Politics - UK Government

Budget 2012 statement by the Chancellor of the Exchequer, the Rt Hon George Osborne MP

Wed, 21 Mar 2012 21:48:27 GMT

The Rt Hon. Chancellor of the Exchequer George Osborne's budget speech to the House of Commons.

Mr Deputy Speaker, this Budget rewards work.

Britain is going to earn its way in the world.

There is no other road to recovery.

This Budget supports working families and helps those looking for work.

It unashamedly backs business.

And it is on the side of aspiration: those who want to do better for themselves and for their families.

This Budget reaffirms our unwavering commitment to deal with Britain’s record debts.

But because we’ve already taken difficult decisions, this can also be a reforming Budget that seeks to repair the disastrous model of economic growth that created those debts.

A model that saw manufacturing almost halve as a share of our national economy, while the national debt doubled.

Mr Deputy Speaker, this is how Britain will earn its way in the world: with far reaching tax reform.

With a simpler tax system, where ordinary taxpayers understand what they are being asked to pay.

With a tax system that is more competitive for business than any other major economy in the world.

A tax system where millions of the lowest paid are lifted out of tax altogether, while the tax revenues we get from the wealthiest increase.
But reforming tax is only part of the story.

We will earn our way in the world by saying to all businesses – large and small: We will provide you with the modern infrastructure; new growth-friendly planning rules and employment laws; the kinds of schools and universities and colleges our future workforce needs.

And in return, you, British businesses, have the self-confidence to: invest, expand, hire, innovate and be the best.

We earn our way in the world if we stop being afraid to identify Britain’s strengths and reinforce them, backing industries, like aerospace, energy and pharmaceuticals, creative media and science.

A deliberate strategy to create a more balanced national economy, where financial services are strong, but they are not the only string to our bow.

Mr Deputy Speaker,

Stability comes first.

And the Report from the Office for Budget Responsibility reminds us today of the risks to stability.

Despite the welcome action by the European Central Bank, the impact of the sovereign debt crisis on the European economy has been significant.

Italy, the Netherlands, Belgium and others are now in recession – and Germany’s economy shrank in the last quarter.

In today’s Report, the OBR are sharply revising down their forecast for euro area growth this year by 0.8% to - 0.3%.

Their forecast for world economic growth is also revised down over the next two years - by 0.2% and 0.3% respectively.

Of course, Britain is not immune from these developments in our largest export markets.

And the OBR say today that “the situation in the euro area remains a major risk to our forecast”.

Another risk they identify is a “further spike in oil prices”, and there is no doubt that the high oil price – driven both by real demand and the Iranian situation – is of great concern across the world.

It means that the OBR’s overall assessment of the outlook and risks for the British economy is “broadly unchanged” since last November’s report.

Despite these headwinds, there are, however, some more positive signs.

The OBR expect the British economy “to avoid a technical recession with positive growth in the first quarter” of this year.

They say that the British economy has “carried a little more momentum into the new year than previously anticipated”.

Indeed, the Office for Budget Responsibility is slightly revising up in their growth forecast for the UK this year to 0.8%.

They then forecast 2% next year;

2.7% in 2014;

And 3% in both 2015 and 2016.

The OBR’s forecast unemployment rate is the same as it was last autumn.

They expect it to peak this year at 8.7 per cent before falling each year to 6.3 per cent by the end of the forecast period.

But they have revised down their estimate of the claimant count, which they now expect to be around 100,000 lower in each of the next four years than they previously forecast – peaking at 1.67 million this year rather than the 1.8 million they forecast in November.

And they forecast one million more jobs in the economy over five years.

Inflation is expected to fall throughout the period, from 2.8% this year to 1.9% next year, and then 2% by the end of the forecast period.

I am today writing to the Governor of the Bank of England to reaffirm the CPI inflation target of 2%.

The Government’s credible and responsible fiscal policy allows the independent central bank to pursue an activist monetary policy consistent with targeting low inflation.

I confirm that the Asset Purchase Facility will remain in place for the coming year.

Fiscal forecasts

So employment is growing, inflation is coming down.

And so too is the deficit.

When this Government came to office, the budget deficit stood at over 11%.

The state was borrowing one in four of every single pound it spent.

Today, I can report that the deficit is falling and is forecast to reach 7.6% next year.

The share of national income taken by the state will have fallen from almost 48% when we took office to 43% next year.

We must stick to the course.

So there will be no deficit funded giveaways today.

But because we’ve taken difficult decisions, nor do we need to tighten further.

Over the five year period, this is a fiscally neutral Budget.

This is achieved through a modest reduction in both taxation and spending.

So, Mr Deputy Speaker, let me turn to those fiscal forecasts.

The whole House will be pleased to know that these have improved a little from the forecasts I presented in November.

Borrowing this year is set to come in at £126 billion, £1 billion lower than I forecast in the autumn.

And over £30 billion a year lower than its peak the year before we came to office.

Borrowing will then fall to £120 billion next year, if you exclude the transfer of Royal Mail pension assets.

It will then fall to £98 billion in 2013-14;

Then £75 billion;

Then £52 billion;

Reaching £21 billion by 2016-17.

So in total, borrowing is £11 billion less than I last forecast in the Autumn.

This will be used to pay down debt.

In my first Budget, I set the Government the fiscal mandate of achieving a cyclically-adjusted current balance by the end of the five year horizon.

The OBR confirm today that we are on course to achieve that mandate, and have eliminated the structural current deficit by 2016-17.

They also confirm that we are also on course to reach our target for debt to be falling as a percentage of national income by the end of the Parliament in 2015-16.

Public Sector Net Debt is now set to peak at 76.3% in 2014-15, almost 2% lower than previously forecast – before falling the following year.

Spending

A balanced structural current budget and falling debt: our deficit reduction plan is on course.

Mr Deputy Speaker, we will not waiver from it.

To do so would risk a sudden loss of confidence and a sharp rise in interest rates – and we will not risk that.

Instead we reinforce today our commitment to fiscal responsibility, not just this year – but in the years ahead.

The transfer of the £28 billion of assets from the Royal Mail pension fund to the Exchequer will free it from its crippling pension debts, ensure the pensions of hard-working staff are paid and help to bring in new private sector investment.

Some would have been tempted to spend the windfall.

I do not propose to spend it.

Instead, I have used it to pay off debt.

We will also maintain our control on welfare spending.

The passing of the Welfare Reform Act two weeks ago was an historic moment.

I pay tribute to my RHF the Work and Pensions Secretary and to all my coalition colleagues for supporting him against determined opposition from those who defend unlimited welfare.

But even with the Act, the welfare budget is set to rise to consume one third of all public spending.

If nothing is done to curb welfare bills further, then the full weight of the spending restraint will fall on departmental budgets.

The next Spending Review will have to confront this.

So I am today publishing analysis that shows that if in the next Spending Review we maintain the same rate of reductions in departmental spending as we have done in this review, we would need to make savings in welfare of £10 billion by 2016.

We will also address the rising costs of an ageing population, and the burden this places on future generations.

We will be publishing a White Paper on social care.

I’ve also said that we would consider proposals to manage future increases in the state pension age, beyond the increases already announced.

I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity.

Details of how this will operate will be published alongside the OBR’s long term fiscal sustainability report this summer.

One area where future government spending is expected to be lower than planned is Afghanistan.

We were reminded again yesterday of the sacrifice so many of our servicemen and women have made.

