This is an edited version of the Chancellor's Budget speech
This is an edited version of the Chancellor's Budget speech
Britain is today experiencing the longest period of sustained econo- mic growth since records began in the year 1701. And the foundation of this Budget is our determination to maintain British stability and growth.
Facing a future of intense global competition, Britain must be prepared and be equipped:
* Long-term prosperity secure only if we make the decisions to be world leaders in science, enterprise and education;
* Family prosperity secure only if we also match a strong economy with investments to help parents balance work and family life, to give every child the best possible start in life, and a fair deal for pensioners.
Inflation - 20 per cent in the 1980s and 10 per cent in the early Nineties - has, every year in the past eight years, been 3 per cent or less, the most stable of all the major industrialised economies.
And with Bank of England independence and continued wage discipline, inflation is just 1.6 per cent. We expect it to be just 1.75 per cent this year and 2 per cent in 2006 and beyond as we continue to meet our 2 per cent inflation target.
The Budget forecast for 2004 of growth at or above 3 per cent was said to be a deliberate misrepresentation of Britain's economic position. Growth in 2004 is as forecast, 3.1 per cent. In December I reported 49 quarters of consecutive growth. Today I report economic growth for the 50th consecutive quarter.
This year and next the euro area is forecast to grow at 1.5 per cent and then just over 2 per cent, Japan at less than 1 per cent. Again North America and Britain will see the fastest growth in the G7. And our forecast for British growth this year is 3 to 3.5 per cent and in 2006, 2.5 to 3 per cent.
In the 18 years from 1979 to 1997, inflation averaged 6 per cent. In the past eight years, inflation has been 2.4 per cent, half as much. In the 18 years from 1979 to 1997, interest rates averaged 10.4 per cent. In the past eight, interest rates averaged 5.3 per cent, half as much.
Since 1997, 150,000 more self- employed, 300,000 more businesses, 1.5 million more homeowners, a 50 per cent increase in personal wealth, a doubling in the numbers of those earning more than £30,000, more than £50,000 and more than £100,000 a year, and two million children and almost two million pensioners are no longer trapped in absolute poverty.
Since 1997 we have created 2,100,000 jobs. Every week, a further 125,000 men and women find new jobs, an additional 50,000 vacancies are advertised and almost 4,000 new business are starting up. And with a total of 650,000 vacant jobs needing people with skills, the answer is not to abolish the New Deal, which has helped 1.2 million people into work, but to extend it to become a New Deal for jobs and skills.
Because we have entrenched stability, from May we will issue long-term bonds with maturities, for the first time in a generation, of up to 50 years, locking in low borrowing costs and benefiting taxpayers and investors.
The Secretary of State for the Environment is announcing five inspection bodies for food safety, the countryside, agriculture, animal health and environmental protection, compared with 22 separate bodies in 1997. Five agencies will be merged into the Health and Safety Executive. The Insolvency Service Agency will take over the responsibilities of the DTI's Companies Investigation Branch. In total we will reduce 35 agencies to just nine, a reduction of 26.
We are today bringing forward proposals for a reduction in public sector inspectorates from 11 to four, with single inspectorates for criminal justice, for education and children's services, for social care and health, and for local services.
The Inland Revenue and Customs will also consult on a single tax account for small business where information need be provided only once, a single point of contact for VAT and corporation tax, and flexible payment options.
Our aim must be that Britain becomes the world's leading location for research-based, science-based and knowledge-based industries. Stem-cell research holds the key to tackling some of the world's most intractable diseases from diabetes to Parkinson's. Britain can be a world leader.
Building on the £40m Research Council investment and £20m committed by the Wellcome Trust, and supported by the new UK Stem Cell Foundation, Britain will create a new national network for stem-cell research. We are setting the goal that Britain become the world's premier location for tracking diseases and developing drugs to treat them.
I also want Britain to be a world-leading location for the next wave of research and development. So with Bristol, Nottingham and Birmingham today joining Newcastle, Manchester and York as Science Cities, I intend to:
* After consultation, enhance the R & D tax credit for the mid-sized research company;
* Stimulate small technology- intensive companies with a guaranteed £100m share of public sector research contracts;
* Offer funding incentives for universities opening their research facilities to business;
* With regional development agencies today announcing more support for growing businesses, offer help for manufacturers on design including establishing a new Design Centre in Newcastle;
* And in 2,000 enterprise areas the time-limited incentive for commercial property purchases which will end will be followed by a new incentive: over three years I will make available £300m to drive forward local business-led regeneration.
To promote young British entrepreneurial talent in business, we will expand our new entrepreneur scholarships and ensure that by 2006 we meet our target that every school pupil has enterprise education.
To ensure help for British film-makers, we will replace existing reliefs with new tax reliefs for low-budget and larger budget films. To promote excellence in management and leadership in the arts, the Secretary for Culture is providing an extra £12m for the Arts Council and other arts bodies.
I have examined rates of corporation tax and capital gains tax. I propose to freeze rates. On air passenger duty, I will freeze rates. On insurance premium tax, I propose to freeze rates. On the climate change levy and the aggregates levy, I will freeze rates. On company car tax, I will freeze rates.
I will implement from midnight on Sunday the normal annual inflation rise of 1p on a pint of beer, 4p on a bottle of wine but I will freeze duty on spirits, cider and sparkling wine. My decision on cigarettes is to go ahead with the annual inflation rise of 7p a packet from 6 o'clock this evening.
I have written to the European Commission proposing the tax-free limit on goods brought into the UK from outside the EU should rise from £145 to £1,000. I will defer the usual inflation increase for fuel duty until 1 September.
