Pre-Budget Statement: Chancellor's Speech: Nation urged to profit by share ownership rather than wage rises

This is an edited version of the Chancellor's statement

"THE CHALLENGE a year ago amid global turbulence and predictions of recession was to steer a course of stability. Now, with this year's pre- Budget report, the challenge is to lock in that stability.

"Britain must leave behind the sterile, century-long conflict between enterprise and fairness - between the left, which promoted the good society at the expense of the good economy, and the right, which promoted the good economy at the expense of the good society, and too often achieved neither. Only by pursuing both enterprise for all and fairness for all can we equip all of Britain for the future, and secure rising living standards for all.

"Britain can now aspire to a new economic ambition for the next decade - a faster rise in productivity than our main competitors as we close the productivity gap.

"A second economic ambition is for all people to gain the highest educational qualifications that they can with the majority of school-leavers going on to degrees.

"A third ambition is to have a higher percentage of people in work than ever before, and the fourth is to cut child poverty by half by the end of the next decade ... Our first priority, yesterday, today and tomorrow, is to lock in fiscal and monetary stability. Having come this far we will not relax our discipline. Our pre-Budget report is based on meeting the inflation target of 2.5 per cent, not just this year, but next year and the year after that.

"The Government is on course to balance the current budget over the economic cycle. Over that economic cycle we will keep debt to below 40 per cent of national income.

"The foundation must be to build a pro-investment, pro-competition, pro- enterprise Britain. For too long British investment has been too low and productivity increases too slow.

"Under governments of both parties, capital gains tax for every investment had been kept at 40 per cent. Subject to consultation on the details, the Budget will make a more radical reform to promote not just hi-tech investment, but long-term investment across the economy in Britain.

"I will say to Britain's prospective and actual investors and entrepreneurs: invest for three years and the capital gains tax rate will not be 40 per cent but 22 per cent. Invest for five years and the tax rate will not be 40 per cent, or 22 per cent, it will be 10 per cent.

"Large companies that invest in growing companies for a specified period will, from next year, receive a tax relief of 20 per cent, underwriting one- fifth of their investment. And companies which reinvest gains in new ventures will be able to defer the tax on capital gains. This pounds 100m incentive can bring Britain additional investment of pounds 500m every year.

"From April, employees will be able to receive shares worth up to pounds 3,000 in their companies, free of income tax, giving a tax saving of up to pounds 1,200. Employees will also be able to purchase pounds 1,500 of additional shares from their pre-tax salary - giving a tax saving of up to pounds 600.

"I urge employees and employers together to consider long-term investments in their firm's success. In preference to inflationary wage rises - which in the end bring higher interest rates - choose stake-holdings which can bring real gains.

"Through regional development agencies, and Scottish, Welsh and Northern Ireland devolved bodies, venture capital firms will be set up in every region. The New Deal for the young jobless to become self-employed and start a business will be extended to the over-25s in every part of Britain.

"The over-50s will be able to get grants of up to pounds 3,000 during the first year. We will also provide cash help for people moving from benefits to business, including support for micro-loans for small-business investment.

"We will create a new national jobs phone line, which the Employment Service would use to update the unemployed about vacancies. For every constituency in the country, the Government will provide assistance for MPs, irrespective of political party, to bring the unemployed and potential employers together.

"I say to the unemployed who can work: we will meet our responsibility to ensure there are job opportunities and the chance to learn new skills. You must now meet your responsibility - to earn a wage.

"The informal hidden economy is now draining billions of pounds in fraudulent benefit claims and unpaid taxes. This loss of revenues, this incidence of fraud, this waste of resources, cannot be allowed to continue, and especially when there are jobs that claimants could take.

"Britain will cut its environmental pollution by the year 2010 by 2 million tonnes a year, but ... the Climate Levy will be reduced from pounds 1.7bn to pounds 1bn. All of these revenues will be recycled to business, with every business enjoying a 0.3 per cent cut in employers' national insurance contributions.

"And there will now be an 80 per cent discount to energy-intensive sectors which agree to sign energy-efficiency agreements. Renewable energy sources and combined heat power will be exempt from this levy ... All the revenues raised in this way will be recycled to business.

"Having cut the deficit and introduced our new environmental policies, we are now in a position, instead of the pre-announced 6 per cent escalator [on road fuel duty] to make our decisions Budget-by-Budget, with the following commitment: if there are any real-term rises in road fuel duties, they will be lower, and the revenues will go straight to a ring-fenced fund for the modernisation of roads and public transport.

"Smuggling is now costing the United Kingdom pounds 2.5bn a year. There will be new scanners sited at major ports to detect contraband goods; new cigarette pack marks; and we will introduce new and tougher fines and penalties for those people who smuggle and those who sell smuggled goods.

"Our intention is to integrate children's tax credit and the child's elements of the working family tax credit and also income support, into one single credit to be paid direct to the mother.

"The Government will contribute 28p for every pounds 1 donated to charity, rising to 50p in the pounds 1 for payroll donations. And there will now be tax relief, not just for cash donations to charities, but also for gifts of quoted shares.

"There will be a trebling of the number of schools to be modernised through the windfall levy to a total of 15,000 by the year 2001 - that will mean half of Britain's schools - funded by an additional pounds 150m from the windfall fund, on top of the pounds 4bn which has already been committed for schools modernisation.

"Extra revenues from a 5 per cent real-term rise in cigarette duties will go to the NHS.

"From next autumn, pensioners over 75 will be receiving their television licence free of charge.

"At a cost of pounds 300m a year, every one of the 3 million households with a pensioner over the age of 75 will be able to save pounds 101 a year."