As the Prime Minister made clear with the US President last week, UK forces will cease combat operation by the end of 2014.

As a consequence, I can tell the House that the cost of operations – which are funded by the Government’s Special Reserve and entirely separate from the defence budget – are expected to be a total of £2.4 billion lower than planned over the remainder of the Parliament.

Let me be clear today, the full cost of operations will continue to be met from the Reserve – and our brave armed forces will get the equipment they need to complete the job.

But I can ensure that some of the benefit of the lower cost is felt by those who fight so hard and give so much for our nation’s security.

We will fund an extra £100 million of improvements in the accommodation of our armed forces and their families.

I will also double the families welfare grant which is used to provide additional support to the families left behind when people deploy.

We’ve already doubled the operational allowance.

Today, I am doubling the rate of Council Tax Relief.

The thousands serving our country in operations overseas will receive 100% Relief on an average Council Tax bill.

Low interest rates/gilts

Mr Deputy Speaker, our commitment to reduce the deficit is keeping interest rates low.

In this Budget, we take measures to ensure that the benefits of those low market interest rates are felt across our economy.

They are certainly benefitting the taxpayer.

Thanks to the reduction in the deficit, and our low interest rates, this Government is saving a total of £36 billion in debt interest payments compared to its predecessor.

This year is the 400th anniversary of the creation of the Treasury Board and the modern Treasury.

There have been times the Treasury has been borrowing money more cheaply than at any previous time in that 400 year history.

Few countries in Europe could say that.

This reflects the confidence investors have in Britain’s ability to pay its way.

I now want to test whether we can we can extend these benefits further into the future and diversify our portfolio.

At present, the longest gilt we currently offer to the market is 50 years.

The Debt Management Office will consult on the case for issuing gilts with maturities longer than 50 years, and the case for a “perpetual” gilt with no fixed redemption date – something Britain last felt able to issue six decades ago.

We are also taking the opportunity to rebuild Britain’s reserves, which had fallen to historically low levels.

I can confirm our gold holdings have risen in value to £11 billion.

This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.

Working families are already being helped by historic low mortgage rates.

The New Buy Scheme that we introduced last week uses the Government’s balance sheet to help those who cannot afford the larger deposits that some mortgage companies are now demanding.

It comes alongside a new, reinvigorated Right to Buy.

And to ensure that there are new homes to buy, we are today expanding the Get Britain Building Fund that provides upfront finance to construction firms.

Credit easing

We are also passing on our low interest rates to small businesses, through the National Loan Guarantee Scheme.

This started operation yesterday.

Barclays, Lloyds, the RBS, Santander and the new business bank Aldermore are all involved.

£20 billion of guarantees in total will be available.

In the Autumn Statement I also allocated £1 billion to invest in funds that lend directly to the mid-cap businesses that are the backbone of our economy.

This is an alternative source of finance to the banks.

The response has exceeded our expectations.

24 funds have submitted proposals.

I am today short-listing seven of them.

And such has been the quality of the bids, I have also decided to increase the size of the Finance Partnership by 20% and I am also expanding the Enterprise Finance Guarantee.

Growth

Stability. Credibility. The low interest rates they bring.

And passing on those low rates to families and businesses.

These are necessary for growth.

But alone they are not sufficient.

We as a nation have to make a choice.

This country became seduced by large deficits and the illusion of cheap finance.

Do we watch as the Brazils and the Chinas, and the Indias of this world power ahead of us in the global economy; or do we have the national resolve to say: “No, we won’t be left behind. We want to be out in front”.

That is this Government’s resolve.

Under this Government, Britain has moved into the top ten of the most competitive places in the world to do business.

But we have to do more.

Here’s how.

Exports and investment

First, exports.

Over the last decade, our share of world exports shrank as Germany’s grew.

We sold more to Ireland than to Brazil, Russia, India and China – put together.

That was the road to Britain’s economic irrelevance.

We want to double our nation’s exports to one trillion pounds this decade.

So we’re expanding UK Export Finance and setting out new plans to help smaller firms in new markets.

Exports abroad must be accompanied by investment at home.

Britain has a reputation as a remarkably open and welcoming place for investment.

We must never allow protectionist rhetoric to creep into our political system.

Instead, we’re actively seeking investment from overseas pension and sovereign wealth funds – and working to develop London as a new offshore market for the Chinese currency.

We also want investment from British pension funds in British infrastructure – and we’re now working with a dozen of the largest pension schemes specifically on that.

We’re the first British government to set out in a National Infrastructure Plan the projects we are going to prioritise in the coming decade.

The roads, railways, clean energy and water, and broadband networks we need are all identified.

I also believe this country must confront the lack of airport capacity in the South East of England – we cannot cut ourselves off from the fastest growing cities in the world.
The Transport Secretary will set out Government thinking later this summer.

We want to look at the opportunities for increasing the role of private investment in the road network, learning lessons from the water industry.

I confirm today that Network Rail will extend the Northern Hub, adding to the electrification of the transpennine rail route, by upgrading the Hope Valley line between Manchester and Sheffield – and improving the Manchester to Preston and Blackpool, and Manchester to Bradford lines.

For years, transport investment in the north of England was neglected. Not under this Coalition Government.

We are working with our great cities to devolve decision making powers – and we are striking a ground-breaking deal with Manchester to support £1.2 billion in growth-enhancing infrastructure.

We will support £150 million of Tax Increment Financing to help local authorities promote development.

And we will provide an extra £270m to the Growing Places fund.

In all this we are working with local areas to support their ideas for growing the private sector in parts of the country where the state has taken a larger and larger share of the economy.

The Mayor of London is also a very effective champion for the city he runs so well.

We will work with him on plans this summer to go on investing in London transport, lengthening commuter trains, extending the Underground and exploring new river crossings in east London.

So from the allocation made to the Mayor through the Growing Places Fund he will be creating a new £70 million development fund to attract new business and new jobs.
And the Mayor has persuaded me of the opportunities the new Royal Docks Enterprise Zone offers our largest city if we offer enhanced capital allowances there – so we will.

24 Enterprise Zones are now going ahead, across England.

Chinese investment pouring into the zone in Liverpool.

The Marches Zone in the West Midlands is already expanding.

I want other parts of the United Kingdom to benefit from these policies.

The Chief Secretary can confirm today that we will offer enhanced capital allowances for businesses starting up in the new Scottish enterprise areas in Dundee, Irvine and Nigg and there will be a new Welsh Enterprise Zone in Deeside, while we look forward to the first Enterprise Zone in Northern Ireland.

Energy

I also want to see investment in our world-leading energy sector, including renewables.

We’ve launched the Green Investment Bank; open for business next month.

We’ve introduced a Carbon Price Floor into our tax system to encourage investment and set the rate today.

Combined Heat and Power plants will not be liable to carbon price support rates on fuels used for heat.

Renewable energy will play a crucial part in Britain’s energy mix – but I will always be alert to the costs we are asking families and businesses to bear.

Environmentally sustainable has to be fiscally sustainable too.

The Carbon Reduction Commitment was established by the previous Government.

It is cumbersome, bureaucratic and imposes unnecessary cost on business.

So we will seek major savings in the administrative cost of the Commitment for business.

If those cannot be found, I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax.

Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years.

And so my RHF the Energy Secretary will set out our new gas generation strategy in the autumn to secure investment.

I also want to that ensure we extract the greatest possible amount of oil and gas from our reserves in the North Sea.

We are today introducing a major package of tax changes to achieve this.