From next month, servicemen and women injured in the line of duty will be entitled to new compensation payments. Such compensation payments would be taxed where recipients stay on in the forces but not taxed if they leave. The Secretary for Defence is announcing that no serviceman or woman will be penalised when they continue to serve our country.
The Heritage Lottery Fund, Sports England, the Government and the private sector are joining to create Britain's first national community service for young people.
With private finance matching public, up to £150m will be provided to recruit one million young volunteers, matching their idealism and their willingness to serve with the needs of communities across our country and internationally.
Third World debt
The International Development Secretary is announcing that by July he plans debt reduction agreements with 19 of the world's poorest countries, Britain unilaterally providing our share of 100 per cent relief on multilateral debts, the money used to fund urgently needed health and education.
For homebuyers I propose a new threshold for stamp duty from midnight. I will raise the threshold, doubling it to £120,000. I will raise the starting point for inheritance tax from £260,000 to £275,000 from 6 April and, in successive years, £285,000, then £300,000. Ninety-four per cent of estates will pay no inheritance tax.
We want to do more to help young people buy their first home. First, we propose in partnership with the Council for Mortgage Lenders - together typically financing 25 per cent of the purchase price - a shared equity scheme that will raise the numbers eligible for low-cost homeownership schemes to 100,000 new homebuyers. Second, starting with nine pilots across the country, we will build private homes in council estates.
Under the figures for the next three years published today the pension credit will - from now to 2008 - rise by 13 per cent, in line with earnings. In 1997 the poorest pensioner received just £69 a week. By 2007, this will be £119 a week.
In total, the pension credit, which is rising in line with earnings, will benefit 3.2 million pensioner households and, in all, 3.7 million pensioners.
In April, I will raise the personal income tax allowance in line with inflation from £4,745 to £4,895. Using £1bn to raise the personal allowance would give a family in work on median earnings [£23,400 a year] with two children just 80p a week or £40 a year. But using the same resources to raise the child tax credit will give that same family £5 a week, or £260 a year.
Payments for children under the child tax credit will rise each year in line with earnings and over the coming three years by a total of 13 per cent. Including child benefit, rising in this period from the £28 a week we inherited to a maximum of £63 a week for the first child and £111 a week for two.
With our new system of tax credits offsetting income tax liabilities, the effective point at which a family with two children starts paying income tax, £15,000 in 1997, is now £21,200 and from April 2007 will be over £22,000, tax credits effectively wiping out income tax liability until earnings of £430 a week.
For policing and law and order, expenditure in 2007-08 will, as stated in our spending plans, be £3.5bn higher than this year. Expenditure on transport will be £2.4bn higher than this year. Defence is £3.7bn higher. Education is £12bn higher. And health is £23bn a year more in 2007-08 than in 2004-05.
Britain must become the best-educated, best-trained, best-skilled country in the world. Since 1997 we have doubled investment per pupil from £2,500 to £5,000 a year. But still we invest less per pupil than our major competitors.
By next year, for the under-fives, there will be 1,000 Sure-start children's centres, by 2010, 3,500, an average of five in each constituency.
From 2007, free nursery education of 15 hours. And during the coming parliament, one million new childcare places and paid maternity leave rising to one year.
Our aim is to ensure every young child is ready to benefit from school. To support children's centres and children's services we will end a long-standing grievance and refund the VAT incurred by local councils on these services. Our aim is education from the age of three that is nationwide, of high quality and available to all.
In each of the next three years for primary schools alone, the Secretary for Education will invest more, rising from £1.6bn this coming year to £1.8bn in 2007-08. The Secretary for Education and I now plan to invest a total of £2bn in 2008-09 and £2.3bn in 2009-10, an investment over the next five years in primary schools alone of £9.4bn.
Our three-year programme of spending on IT will be raised to £1.67bn. Capital investment in buildings, technology and computers for primary and secondary schools, which was just £100 per year per pupil in 1997 and was last year £650, will rise by 2010 to at least £1,000 per pupil per year, 10 times the investment of 1997.
To advance our objective that nine out of 10 17-year-olds stay on at school or join a vocational course, we will now offer those in full time education or unwaged training up to £75 a week in education maintenance allowances and children's benefits.
Every year, 150,000 16- and 17-year-olds are in work but not in training. So starting in eight areas, every young employee will be offered apprenticeships or college-based training, with time off for employees in return for financial help to employers.
No direct payments to school headteachers existed in 1997. Today the typical primary school receives £30,000, the secondary school £96,000, money direct to the school and the headteacher to spend on the school's priorities.
Payments will rise each year to 2008 in England. Separate announcements of allocations will be made for Scotland, Wales and Northern Ireland.
Headteachers of a typical primary will receive £31,000 this coming year, rising to £34,000, rising to £36,000, a guarantee over the next three years of a total of over £100,000. And headteachers of the typical secondary will receive £98,500 next year rising to £109,000, rising to £115,000, a guarantee over the next three years.
Thousands of pensioners and other patients in hospital are charged, cash deducted from their pension and benefits to pay for their stay. I am, from today, abolishing these charges. In 1997, there was no winter fuel allowance. This autumn we will again pay a £200 winter fuel allowance, for pensioners, £300 for the over-80s.
We will pay to every pensioner household - 65 and over - paying council tax, a refund of £200. Since 1997, free TV licences for the over 75s; free eye tests for all pensioners; free hospital charges; a £200 winter allowance free of tax; and a £200 council tax refund.
And in every community of the United Kingdom there is, from next year, free local bus travel for every pensioner and every disabled person.