VED announced in this Budget will cut the tax cost of car ownership by almost £250 million in 2000-01;

• from April 2002, the tax charge on company cars will also be graduated according to their rate of CO2 emissions (see REV 6); and

• the successful policy of setting differential rates of fuel duty to encourage cleaner fuels will continue with:

- a 1p per litre incentive for ultra low sulphur petrol to take effect from a target date of 1^st October 2001; and

- a freeze in duty on road fuel gas.

BOOSTING COMPETITIVENESS AND REDUCING CONGESTION

Budget 2000 contains a package of measures, including lorry VED cuts worth £45 million, designed to boost the competitiveness of UK hauliers while helping to relieve the road network from the damage and congestion which lorries can cause:

• road-friendly 44-tonne/6-axle lorries will be introduced at a low VED rate, easing congestion, boosting the competitiveness of domestic UK hauliers, and allowing the Government to cut £1,800 off the VED rate for the 40-tonne/5-axle lorry used by the UK's international hauliers;

• VED will be cut by £500 for the most popular heavy lorry and a lorry typically used for collecting freight from ports, and frozen for almost all other lorry types for the third year running - a cut in real terms; and

• tougher enforcement against 'cowboy hauliers' to protect the competitiveness of legitimate hauliers, including legislation in the Transport Bill to allow the impounding of their trucks.

Gus Macdonald, Minister for Transport said:

"This Government is determined to deliver a better transport system and to protect the environment. Today's Budget shows we mean business.

"Today's additional investment supports the policies outlined in the Integrated Transport White Paper, and points the way towards July's Ten Year Transport Plan, which the Deputy Prime Minister has asked me to prepare. This will set out the long-term strategy and investment needed to deliver on our promises and build a modern integrated transport system.

"The DVLA will shortly be launching a publicity campaign to emphasise to motorists that driving a more fuel-efficient vehicle will cut their VED and fuel bills, as well as helping the environment.

"The measures announced to boost the competitiveness of UK hauliers show the value of the work undertaken in the Road Haulage Forum over the past year to consider these competitiveness issues. We will carry on this work with the industry so that it can continue to inform the Government's decision making."

NOTES FOR EDITORS

Fuel duties and differentials

1. Rates of duty on petrol and diesel will increase in line with inflation from 6pm today. Duty on road fuel gases will be frozen. The new rates are set out in the table below, together with the effect of the total tax increase (duty plus VAT) on the price of a litre of petrol:

2. The Government intends to introduce a 1 pence per litre incentive for ultra low sulphur petrol from 1^st October 2000. There will be consultation with the industry and other interest groups on the exact specification for this new, cleaner type of petrol and the exact date of introduction.

3. Details for businesses are published in Budget Notice 62/2000 which is available from Customs and Excise Advice Centres and from www.hmce.gov.uk

Vehicle Excise Duty (VED) for existing cars

4. A reduced VED rate for cars was announced in the last Budget and introduced on 1^st June 1999 for all cars with engines up to 1,100cc. This gave a £55 VED cut to drivers of around 1.8 million cars. Engine size is the best available proxy for measuring the fuel-efficiency of existing cars.

5. From 1^st March 2001, the reduced rate will be extended to apply to all existing cars with engines up to 1,200cc - giving a £55 cut to an additional 2.2 million smaller cars, including around 700,000 models of the Ford Fiesta, 200,000 Vauxhall Corsas, 200,000 Vauxhall Novas and 200,000 Renault Clios.

6. VED rates for existing cars, taxis and vans will increase in line with inflation from 1^st March 2001: the reduced rate for cars with smaller engines will be £105; the standard rate will be £160.

VED for new cars

7. Also from March 2001, a graduated VED system for new cars will be introduced. Under this system, all new cars first registered from that date will go into one of four VED bands according to their rate of carbon dioxide emissions.

8. Within each band, there will be a £10 discount for cars using cleaner fuels and technology. Initially, this will include cars run on road fuel gas, bi-fuel and dual fuel cars, and cars using hybrid technology.

9. Within each band, there will also be a supplement for diesel cars to reflect their higher emissions of particulates and other pollutants which damage local air quality. The system will be built in a flexible way so that the treatment of diesel cars can be reviewed as their emissions standards improve.