We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach.

We are also introducing new allowances including a £3 billion new field allowance for large and deep fields to open up West of Shetland, the last area of the basin left to be developed.

A huge boost for investment in the North Sea.

Aerospace/ Science/ Creative hub

We shouldn’t be shy about identifying our successful industries and reinforcing them.

Around one fifth of the world’s top 100 medicines originate from UK research.

So we’re backing our life sciences sector through creating the Francis Crick Institute at St Pancras and cutting taxes on patents to make this one of the most attractive places in the world to invent new medicines.

We’ve protected the science budget.

Now we’re committing £100m of support, alongside the private sector, for investment in major new university research facilities.

And with the world’s second largest aerospace industry, we will also establish a UK centre for aerodynamics, to open next year that will encourage innovation in aircraft design and commercialise new ideas.

Today we also set Britain this industrial ambition.

That we turn Britain into Europe’s technology centre.

We will start with digital content.

The film tax credit, protected in our spending review, helped generate over £1 billion of film production investment in the UK last year alone.

Today I am announcing our intention to introduce similar schemes for the video games, animation and high-end TV production industries.

Not only will this help stop premium British TV programmes like Birdsong being made abroad, it will also attract top international investors like Disney and HBO to make more of their premium shows in the UK.

It will support our brilliant video games and animation industries too.

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To be Europe’s technology centre we also need the best technology infrastructure.

Two years ago Britain had some of the slowest broadband speeds in Europe; today our plans will deliver some of the fastest – with 90 per cent of the population having access to superfast broadband, and improved mobile phone coverage for rural areas and along key roads across the UK.

But we should not be complacent by saying it is enough to be the best in Europe when countries like Korea and Singapore do even better.
So today we’re funding ultra fast broadband and wifi in ten of the UK’s largest cities.

Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London.

My HF for Brighton Kempton asked me to help small cities too – no doubt with his own city in mind.

I agree. £50m will be available for smaller cities too.

The fastest digital speeds in the world available in our cities, with the most connected countryside in Europe – and the most creative digital content anywhere.
That’s what a modern industrial policy looks like.

And the Business Secretary and I have asked Michael Heseltine to review by the Autumn how Government spending departments and other public bodies can work better with the private sector on economic development.

From Liverpool to Canary Wharf, Michael knows how it’s done.

Best place to start business

Of course, those projects succeeded because they were not killed off by the planning system.

You can’t earn your future if you can’t get planning permission.

Global businesses have diverted specific investments that would have created hundreds of jobs in some of the most deprived communities in Britain to countries like Germany and the Netherlands, because they couldn’t get planning permission here.

That is unacceptable.

Next week my RHFs the Communities Secretary and the Planning Minister will publish the results of our overhaul of planning regulation.

We’re replacing 1000 pages of guidance with just 50 pages.

We’re introducing a presumption in favour of sustainable development;

While protecting our most precious environments.

The new policy comes into effect when the National Planning Policy Framework is published next Tuesday.

This is the biggest reduction in business red tape ever undertaken.

As a country, we also want to make the most of the Olympic and Paralympics Games.

Some of the biggest events will be on a Sunday.

When millions of visitors come to Britain to see them, we don’t want to hang up a ‘Closed for Business’ sign.

So we will introduce legislation limited to relaxing the Sunday trading laws for eight Sundays only, starting on July 22nd.

Education/ flexible workforce

Mr Deputy Speaker, earning our way in the world means giving young people the skills to compete.

In time, my RHF the Education Secretary’s school reforms will do more to improve the long term economic performance of our economy than any Budget measure ever will.
But we’ve got to help the young adults who’ve already been let down by the school system.

We’re offering a record number of apprenticeships and our Youth Contract comes into force next month.

I can tell the House, we are also exploring the idea of enterprise loans.

Young people get a loan to go to university or college.

We now want to help them get a loan to start their own business.

We’re also looking to see whether we can make public sector pay more responsive to local pay rates.

It is something the last Government introduced into the Court Service.

London weighting already exists across the public sector.

Indeed, the Opposition have proposed the interesting idea of regional benefit rates.

So we should see what we can do to make our public services more responsive, and help our private sector to grow and create jobs in all parts of the country.

We’ve asked the independent Pay Review bodies to look at the issue.

Today, we publish the evidence that the Treasury are submitting to them.

And some departments will have the option of moving to more local pay for those civil servants whose pay freezes end this year.

Tax reform

Mr Deputy Speaker,

New infrastructure and investment.

Ambitious reforms on planning, education and welfare to help businesses to create jobs.

These will all help Britain earn its way in the world.

But we also need a tax system that supports work.

Two hundred years ago, Adam Smith set out the four principles of good taxation – and they remain good principles today.

Taxes should be simple, predictable, support work, and they should be fair.

The rich should pay the most, and the poor least.

The tax system this Government inherited from its predecessor had drifted far from these principles.

We have already addressed some of the problems.

We’ve established an Office of Tax Simplification to drive out complexity.

Companies are now moving to Britain, not away.

We’ve stopped the jobs tax.

We’ve taken one million low paid people out of tax altogether.

We now need further reform.

We need to give Britain a modern tax system fit for the modern world.

Tax transparency

The first goal is a far simpler tax system, which businesses can easily navigate and where ordinary taxpayers understand what they are being asked to pay.

So we will radically change the administration of tax for our smallest firms.

Last year, I asked the Office of Tax Simplification for recommendations.

They have proposed that we tax small firms on the basis of the cash that passes through their businesses, rather than asking them to spend a huge amount of time doing calculations designed for big business.

I agree.

So we will consult on this new cash basis for calculating tax for firms with a turnover of up to £77,000 - double what the Office proposed.

This will make filling in tax returns dramatically simpler for up to 3 million firms.

We are also pressing forward with our ambition to integrate the operation of income tax and national insurance I announced at last year’s Budget – so we don’t ask businesses to run two different payroll tax administrations.

A detailed consultation on how we do this is being published next month.

We will also address some of the loopholes and anomalies in our VAT system.

For example, at present, soft drinks and sports drinks are charged VAT; sports nutrition drinks are not.

Hot takeaway food on high streets has been charged VAT for more than twenty years; but some new hot takeaway products in supermarkets are not.

And some companies are using the VAT rules that exempt the rental of land to avoid tax that their competitors are paying.

We’re publishing our plans today to remove loopholes and anomalies, but we keep the broad exemptions on food, children’s clothes, printed books and newspapers.

We should also simplify the age related allowances – which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system.

The NAO points out that many pensioners don’t understand them.

These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded away.

So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6th April 2013 and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.

This will protect the existing level of allowance pensioners have, while introducing a single personal allowance for all.

It is a major simplification.

It saves money.

And no pensioner will lose in cash terms.

Under this Government, pensioners next month will receive the largest ever cash increase in the Basic State Pension of £5.30 a week.

Now, we want to simplify the Basic State Pension and its interaction with the second state pension.

I pay tribute to the work my HF Pensions Minister has done on this.

Such is the complexity of this means tested system, only someone like our Pensions Minister can work out exactly what someone’s entitled to - and what they need to save.

So I can confirm that we will introduce a new single tier pension for future pensioners, set above the means test.

This is currently estimated at around £140.

It will be based on contributions.

And it will cost no more than the current system in any year.

We will bring forward further details later this spring.

A single, generous, basic state pension for those who have worked and saved hard all their lives.

And a further major simplification of our tax and benefit system.

