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Stability and steady
growth for BritainThe Government's central economic objective is to
achieve high and stable levels of growth and employment. It has set
the following long-term economic ambitions for the next decade:
- from a platform
of stability, Britain will have a faster rise in productivity
than its main competitors, as it closes the productivity gap;
- school and college
leavers will gain the highest possible qualifications they
can with the majority going on to higher education for the first
time;
- there will be
a higher percentage of people in employment than ever before;
and
- child poverty
will be reduced by half, as the Government moves towards its
aim of abolishing child poverty in Britain within the next 20 years.
A
continued commitment to stability and steady growth is necessary to
ensure the best public services for Britain.
As it meets its economic
goals, the Government is committed to meeting its environmental targets.
This leaflet summarises the Government's Pre-Budget Report (PBR). The
PBR provides a progress report on what has been achieved by the Government
so far; gives updated information on the state of the economy and the
government finances; and sets out the direction of Government policy
in advance of the spring 2000 Budget. The Government wants to hear
what you think. A comments slip is attached to this leaflet. Alternatively,
you can e-mail views to budget@hm-treasury.gov.uk
A stable economy... The Government has taken the long term action
necessary to create a stable economy and avoid a return to the damaging
boom and bust of the past. The Bank of England has responsibility for
setting interest rates in the best long-term interests of the economy,
while the public finances are controlled according to two strict fiscal
rules. The Government is pursuing policies to ensure stability across
the UK, including action to promote housing market stability with recent
increases in stamp duty and ending mortgage interest tax relief from
April 2000. As a result:
- inflation
is historically low and expected to remain close to its 21/2% target;
- the public
finances are under firm control, with the Government on track
to meet both its fiscal rules;
- economic growth
has been stronger than expected and is forecast to rise from 13/4%
in 1999 to 21/2-3% in 2000 and 21/4-23/4% in 2001 and 2002; and
- the number
of people in work has risen by 700,000 since May 1997 to a record
level.
The number of people
in work
Opening employment
opportunity to all... Employment opportunities should be open to all.
The Government's welfare to work policies have already helped 145,000
young people into jobs, with youth and long-term unemployment reduced
by half. Tax and benefit reforms and the National Minimum Wage are
increasing work incentives and making work pay. As announced in Budget
99, a new 10p rate of income tax was introduced in April 1999 (with
the previous 20p rate withdrawn), and the basic rate will be cut to
22p from April 2000. The new Working Families Tax Credit, introduced
in October, will boost the incomes of up to 1.4 million low and middle
income families by an average of £24 a week. Together with the minimum
wage and other reforms, it guarantees a minimum income of £200
a week for families with a full-time earner, and no family earning
under £235 a week will pay net income tax. The PBR announces
further measures to help people into work, including:
- more help
for the unemployed aged 25 and over, through New Deal 25 Plus
- extending to the over 25s the principles of the New Deal for under
25s;
- a new national
network of job-broking call centres harnessing new technology
to match people with jobs;
- enhancing the
New Deal for lone parents, including inviting those on Income
Support with children aged 3 and over to participate;
- a new Intermediaries
Fund to support organisations in the most deprived inner cities,
working to help the most disadvantaged into work; and
- nationwide extension
of the Intensive Gateway approach preparing 18-24 year olds
for work.
Raising productivity...
The Government wants to create a more entrepreneurial Britain where
enterprise is open to all. Britain's productivity performance has been
poor, showing a substantial gap of up to a third with countries such
as the US, France and Germany. This gap reflects long-standing weaknesses
such as an unstable economy, weak competition, poor skills and low investment.
Addressing these and raising Britain's productivity to match that of
other economies offers the prospect of significant increases in living
standards. Building on measures already introduced, including cutting
corporation tax rates to the lowest of any major industrialised country,
abolishing payable tax credits which favoured dividends over investment,
and extending capital allowances for small and medium sized firms to
encourage investment, the PBR sets out the next stage of reforms to
meet the productivity challenge: The productivity gap
- capital gains
tax reforms to strengthen the incentives for entrepreneurial
investment;
- a new £10 million
package to boost enterprise skills in schools, and a £30
million package of measures to boost enterprise among disadvantaged
groups and in deprived areas;
- further details
of the new Research and Development tax credit to stimulate
investment by small and medium-sized companies, and of Enterprise
Management Incentives and Corporate Venturing Tax relief,
to promote entrepreneurship and investment in high-tech companies;
and
- the new All
Employee Share Ownership scheme, proposed in Budget 99, to encourage
workers to take a stake in the success of their companies.
Fairness for families
and communities... The Government is committed to building a fairer
and more inclusive society in which everyone can contribute to and benefit
from economic prosperity. The Government attaches priority to supporting
families with children and is committed to abolishing child poverty
within 20 years. Measures already being introduced include the Working
Families Tax Credit, higher levels of child benefit and the new ChildrenÕs
Tax Credit from April 2001 (following the withdrawal of the married
couples allowance in April 2000). Together these measures will lift
around 800,000 children out of poverty. The Government is also ensuring
fairness for pensioners, including this winter's fivefold increase
in the winter fuel payment to £100 for every pensioner household. Further
measures to build a fairer society and ensure a fair tax system include:
- free TV licences
for people aged 75 and over from autumn 2000;
- extending the
10p income tax rate to savings from April 1999;
- a new Children's
Fund to support voluntary and community organisations in their
work with children in poverty; and
- a new tax package
to encourage giving to charities.
There is a strong ongoing
health case for increases in tobacco taxes, but decisions on
increases will be taken Budget by Budget. Revenues from any real increases
will be spent on the NHS. The Government is also taking measures to
crack down on tobacco smuggling, including cigarette pack marks.
Protecting the environment... Growth must take place in a way which
ensures effective protection of the environment. Global threats such
as climate change must be limited, hazards such as poor air quality
must be reduced and things that people value such as wildlife and the
landscape should be protected. The Government is committed to meeting
its environmental targets. Following Budget 99, the PBR:
- provides further
details of the new climate change levy on the business use
of energy, with an accompanying cut in employersÕ NICs and increased
support for energy efficiency measures; and
- announces that
decisions on petrol and diesel duties will in future be determined
on a Budget by Budget basis, taking into account the GovernmentÕs
economic and social objectives, as well as the UKÕs environmental
commitments. Revenues from any increases above inflation will go
to a ring-fenced fund for modernising public transport and improving
roads.
Where taxpayers'
money is spent The public sector spends £350 billion a year: £6,000
for every man, woman and child in the UK. £100 billion a year is spent
on education and the health service. A similar amount is spent on
ensuring pensioners, families and children, people with disabilities
and the unemployed get the help at the time of their lives when they
most need it through the social security budget.
Where tax payers'
money is spent
Where taxes come
from
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