10. The table below sets out the bands and rates for the new system, including some examples of where the most fuel-efficient models of popular new cars will go.

11. New light goods vehicles (e.g. vans) for which there is currently no carbon dioxide emissions data available will pay £160 VED.

12. Under this new system, 95% of new cars will pay from £5 up to £70 less than under the rates for existing cars. Petrol models of Britain's best-selling new cars - the Ford Focus and Fiesta - will pay up to £40 less; while petrol models of the Vauxhall Astra, Rover 400 and Ford Mondeo will pay up to £20 less.

13. The new graduated VED system will therefore encourage the use of new cars as opposed to older cars, cars with lower CO2 emissions and better fuel-efficiency, and cars using cleaner fuels and technology.

Implementation and publicity for changes to car VED

14. In response to requests from motor manufacturers and traders for additional time to prepare, the Government has extended the timetable for introduction of the graduated VED system for new cars from Autumn 2000 to March 2001. This will coincide with the introduction of Y-registration number plates so it will be easy to distinguish cars which will pay VED under the new system.

15. The DVLA will continue to work with manufacturers, traders and other bodies throughout the year to collect the information and introduce the systems on which the new scheme will be based. Further details about the new system can be found on www.dvla.gov.uk/newved

16. To ensure public awareness and understanding of the new system, DVLA will be launching an extensive publicity campaign to explain the changes and promote the financial and environmental benefits of choosing cleaner cars: not only from cutting down on VED and fuel bills, but also from cutting down on emissions of carbon dioxide and local air pollutants.

17. For the extension of the reduced rate threshold to 1,200cc, DVLA will be putting into place a special, customer-friendly rebate scheme. From March 2001, all owners of newly-qualifying vehicles who have licensed their car at the standard £155 rate during 2000-01 will receive a £55 cheque in the post as a reward for driving a smaller, cleaner car.

Introduction of 44-tonne lorries

18. Acting on the unanimous recommendations of the Commission for Integrated Transport (CfIT), the Government has decided to allow 6-axle lorries meeting Euro II emissions standards to use UK roads at new 44-tonne weight limits. A target date of 1^st January 2001 has been set for their introduction: the final date will be confirmed in July's ten year plan in the context of wider freight policy.

19. 44-tonne lorries are no bigger than existing lorries, but are simply allowed to carry heavier loads. They do less damage to roads than existing 40-tonne/5-axle lorries because of their better weight distribution. CfIT's report on 44-tonne lorries (published on 6^th March) can be found at www.cfit.gov.uk. It also recommends improvements in the current enforcement regime and to rail freight.

20. Talking of his decision to introduce 44-tonne lorries, Lord Macdonald said:

"CfIT has carried out the most thorough analysis of the 44-tonne issue in 20 years. They have considered the issue in terms of the best environmental outcome, and concluded that there would be a small but significant net gain to the environment from allowing 44-tonne lorries. This approach of looking for the best environmental options is at the heart of our integrated transport policy.

"I accept CfIT's conclusion that 44-tonne lorries will mean fewer lorry journeys are needed to carry the same amount of goods, which they say is equivalent to removing 230 return journeys from London to Edinburgh every day. It is in no-one's interest to have empty space in lorries running around our roads when that space can be filled without penalties in terms of pollution or safety."

VED for lorries

21. A VED rate of £2,950 has been set for the new 44-tonne/6-axle lorries, which will take effect from a target date of 1^st January 2001. The other changes to lorry VED, which take effect from 6pm on Budget day, are set out in detail below. They will cost a total of £45 million per annum, with major VED cuts targeted at areas of the haulage industry which are under the most competitive pressure:

• the VED rate for the road-damaging 40-tonne/5-axle lorry will be cut by £1,800 from £5,750 to £3,950 to boost the competitiveness of international hauliers who need to run at 40-tonnes due to continental weight limits;

• a £500 cut in the VED rate for the UK-standard 38-tonne/5-axle lorry from £3,210 to £2,750 to encourage hauliers to continue using this lorry;

• a £500 cut in VED from £4,250 to £3,750 for the 41-tonne lorry capable of being used with up to 3 trailer axles - a lorry typically used by smaller operators collecting freight shipped 'unaccompanied' to UK ports;

• rates will be frozen for almost all other lorry types except for the 36-tonne on 5-axles (cut by £500 in line with the 38-tonne) and for lorries currently paying £155 or £160 which rise in line with the standard car rates.