Mr Deputy Speaker, in the information age people should know what taxes they’re paying and what their money is being spent on.

My HF the Member for Ipswich recently proposed to this House that we send to taxpayers an annual statement showing them just that.

I think this is an excellent idea – and I intend to put it into practice.

HMRC contacts roughly half of taxpayers each year.

From 2014, these 20 million taxpayers will at the same time receive a new Personal Tax Statement.

This will tell people how much income tax and national insurance they have paid; their average tax rates; and how this contributes to public spending.

In other words - how much, proportionately, of their tax bill goes to fund the healthcare, education, or welfare; and how much is spent on servicing interest payments on the national debt.

People will know what they are paying – and what they are paying it for.

A tax system that is simple and transparent: that is our first goal.

Business tax

Our second goal is a tax system that is more competitive for business than any other major economy in the world.

Our predecessors wanted to increase taxes on small business.

Instead we’ve cut the tax rate on small companies to 20%.

Our predecessors wanted to increase national insurance on jobs.

We have cut it.

Our new Controlled Foreign Company rules will be legislated for in the coming Finance Bill and will stop global firms leaving Britain as they were, and encourage them to start coming here.

This Government also supports research and development here in Britain instead of abroad.

We’ve already increased the generosity of the R&D tax credit for smaller firms.

I confirm that from next year we will also introduce an “Above the Line” R&D tax credit that business organisations like the EEF, IOD and CBI have campaigned hard for.

And we will help new start up businesses recruit and retain talent – by more than doubling the Enterprise Management Incentive Scheme grant limit to £250,000 and easing the rules so that academics in our universities can turn great ideas into great companies.

The Treasury will review for this autumn what more we can do to encourage employee ownership.

All of these tax reductions will help win business for Britain.

But the headline rate of corporation tax remains the most visible sign of how competitive our country is.

We’ve already cut the rate from 28% to 26%.

This April it is due to fall again to 25%.

I can announce today a further cut of one percent – to be implemented right away.

From next month, Britain will have a corporation tax rate of just 24%.

And we will continue with the two further cuts planned next year and the year after.

So that by 2014, Britain will have a 22% rate of corporation tax.

The biggest sustained reduction in business tax rates for a generation.

A headline rate that is not just lower than our competitors, but dramatically lower.

18% lower than the US.

16% lower than Japan.

12% below France and 8% below Germany.

An advertisement for investment and jobs in Britain.

And a rate that puts our country within sight of a 20% rate of business tax that would align basic rate income tax, the small companies rate and the corporation tax rate.

I am also increasing the rate of the bank levy to 0.105 per cent from next January, so that the additional corporation tax cuts do not benefit the banks; and so our levy will raise the £2.5 billion a year that we said it would.

Duties

This Mr Deputy Speaker brings me to the main duties.

Let me start with alcohol duty.

The Government will shortly be publishing its Alcohol Strategy to address the growing problem of alcohol abuse, and the many billions of pounds it costs our NHS and criminal justice system.

But today I have no further changes to make to the duty rates set out by my predecessor.

Turning to tobacco duty.

Smoking remains the biggest cause of preventable illness and premature death in the UK.

There is clear evidence that increasing the cost of tobacco encourages smokers to quit and discourages young people from taking it up.

So duty on all tobacco products will rise by 5 percent above inflation.

That’s 37 pence on a packet of cigarettes.

This will take effect at 6pm tonight.

One area where I am today making substantial changes is gambling duties.

The VAT treatment of gaming machines is being repeatedly challenged by operators in the courts.

So I will introduce a new Machine Games Duty – with a standard rate of 20% and a lower rate for low stakes and prize machines of 5% of net takings.

The current duty regime for remote gambling introduced by the last Government was levied on a ‘place of supply’ basis.

This allowed overseas operators to largely avoid it – and much of the industry has, as result, moved offshore.

90% of online gambling consumed by our citizens is now supplied from outside the UK.

And the remaining UK operations are under pressure to leave.

This is clearly not fair – and not a sensible way to support jobs in Britain.

So we intend to introduce a tax regime based on the place of consumption: where the customer is based, not the company.

And from this April we will also introduce double taxation relief for remote gambling.

These changes will create a more level playing field, and protect jobs here.

I turn now to fuel and vehicle excise duties.

High oil prices have put real pressure on household budgets and on businesses.

That is why we took action in last year’s Budget to cut fuel duty so it is 6p lower than our predecessors planned.

We have also scrapped the last Government’s fuel duty escalator of annual above inflation rises, regardless of the oil price – and are today confirming the fair fuel stabiliser.

Above inflation rises will only return if the oil price falls below £45 on a sustained basis – currently equivalent to around $75 dollars.

These measures mean that this Government has eased the burden on motorists by £4.5 billion at a time when money is very short.

I do not propose to make any further changes to the fuel duty plans already set out.

I am increasing Vehicle Excise Duty by inflation only.

To encourage fuel efficient fleets, we will extend the 100 per cent first year capital allowance for low emission business cars, reduce the CO2 threshold for the main capital allowance rates; and increase the percentage list price of company cars subject to tax.

I can also announce that I am again freezing VED for road hauliers.

Personal tax/ Tax avoidance

Mr Deputy Speaker,

I now turn to personal and property taxation.

My goal is a tax system where the lowest paid are lifted out of tax altogether, while the tax revenues we get from the richest increases.

Most wealthy people pay their taxes – and without them we could not begin to afford the public services on which the country depends.

But under the last Government, it was the boast of some high earners that, with the help of their accountants, they were paying less in tax than their cleaners.

I regard tax evasion and – indeed – aggressive tax avoidance – as morally repugnant.

We’ve increased both the resources and the number of staff working on evasion and avoidance at HMRC.

Taken together, the anti-avoidance measures in this year’s Finance Bill will increase tax revenue over the next five years by around £1 billion – and protect a further £10 billion that could have been lost.

This week, we have signed a further agreement with the Swiss to stop UK residents from evading tax.

We’ve done all these things – but today we do even more.

On coming to office, I asked Graham Aaronson QC to establish whether a General Anti-Avoidance Rule could work in the UK tax system.

He recommended that such a rule would improve our ability to tackle tax avoidance without damaging the competitiveness of the UK as a place to do business.

We agree.

So we will introduce one.

We will consult on the details of the new Rule and legislate for it in next year’s Finance Bill.

A major source of abuse – and one that rouses the anger of many of our citizens – is the way some people avoid the stamp duty that the rest of the population pays, including by using companies to buy expensive residential property.

I have given plenty of public warnings that this abuse should stop.

Now I’m taking action.

I am increasing the Stamp Duty Land Tax charge applied to residential properties over £2 million bought into a corporate envelope.

The charge will be 15%.

And it will take effect today.

We will also consult on the introduction of a large annual charge on those £2 million residential properties which are already contained in corporate envelopes.

And to ensure that wealthy non-residents are also caught by these changes, we will be introducing capital gains tax on residential property held in overseas envelopes.

We are also announcing legislation today to close down the sub-sales relief rules as a route of avoidance.

Let me make this absolutely clear to people.

If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of Parliament.

I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around these new rules are found.

People have been warned.

Mr Deputy Speaker, it is fair when money is tight, and so many families could do with help, that those buying the most expensive homes contribute more.

From midnight tonight, we will introduce a new Stamp Duty Land Tax rate of 7 per cent on properties worth more than £2 million.

I also intend to deal with the unlimited use of income tax reliefs.

