Building long-term prosperity for all

HM Treasury November 2000

The Pre-Budget Report describes the Government's strategy to build long-term prosperity for all.

The Government 's objective is a strong and stable economy. Building on a platform of economic stability, its aim is to raise Britain's long-term productivity performance, deliver employment opportunity for all, and ensure a fairer and more inclusive society in which everyone can share in rising living standards.

The Pre-Budget Report outlines the next stage of reforms on which the Government will be consulting in the run-up to Budget 2001.

The Government wants to hear your views on the issues and proposals in the Pre-Budget Report. A comments slip is attached to this leaflet. Alternatively, you can e-mail your views to budget@hm-treasury.gov.uk.

Delivering a stable economy

The Government has taken action to avoid a return to the boom and bust of the past, including by reducing the high levels of government borrowing it inherited. Steady and stable growth is now being accompanied by record levels of employment, historically low inflation and sound public finances:

• inflation is expected to remain close to the Government's 21/2% target;
  
  
• the economy continues to expand, with economic growth of 3% forecast for this year and 21/4-23/4% for the following years; and
  
  
• the Government has repaid debt in each of the last two years and is on course to do so again this year. The public finances remain on track to meet the Government's strict rules for borrowing.

Because of the Government's commitment to prudence and stability, it was able to raise investment in Britain's key public services in the July 2000 Spending Review ­ including substantial new resources over the next 3 years for education, health, transport and fighting crime.

A fair deal for transport and the environment

The Pre-Budget Report contains a package of measures to meet people's concerns about the impact of rising oil prices on the economy and living standards without putting at risk long-term economic stability, investment in public services or environmental gains.

The Government will:

• freeze all fuel duties in cash terms in Budget 2001, lowering petrol and diesel duties by around 11/2 p a litre in real terms.

The Government will consult on:

• proposals for a 2p duty cut in ultra low sulphur petrol which can be used in all cars and a 3p duty cut in ultra low sulphur diesel from April next year;
  
  
• further assistance for the haulage industry, with lorry VED to be cut by over 50% on average in Budget 2001 (including lower rates for cleaner lorries). As a transitional arrangement, the Government has also committed up to £265 million this year, meaning a rebate of up to 50% in lorry VED;
  
  
• introduction of a 'vignette' system, a British disc to ensure non-British lorries pay their share for using British roads; and
  
  
• extending the reduced rate of VED to existing cars with engines up to 1,500cc meaning 8.4 million cars ­ an extra 5 million ­ will pay the reduced rate.

Fairness for families and communities

The Government wants to build a fairer and more inclusive society in which everyone can contribute to and benefit from the country's rising prosperity. The Pre-Budget Report describes further steps the Government is taking, including measures to ensure fairness for pensioners, to invest in education and to support saving:

• a package to boost pensioner incomes:
  
  
  • increasing the winter fuel payment which is set at £150 for future years, by a further £50 for this winter ­ a payment of £200 for all pensioner households;
    
    
  • increasing the basic state pension by £5 a week for single pensioners in April 2001 and a further £3 a week in April 2002. For couples, there will be corresponding increases of £8 and £4.80 a week;
    
    
  • increasing the Minimum Income Guarantee to £92.15 a week for a single pensioner and £140.55 a week for couples in April 2001, and at least £100 for a single pensioner and £154 for a pensioner couple by 2003; and
    
    
  • consulting on raising the age-related personal tax allowances for pensioners in 2003-04 by £240 over and above indexation.

• extending the Individual Savings Account (ISA) annual contribution limit of £7,000 (and the £3,000 cash limit) to April 2006, and making cash ISAs available to 16 and 17-year olds from April 2001; and
  
  
• an extra £200 million investment in school buildings this year with further direct payments to schools.

Increasing employment opportunity for all

The number of people in work

Source: Labour force survey

There are now over 1 million more people in work than in spring 1997 and unemployment has fallen to its lowest level for over 20 years.

The Government's New Deal has already helped almost 245,000 young people into jobs. Youth unemployment is down by 70% and long-term unemployment is down by over 60% over the past 31/2 years.

The New Deal is also helping to provide employment opportunity for lone parents, the long-term unemployed and people with disabilities.

Building on the New Deal and radical reforms to make work pay, the Pre-Budget Report:

• extends New Deal help and support starting from autumn 2001 to all lone parents on Income Support who are not working or who work under 16 hours a week; and
  
  
• announces a new Job Transition Service providing extra help for those affected by large-scale redundancies to move into new jobs.

Meeting the productivity challenge

Productivity - output per worker

Source: OECD, UK = 100

The amount of output produced per worker (productivity) in Britain is lower than that in countries such as the US, Germany and France. This is a long-standing problem, and one which the Government is determined to address.

Closing the productivity gap with other countries and raising Britain's productivity performance will mean more jobs and higher living standards in the future.

Building on a new Competition Act to promote a more competitive economy, tax reforms to increase enterprise and investment, and additional resources for education and training, the Pre-Budget Report sets out:

• proposals for a major package of VAT measures from April 2001 to reduce the administrative burden on small and medium-sized firms and improve their cash flow; and
  
  
• further steps to promote enterprise in all regions, with greater freedom and flexibility for Regional Development Agencies and taking forward the Social Investment Taskforce proposals to stimulate more private investment in disadvantaged areas.

Where taxpayers' money is spent

Total public spending is expected to be around £372 billion this year, around £6,000 for every man, woman and child in the UK.

As a result of the increased resources announced in the 2000 Spending Review, this is set to increase to £395 billion next year and £443 billion by 2003-04 ­ with over half of the rise between 2000-01 and 2003-04 allocated to education and health, and a further 20% to transport, housing and law and order.

Where taxpayers' money is spent

Source: HM Treasury, 2000-01 estimates

Where taxes come from

Source: HM Treasury, 2000-01 estimates