HM Treasury 1
25 November 1997
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CHANCELLOR LAUNCHES PRE-BUDGET DEBATE
Chancellor Gordon Brown today launched a national debate on
the major economic issues facing Britain. For the first time
ever, the Government's detailed thinking on economic policy is
being opened up to comment and scrutiny before final Budget
decisions are taken.
The Pre-Budget report published today invites open discussion
of the economic policies necessary to deliver the Government's
objectives of high and stable levels of growth and employment.
The Government will set the economic framework which underpins
stability, and removes barriers to growth and employment.
Responsible pay settlements from the boardroom to the
shopfloor will help to achieve lower inflation, higher growth
and more jobs.
The Report sets out the challenges the nation must address and
the solutions that are open to securing a successful long-term
economic future. The debate will help build the foundations
of a shared understanding and sense of national economic
purpose between Government, business and individuals. This
is essential if the economy is to succeed in the global
marketplace and if Britain is to share in higher standards of
living.
Economic stability
In the past, instability has hindered the long-term growth and
development of the economy. Britain's productivity is
significantly behind its major competitors and in nearly 20
per cent of households with people of working age, no one is
in work. This Government will put an end to stop-go policies.
Stable public finances and low inflation are the building
blocks for high levels of growth and employment. This
requires a responsible approach from Government to monetary
and fiscal policy, and from business and individuals to
earnings throughout the economy.
To complement the reform of the Bank of England and the rules
for monetary policy, the Government proposes to legislate for
a Code for Fiscal Stability. This will ensure that fiscal
policy is set to promote long-term economic stability (see HM
Treasury 2).
Promoting growth
Economic stability underpins growth. But the growth itself
depends on productive investment. Changes to the tax system,
which the Government is considering, will
create the environment for long-term investment. In the
Spring Budget:
- advance corporation tax (ACT) will be abolished;
- a system of quarterly payments of corporation tax for
larger companies will be phased in over four years
from 1999;
- the main rate of corporation tax will be cut by 1 per
cent to 30 per cent from 1 April 1999.
This will allow companies time to plan ahead. Alongside the
reform of corporation tax, there will be:
- a Competition Bill to ensure small businesses are not
held back by cartels and monopolies;
- measures in the Spring Budget to reform capital gains
tax to encourage long-term investment.
Employment opportunity
To share in the benefits of economic growth, everyone must
have the chance to unlock their potential. The Government is
pledged to achieve high and stable levels of employment - the
modern definition of full employment for the 21st century -
and modernising the welfare state to help people from welfare
to work. Building on the New Deal, announced in the July
Budget, there will be a co-ordinated strategy of reform in
four areas to help the unemployed move into work and to ensure
that work pays:
- a new tax credit for working families on low incomes
paid directly through the wage packet;
- reform of national insurance;
- the introduction of a 10p starting rate of income tax
as soon as it is prudent to do so;
- these reforms will be introduced alongside a minimum
wage.
The Chancellor also set out today new ways in which the
Welfare to Work programme would be developed including: a New
Deal for the long-term sick and disabled; action on skill
shortages; new help for lone parents and increased childcare
provision to meet the challenges of the new labour market (see
HM Treasury 6).
A fair tax system
The Government is committed to developing the tax system to
benefit the many and not just the few, and ensuring that it is
fair and seen as fair. When it is prudent to introduce the
10p starting rate, changes will be made to ensure that its
benefits go to the lower paid. Any changes resulting from the
review of tax and benefits being led by Martin Taylor will
play a key part in shaping a fairer system.
A fairer system also means providing everyone with the
opportunity to save in a tax favoured environment. The
Individual Savings Account (ISA), extending the principle of
TESSAs and PEPs, will look to extend the benefits of saving
more widely, particularly to those on more modest incomes.
The Government will be launching a consultation document on 2
December.
The tax system must also be fair to future as well as present
generations (see HM Treasury 4). The Government's objective
is to secure growth that is environmentally sustainable. It
is committed to exploring the scope for using the tax system
to deliver environmental objectives. A consultation paper on
options for dealing with water pollution is being issued on
Thursday by the Department of the Environment, Transport and
the Regions. The results of the review on ways of helping the
less well-off to keep warm is published today, with the full
report published tomorrow by HM Customs and Excise.
Today's announcement for this year and next of a 20 Pounds
payment for pensioner households and a 50 Pounds payment for
pensioner households receiving Income Support to help with
winter fuel bills is an immediate step towards a fairer
society (see HM Treasury 5).
Taking the consultation forward
The debate which begins today is a clear break with the past.
Budgets will no longer be prepared in conditions of Budget
"purdah". Instead, there will be open discussion and the
Chancellor will listen carefully to all points of view.
The debate will culminate in the Spring Budget. During the
coming weeks, the Treasury will make further contributions to
the discussion.
On Thursday, it will publish a paper on the labour market -
"The Modernisation of Britain's Tax and Benefits System:
Employment Opportunity in a Changing Labour Market". On 2
December, a consultation exercise on Individual Savings
Accounts will be launched. A further paper on fiscal policy
will follow in early December. A number of regional
conferences to discuss key economic policy issues will also be
announced soon.
The Chancellor welcomes all contributions to this debate. All
correspondence will be read carefully and fed into the policy
process. We are inviting the public and business to write to
the Chancellor at the following address:
The Chancellor of the Exchequer
Pre-Budget 1998
HM Treasury
Parliament Street
London SW1P 3AG
or send an e-mail to budget@hm-treasury.gov.uk.
HM TREASURY PRESS OFFICE
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