Let’s be clear – most rich people pay a lot of tax.

It is also right that we have tax reliefs that promote investment, support charitable giving and reflect genuine business losses.

But it can’t be right that some people make unlimited use of these reliefs year after year.

Everyone in this country and particularly those with the highest incomes should contribute a fair share to the Exchequer.

Some reliefs – like the Enterprise Investment Scheme and pension’s relief are already capped – and I don’t intend to make any significant changes to pensions relief in this Budget.

But to make sure that those on the highest income contribute a fair share I am introducing a new cap on those reliefs that are currently uncapped.

From next year anyone seeking to claim more than £50,000 of these reliefs in any one year will have a cap set at 25 per cent of their income.

We’ve capped benefits.

Now it’s right to cap tax reliefs too.

Mr Deputy Speaker, that brings me to rates of income tax and the additional rate of 50 pence.

This tax rate is the highest in the G20.

It is higher not just than the tax rate of America but also of major European countries like France, Italy, and Germany.

It is widely acknowledged by business organisations and international observers as harming the British economy.

Like the previous Chancellor who introduced it, I’ve always said it was temporary.

But I also said three years ago that I would not be prepared to reduce it while we were asking the whole public sector to accept a pay freeze.

I will stick to those pledges.

A 50p tax rate, with all the damage it does to Britain’s competitiveness, can only be justified if it raises significant sums of money.

In last year’s Budget I asked HM Revenue and Customs to look at the evidence, and especially to look at the self-assessment tax receipts that have come in since this January.

I am publishing their report today.

And what it reveals is that the 50p tax rate has caused massive distortions.

HMRC find that an astonishing £16 billion of income was deliberately shifted into the previous tax year – at a cost to the taxpayer of £1 billion, something that the previous Government’s figures made no allowance for.

Self assessment receipts this year are below forecast by some £3.6 billion, while other tax receipts have held up.

The increase from 40p to 50p raised just a third of the £3 billion we were told it would raise.

Of course, the previous Government initially proposed a rate of 45p and then increased that to 50p.

Let me tell the House what HMRC say about the difference between 50p and 45p.

Their figures tell the story.

The direct cost is only £100 million a year.

Indeed HMRC calculate the loss of other tax revenues may even cancel that out.

In other words, it raises at most a fraction of what we were told – and may raise nothing at all.

So from April next year, the top rate of tax will be 45p.

No Chancellor can justify a tax rate that damages our economy and raises next to nothing.

It is as simple as that.

And thanks to the other new taxes on the rich I’ve announced today, we’ll be getting five times more money each and every year from the wealthiest in our society.

So the richest pay more.

The economy benefits.

Britain is competitive again.

Now the Shadow Chancellor has said that the HMRC report is not enough and that the Office for Budget Responsibility should pass judgement.

They have.

Because these days the direct costing the Treasury applies to every Budget measure is independently assessed and certified by the OBR.

And unlike the previous government they also assess the cash flow consequences of forestalling.

When it comes to the £100m direct permanent costs of this measure, the OBR say “we believe that this is a reasonable and central estimate”.

And they also assess as reasonable the estimate that the new taxes I’ve introduced on the rich today directly raise five times that amount.

That is half a billion pounds we can now use to help people on lower and middle incomes keep more of their earnings.

Child benefit

Mr Deputy Speaker, in the Spending Review, we took the difficult decision to remove child benefit from families with a higher rate taxpayer.

I said then that I simply could not justify asking those earning £15,000 or £30,000 to go on paying Child Benefit to those earning £80,000 or £100,000.

And I stand by that principle.

All sections of society must make a contribution to dealing with the deficit – without this measure we wouldn’t get the job done.

But I said I wanted to do this in a way that is fair and that does not involve setting up some new means tested tax credit system for millions of families.

And I said I would set out exactly how this measure would be implemented in this Budget.

We want to avoid a cliff-edge that means people lose all their Child Benefit when they earn just a pound more.

So I can today confirm that instead of withdrawing child benefit all at once when people earn more than the higher rate threshold – the benefit will only be withdrawn when someone in the household has an income of more than £50,000.

And the withdrawal will be gradual, 1% of child benefit for every extra £100 earned over £50,000 so there is no cliff-edge, and only those with an income of more than £60,000 lose all their child benefit.

This means an extra 750,000 families will keep some or all of their child benefit.

90% of all families will remain eligible for child benefit.

We can afford to implement the child benefit policy in this way because instead of extending the full benefit of this Budget’s increase in the personal allowance to all higher rate taxpayers as we did last year – we will pass on a quarter of the benefit to higher rate taxpayers, and spend the rest on helping families with children towards the bottom of the higher rate band.

Personal allowance

Mr Deputy Speaker, that brings me on to the personal allowance – and central goal of this Budget: which is to support working families.

This Coalition Government believes that the best way to support working people on the lowest incomes is to take them out of tax altogether.

And the best way of getting money directly into pockets of working families on middle incomes is to increase the amount of their earnings they can keep before they pay tax.

That is why this Government has set itself the goal of raising the personal tax free allowance to £10,000 – and we’ve promised real increases every year to reach that.

In my last two Budgets, we have made great strides forward.

Last year, the personal allowance rose by £1,000.

In two weeks time, it will go up by another £630 to £8,105.

Together, these increases have taken over a million low income people out of tax.

And today, I want to go much further and much faster.

I am announcing the largest ever increase in the personal allowance – the amount people can earn tax free.

From next April that amount will increase by £1,100.

Every working person on low or middle incomes will benefit. People will be able to earn up to £9205 before they have to pay any tax.

Millions of working people will be £220 better off every year.

That’s £170 better off after inflation.

Because higher rate earners will also benefit, 24 million people earning less than £100,000 a year will gain from this measure.

We are in touching distance of the goal of £10,000 personal allowance that we all share.

And I can tell the country that as a result of our Budgets, people working full time on the minimum wage, will have seen their income tax bill cut in half.

And this coalition Government will have taken 2 million people on the lowest incomes out of tax altogether.

Mr Deputy Speaker, in the middle of this Parliament, in difficult economic times, this coalition Government has not settled for a “do nothing” Budget.

We have not ducked the difficult choices – we’ve taken them head on.

A competitive top rate of tax.

More revenues from those best able to pay.

Fewer reliefs.

A tax cut for working people.

Support for families.

Low income earners taken out of tax altogether.

Alongside it, one of the lowest rates of business tax in the world.

A simpler tax code.

And a country where its citizens know the tax they are paying – and what they are paying it for.

We have achieved all this – and kept to our deficit plan.

Let us be resolved.

No people will strive as the British will strive.

No country will adapt as the British will adapt.

No country will value those who work as we will value them.

Together, the British people will share in the effort and share the rewards.

This country borrowed its way into trouble.

Now we’re going to earn our way out.

I commend this Budget to the House.

HM Treasury - Draft Tax Legislation Gives Greater Predictability and Clarity

Tue, 06 Dec 2011 18:45:26 GMT

Following Budget 2011, the Government has today published responses to a number of tax policy consultations, alongside draft clauses for legislation to be included in Finance Bill 2012.

This fulfils the Government’s objective of confirming the majority of intended tax changes at least three months ahead of publication, making the tax system more open, predictable and stable. The draft clauses are open to consultation, and taxpayers, businesses and tax professionals are able to contribute to this until 10 February 2012.