Enforcement against 'cowboy hauliers'

22. To protect the competitiveness of legitimate UK hauliers, the Government is taking forward a number of measures designed to impose more stringent checks and penalties on those who operate illegally and to lessen the compliance burden on legitimate hauliers. These include:

• the addition of legislation to the Transport Bill to allow for the impounding of illegally-operated lorries;

• a review by a sub-group of the Road Haulage Forum aimed at improving the targeting and effectiveness of current enforcement efforts, which will also consider CfIT's recommendations in this area;

• a major project to improve the IT systems of the Traffic Area Offices, enabling improved levels of service to operators, co-operation between enforcement agencies and more efficient targeting of enforcement, benefiting both road and vehicle safety and legitimate hauliers;

• the enforcement of tough new rules brought in last year on access to the haulage profession, including more challenging tests for the Certificate of Professional Competence required by haulage operators; and

• tighter rules on use of rebated 'red diesel', and tougher penalties for misuse.

Other transport measures

23. Details of the company car tax reforms are set out in press notice REV 6 or can be seen at www.inlandrevenue.gov.uk/cars

PRESS ENQUIRIES should be directed to the DETR Press Office on: 020 7890 3066

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Treasury / Department of Health 1

21 March 2000

A MODERN NHS

FAIRNESS FOR FAMILIES AND COMMUNITIES

A historic four year package of funding for the NHS was announced by Chancellor Gordon Brown today, to be accompanied by a national consultation on measures to drive up performance which the Prime Minister will announce tomorrow.

The Chancellor has made available for the UK:

an extra £2 billion for the National Health Service for the year from April including extra resources from the tobacco tax increase;

6.1 per cent average annual real terms growth over the next four years - the longest period of sustained high growth in the history of the NHS;

a 50 per cent cash increase in NHS spending over the five years from the beginning of the first Comprehensive Spending Review - 35 per cent in real terms - equivalent to a rise in NHS cash spending per household from £1,850 in 1998/99 to £2,800 in 2003/04.

Speaking today, Secretary of State for Health, Alan Milburn, said:

"These are large and sustained increases in funding which will give the NHS a unique opportunity to invest for reform. The four year settlement provides the platform the NHS needs to plan far-reaching service modernisation. It amounts to a step change in NHS resources. Now we need a step change in results.

"The Government has met the call for increased funding. Now we look to work with the Service to deliver major improvements in patient care.

"It is not just money that the NHS needs. It is reform. The focus now needs to be on the modernisation that is necessary to build the 21^st century NHS our nation needs."

Budget 2000 announces the largest ever sustained increase in NHS resources with new baselines fixed for the medium term. Over the next four years NHS funding in England will grow by an average 6.3% in real terms - twice the historical average. This will deliver the longest period of sustained stable growth in resources since the NHS was founded. In England NHS resources will grow in real terms by 36% over the five years from 1999/00.

On Wednesday the Secretary of State for Health will set out to the House of Commons how increased resources will help speed up the modernisation of patient services.

There will be a new focus too on reforming the performance of local health services to address unacceptable variations in quality and cost. Mr Milburn added:

"At present there is too much variation in practice between different parts of the NHS. That is unfair both to patients and to taxpayers. Getting the most from these unprecedented funding increases will need new ways of ensuring that the rest perform to the level of the best. By forging an alliance with clinicians, managers and patients in the NHS we can do just that."

The Prime Minister will make a statement to Parliament tomorrow on work to reform and modernise the Health Service and to tackle unacceptable variations in performance, to ensure that a step change in resources can achieve a step change in results.

Notes for editors

1. The new resources are broken down as follows:

NHS UK, cash (£ billion)

Note: these figures include additions to the devolved administrations and the Northern Ireland departments.

England, cash (£ billion)