Finance Bill 2012 will include the next steps in the Government’s plans to make the UK system the most competitive in the G20:

cutting corporation tax to 24% in 2013, on its way to 23% in 2014;
reforming the controlled foreign companies regime; and
introducing a patent box.

It also introduces measures to improve growth through more generous R&D tax reliefs, enhanced capital allowances for enterprise zones, and a new seed enterprise investment scheme.

The draft legislation also includes clauses to introduce the VAT cost sharing exemption, and details of the Government’s proposals to encourage charitable giving and philanthropy.

David Gauke, Exchequer Secretary to the Treasury, said:

“This is the second year we have published draft tax legislation, and the Government’s more open, predictable and simple approach to tax policy making is working well. By confirming intended tax changes ahead of publication, we are giving greater certainty and stability to taxpayers and businesses than they have had in the past. Furthermore, the consultation responses we are publishing today demonstrate the Government’s commitment to listening to the views of those affected by changes to the tax system.”

Government responses to consultations on a range of tax policies have been published today by HM Treasury and HM Revenue & Customs (HMRC).

HM Treasury - Government Ends Exploitation of Channel Islands VAT Rules

Mon, 28 Nov 2011 08:53:16 GMT

The Government has announced that from 1 April 2012, Low Value Consignment Relief (LVCR) will no longer apply to goods sent to the UK from the Channel Islands.

This reform will bring increased fairness for UK businesses, benefit the UK economy and protect millions of pounds in tax revenue.

At Budget 2011, the Chancellor stated the Government’s intention to take action to end the exploitation of LVCR, which in recent years has been used on an increasingly large scale to sell low value goods to UK customers VAT-free. Most of this trade is from, or via, the Channel Islands.

The Government took the initial step of reducing the LVCR threshold, below which items are imported free of VAT, from £18 to £15. The new threshold came into effect on 1 November 2011 and will apply to goods from the Channel Islands until 1 April next year.

David Gauke, Exchequer Secretary to the Treasury, said:

"These reforms will ensure that UK companies, especially small and medium sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands. We are also protecting a significant amount of tax revenue. By making these changes, we are striking the best possible balance between the costs of collecting small amounts of VAT and protecting the interests of UK taxpayers and businesses."

Legislation to enact the change will be published in draft on 6 December 2011, for inclusion in Finance Bill 2012.

HM Treasury - Remote Islands to Get Cheaper Fuel from March 2012

Mon, 28 Nov 2011 08:44:38 GMT

Chief Secretary to the Treasury Danny Alexander has announced that from March 2012 motorists in remote island communities will benefit from a 5 pence a litre fuel discount.

The announcement came after the Government received final EU clearance to operate its rural fuel rebate pilot scheme in the Inner & Outer Hebrides, Northern Isles, islands in the Clyde and the Isles of Scilly.

The scheme will bring much needed relief to remote islands, where pump prices are particularly high due to transportation costs.

Danny Alexander said:

"This is terrific news for island communities, which have long suffered the effects of high fuel costs. From 1 March next year, islanders will see a 5p cut in the pump price of petrol and diesel.

"As well as securing EU clearance, we have produced a scheme designed to protect the cashflow of local retailers. We have also delivered on a promise to help address the persistent unfairness of some of the lowest income communities in the country paying among the highest pump prices.

"After years of people saying this could not be done, the Government has delivered it in less than two.

"This is another example of our determination to govern for the benefit of the whole United Kingdom."

Fuel retailers on the islands will receive a 5p a litre rebate on the petrol and diesel they purchase and will be required to pass on the full saving to the customer.

To ensure that retailers suffer no cashflow problems in passing on the discount from 1 March, they will be able to claim the 5p rebate from HM Revenue & Customs (HMRC) on fuel purchased from 1 January next year.

HM Treasury - Independent study on general anti-avoidance rule published

Mon, 21 Nov 2011 20:19:11 GMT

Graham Aaronson QC has today set out his recommendation to the Government for the introduction to the UK tax system of a narrowly focused general anti-abuse rule (GAAR).

The recommendation is published in the final report of Mr Aaronson’s eleven month review of the feasibility for the UK tax system of a GAAR. With the advice of a committee of tax experts, he has concluded that introducing a narrowly-focused GAAR would:

- deter abusive tax avoidance schemes;
- contribute to providing a more level playing field for business;
- reduce legal uncertainty around tax avoidance schemes;
- help build trust between taxpayers and Her Majesty’s Revenue and Customs (HMRC); and
- offer opportunities to simplify the tax system.

However, it warns against the introduction of a broad spectrum general anti-avoidance rule.

The report recommends that a GAAR should initially apply to the main direct taxes – income tax, capital gains tax, corporation tax, and petroleum revenue tax, as well as national insurance contributions. It sets out in detail how a GAAR could be introduced, and includes an illustrative draft rule. It also includes a summary of the views of representative bodies in the tax sector.

Speaking in response to the publication of the review’s recommendations, David Gauke, Exchequer Secretary to the Treasury, said:

“The Government is committed to tackling tax avoidance. We asked Graham Aaronson to consider whether a UK GAAR could deter and counter tax avoidance, while providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for businesses and HMRC. We welcome the completion of his study and will carefully consider its recommendations against these criteria, alongside the feedback from businesses and tax professionals that we look forward to receiving.”

Publishing the report, Graham Aaronson QC said:

“Responsible tax planning is an essential feature in a complex tax regime, such as the UK’s. But artificial and abusive tax avoidance schemes are widely regarded as an intolerable assault on the integrity of the tax regime. A general anti-abuse rule narrowly targeted to deter such schemes, while not affecting responsible tax planning, should lead to a fairer, more principled and ultimately simpler tax system; and I strongly recommend that such a rule should be introduced into our tax laws.”

The Government will consider the report in detail and the extent to which the proposals could add to HMRC’s existing legislative and administrative approaches and further reduce levels of tax avoidance. The Government will discuss the implications of the proposed rule with business and tax practitioners and respond fully at Budget 2012, setting out its plans for further, formal public consultation, if appropriate.

HM Treasury - Government Sets Out its Offer on Public Service Pensions

Thu, 03 Nov 2011 13:57:23 GMT

The Government has set out details of its offer to workers on public service pensions.

This new offer will mean that while most workers will still have to work longer and pay more, the pension that most low and middle earners working a full career will receive pension benefits at least as good, if not better, than they get now.

The offer includes a more generous ‘accrual rate’ – the rate at which annual benefits are earned – increasing from the 1/65ths offered in October to 1/60ths. This is an eight per cent increase.

The Government also announced today its objective that anyone within ten years of their pension age on 1 April 2012 will be protected, meaning they will see no change in when they can retire nor any decrease in the pension they receive at their normal pension age. This will benefit over a million people.

Others very close to being ten years from retirement age may also see some additional protection, the details of which will be subject to further discussions.

The reforms are due to come into force from 2015 onwards for the rest of the workforce.

Today’s proposals are conditional on agreement being reached in scheme by scheme talks.

As previously announced, proposed pensions contribution increases starting in April 2012 will still apply to those earning more than £15,000 a year.

The offer means that, unlike many in the private sector, public service workers will continue to have access to a guaranteed benefit in retirement, not subject to market fluctuations or fees.

For a public service worker to buy a similar pension on the private market they would typically need to contribute around one-third of their salary every year.
The Chief Secretary to the Treasury, Danny Alexander, said:

“From nurses to teachers, civil servants to road sweepers, public service workers provide a valuable service and deserve good pensions in retirement. But people are living longer, so public service pension reform is inevitable.

“We’ve listened to public service workers and come up with a deal that’s fair and affordable. The lowest paid and people ten years off retirement will be protected – and pensions will still be among the very best available.”

The Minister for the Cabinet Office, Francis Maude said:

“From the beginning we have been absolutely committed to engaging with the unions on making the necessary reforms to public service pensions. We have listened to the concerns of public service workers and responded. It is time now for the unions to respond in a responsible manner and remember that industrial action will cause unnecessary disruption to small businesses and working people up and down the country who themselves do not have access to such generous pensions schemes.

“Let's not forget that as well as the new protections set out today, these proposals represent a settlement for a generation – and a settlement that will still see public service workers getting a guaranteed benefit in retirement – something which has all but been eliminated elsewhere."

In July, the Government agreed a process with the unions for taking forward Lord Hutton’s proposals for long-term reform through scheme-specific talks. To provide the parameters for talks with trades unions, the Government set out initial cost ceilings at the beginning of October. These cost ceilings set out the combined employee and taxpayer contributions.

The Government is not proposing any further increase in the total employee scheme contribution rates in addition to the proposed 3.2 percentage points increase in contributions already announced.

Following these discussions, the Government has increased these cost ceilings, making its offer more generous. It is now for trades unions to come forward with detailed proposals within these ceilings by the end of the year.

Based on the new offer, some workers will actually receive larger pensions at retirement, though they will have to work longer and in most cases pay more to get them.
For example, at normal pension age, after a full career in the new scheme:

a nurse with a salary at retirement of £34,200 would receive £22,800 of pension each year if these reforms were introduced – under the current NHS Pension Scheme 1995 arrangements, they would only get £17,300;
a teacher with a salary at retirement of £37,800 would receive £25,200 each year under our proposals, rather than the £19,100 they would currently earn in the final salary Teachers’ Pension Scheme (pre-2007);
a civil servant with a salary at retirement of £29,800 would receive a pension of £24,300 each year under our proposals – under their current Nuvos Pension Scheme arrangements, they would only receive £20,100 per year;
a housing benefits officer with a salary on retirement of £21,500 would receive £17,500 each year under our proposals, rather than the £13,600 they would currently get in the Local Government Pension Scheme (1 April 2008);
a hospital porter with a salary at retirement of £14,600 would receive pension benefits of £11,900 each year, as opposed to the £9,300 they would currently get in the NHS Pension Scheme (2008); and
a senior civil servant with a salary at retirement of £100,000 would receive a pension of £37,000 each year under our proposals, rather than the £44,400 they would currently get in their Premium Pension Scheme arrangements.

HM Treasury - Junior ISAs to Help Parents Save for their Children's Future

Tue, 01 Nov 2011 21:30:54 GMT

Parents will be able to open a Junior ISA account for their children at a range of high street institutions, Financial Secretary to the Treasury Mark Hoban has confirmed.

Around six million children will immediately be eligible for a Junior ISA, with a further 800,000 children benefitting each following year. All children under 18 who are UK residents and do not have a Child Trust Fund (CTF) will be eligible for a Junior ISA.

Mr Hoban confirmed that the limit for Junior ISAs would be set at £3,600. To ensure that children with a CTF are not disadvantaged he also confirmed that, from today, the CTF savings limit will treble from £1,200 to £3,600, aligning it with the new Junior ISA limit.

Funds in a Junior ISA will be locked-in until age 18 and roll over into an adult ISA on maturity, meaning that the accounts will help to foster a long-term savings habit among young people.

Mark Hoban said: "The launch of Junior ISAs is a clear demonstration of the Government’s commitment to encourage saving for children. Junior ISAs will be open to all parents, regardless of income. This, together with changes made to Child Trust Funds, mean that parents can save up to £3,600 per year for their child.”

Foreign Secretary Statement Following the Death of HRH Crown Prince of Saudi Arabia

Sat, 22 Oct 2011 12:57:44 GMT

Foreign Secretary William Hague has made a statement offering his condolences to the Kingdom of Saudi Arabia and its people.

He said:

"I was very sad to hear of the death of HRH Crown Prince Sultan bin Abd Al Aziz of the Kingdom of Saudi Arabia. He served the Kingdom of Saudi Arabia for many years with great dignity and dedication.

"His contribution to the prosperity and development of the Kingdom will long be remembered. I would like to offer my sincere condolences to the Kingdom and its people at this sad time"

HM Treasury Confirms Higher ISA Limits for 2012-13

Thu, 20 Oct 2011 13:18:51 GMT

Following the publication today of inflation figures for September by the Office for National Statistics (ONS), HM Treasury has announced that subscription limits for Individual Savings Accounts (ISAs) from April 2012 will increase to £11,280 (up to half of which can be saved in cash).

Junior ISAs (JISAs) will be available from 1 November with a limit of £3,600 for each eligible child per year as part of the Government’s commitment to encourage saving for children.

To ensure that children with a Child Trust Fund (CTF) are not disadvantaged, the current £1,200 CTF savings limit will also treble to £3,600 from 1 November, aligning the CTF limit with the new JISA limit. Both JISAs and CTFs will be index linked from April 2013.

HM Treasury Launches Review in to Management of the Financial Crisis

Mon, 17 Oct 2011 19:17:58 GMT

HM Treasury is reviewing its response to the financial crisis.

The review is being led by Sharon White, formerly a Director General at the Ministry of Justice and the Department for International Development, and has begun work today. The Review will examine:

the Treasury’s capability on financial services ahead of the crisis;
the pace at which the Treasury built its capability when the crisis hit; and
whether the capability and senior management arrangements put in place to handle the crisis and the aftermath have been adequate.

The review will inform decisions on organisational arrangements of HM Treasury as part of its Spending Review settlement. It will make recommendations with the aim of:

ensuring that the Treasury has the capability it needs going forward;
improving the retention of people with the necessary skills, expertise and experience, having consideration to issues of Treasury culture and values, as well as remuneration; and
ensuring that the Treasury has robust arrangements for risk management, contingency planning and knowledge management.

This review follows recommendations from the Public Accounts Committee and the National Audit Office.

The final report will be publicly presented to the Treasury’s executive management board no later than Easter 2012.

FCO - Foreign Secretary Re-opens British Embassy in Tripoli

Mon, 17 Oct 2011 11:01:10 GMT

Foreign Secretary William Hague has officially re-opened the British Embassy in Tripoli, and appointed a new Ambassador, Sir John Jenkins.

During his visit, the Foreign Secretary met NTC Chairman Mustafa Abdul Jalil; officially re-opened the British Embassy in Tripoli; and announced the appointment of Sir John Jenkins as the new British Ambassador.

Speaking at the end of the visit, the Foreign Secretary said:

"Today marks a watershed in the UK's relations with Libya. Having been one of the first diplomatic Missions back into Tripoli after its liberation, we have now formally re-opened our Embassy and appointed an excellent new Ambassador to Libya Sir John Jenkins. This is further recognition of the great progress the National Transitional Council has made in stabilising Libya and re-establishing the country's role as a full member of the international community.

"The Libyan people's decisive break with the past means we are now able to open a new era in UK-Libya relations, building on our military, political, diplomatic and humanitarian support to the Libyan people during their revolution. I am therefore pleased to make the following announcements:

“First, the UK will make available places for Libyans injured in the conflict to receive treatment in the UK. Up to 50 more patients who have suffered traumatic amputations will be offered rehabilitation and prosthetics care. Libyan health experts will be invited to observe the care so that they can support these patients on their return to Libya and others with similar injuries.

“Second, we are also increasing our contribution to security and stability in Libya. We are making available further support for emergency de-mining activities by the UN Mine Actions Service. This will help to protect thousands of people so that they can return to their homes including around Sirte and Bani Walid. And along with the US we are destroying hundreds of Man Portable Air Defence Systems (MANPADS) to improve security throughout Libya.

“Third, at the NTC's request, UK experts on policing civil society and public financial management are now working in Libya.

“Fourth, the final requested shipment of Libyan banknotes frozen in the UK will be delivered to Libya, helping the economy to get back on track and provide for the Libyan people.

"To date, the UK has allocated £20.6m to support Libya's stabilisation and up to a further £20m to support political and economic reform.

"Our Embassy will have an important role to play as we build our relations with the new Libya, as will the diplomatic office we are maintaining in Benghazi, and I have every confidence that our diplomats here will do so with distinction. I pay tribute to all our staff in Tripoli and Benghazi for their courageous efforts in recent months, and to our dedicated staff from DFID, the MOD and UKTI staff, whose work will also help us cement our new partnership with Libya."

FCO - William Hague Arrives in Malta on Official Visit

Sun, 16 Oct 2011 18:32:14 GMT

The Foreign Secretary has arrived in Malta, his first visit since taking office and the first bilateral visit by a UK Foreign Secretary since Douglas Hurd.

The Foreign Secretary will meet Prime Minister Lawrence Gonzi and Deputy Prime Minister and Minister for Foreign Affairs. He will thank Malta for their staunch assistance, particularly for humanitarian purposes, with operations in Libya, and he will welcome the strength of UK-Malta relations. He will visit Malta's Air Traffic Services and pay tribute to staff involved in the hugely increased workload of recent months during Libya operations. He will also host a meeting for the British Business Forum aimed at deepening economic ties.

Speaking on arrival in Valletta William Hague said:

"Malta and Britain are close allies, with a strong affinity based on history and shared values. We work closely together in the EU and on foreign policy issues including Iran and North Africa. I hope my visit will strengthen these ties.

"I am looking forward to my meetings with Prime Minister Gonzi and Foreign Minister Borg. I want to thank them in person for the support their Government has provided for our efforts in Libya and their invaluable assistance in the evacuation of over 500 British nationals from Libya earlier this year. We will discuss recent developments in Libya and how best to continue support to the new Libyan authorities.

"We will discuss a range of EU issues, including the importance of encouraging growth through the single market and our shared view that the EU budget must be rigorously controlled. We will also consider how the EU can tackle illegal migration effectively, as well as the EU response to the latest developments with Iran."

FCO - Minister for Human Rights marks World Day Against the Death Penalty

Sun, 09 Oct 2011 15:38:04 GMT

On the eve of the eighth anniversary of the World Day Against the Death Penalty, & the fourth anniversary of the European Day Against the Death Penalty FCO Minister Jeremy Browne has issued a statement.

The Minister said:

"It is the longstanding policy of the UK Government to oppose the death penalty in all circumstances as a matter of principle. There is no evidence of its deterrent value and any miscarriage of justice is irreversible and irreparable.

"Since I launched the Government’s Strategy for Abolition of the Death Penalty in October 2010, we have continued to take action against our three goals, taken all appropriate opportunities to raise the issue with our priority countries and I have raised it with a number of my counterparts including in Asia and the Caribbean.

"There have been several positive developments over the last year which I welcome. At the end of last year, there was record support achieved at the United Nations General Assembly with an increase in the number of countries voting in favour of the Resolution on the Moratorium on the Use of the Death Penalty. And this year we have seen China reduce the number of crimes eligible for the death penalty from 68 to 55, and Trinidad and Tobago rule the mandatory death penalty for felony murder unconstitutional. The UK is keen to see this increasing international trend towards abolition of the death penalty continue.

"The UK Government is absolutely committed to its efforts to achieve its objective of global abolition of the death penalty. We call on all retentionist states to formally establish a moratorium on the use of the death penalty, with a view to abolition. In the interim, we urge all retentionist countries to ensure that EU minimum standards on the use of death penalty are met."

HM Treasury - Council Tax Freeze

Mon, 03 Oct 2011 20:45:42 GMT

The Chancellor of the Exchequer has today announced new support for local authorities to help them freeze council tax next year.

The Government has set aside an extra £805 million to help freeze council tax bills for hardworking families. The support for local authorities, on top of the existing freeze, means that taxpayers living in an average Band D home in England could save up to £72 on a five per cent rise in council tax.

A second year’s council tax freeze will give real help to households in difficult times and this extra funding will make a positive contribution to those local authorities who wish to keep council tax down.

A new grant scheme will be open to all billing and major precepting authorities, including police and fire authorities, which decide to freeze or reduce their council tax next year.

If they do, councils will receive additional funding, equivalent to raising their 2011-12 council tax by 2.5 per cent. Police and fire authorities will receive additional funding equivalent to raising their 2011-12 council tax by 3 per cent.

HM Treasury - Progress Made on Scotland Bill, but 'Still a Long Way to Go'

Mon, 03 Oct 2011 20:16:39 GMT

Exchequer Secretary to the Treasury, David Gauke gave evidence on behalf of the UK Government to the Scotland Bill Committee.

The Committee asked the Minister about a range of issues relating to the implementation of the Scotland Bill.

During the committee session, the Minister was clear that the UK Government believes that the Scotland Bill package as it currently stands is the right one for Scotland, saying:

“This is a big increase in responsibility for the Scottish Government, and therefore increases the accountability of the Scottish Government to the Scottish people”

He welcomed the progress made in this morning’s meeting of the Joint Exchequer Committee, saying:

“I’m pleased we have made progress on the high level principles of the block grant. It was a useful forum where we could discuss the key issues... [But] there is more work to be done on the details and I hope that we can continue to work constructively with the Scottish Government on this.”

However, the Minister expressed concern that the Scottish Government has to date focused too much on requesting additional powers, rather than on implementing its existing powers, saying:

“It’s a great pity that the focus of the Scottish Government is on Corporation Tax rather than the bread and butter issues of full control of Stamp Duty Land Tax and Landfill Tax...There is a lot of work on implementation that needs to be done.

The focus of the UK Government is on implementation, the focus of HMRC is on implementation. We hope the focus of the Scottish Government is on implementation of the things they are responsible for.”

He also pointed to the Scottish Variable Rate where the Scottish Government had had powers, but had never used them.

The Minister argued that the Scottish Government has not yet provided sufficient analysis behind its argument for additional powers, such as the devolution of excise duties. On Corporation Tax, he said:

“There have been a couple of papers, but frankly they are inadequate...they don’t address some of the fundamental questions... There is no recognition that if Scotland were to have powers over corporation tax and corporation tax were to be cut, that would involve a reduction in the Block Grant.”

He went on to express disappointment that these papers are not “an open, straight-forward assessment” of the implications of devolving corporation tax powers.

He also questioned whether the Scottish Government has done much work with tax professionals to understand the implications of the devolution of corporation tax.

Summing up, the Minister was clear that the UK Government wants to work as constructively as possible with the Scottish Government and the Scottish Parliament. Concluding his evidence, he said:

“This is a big step forward for Scotland. It is an opportunity for the Scottish Government to take much greater responsibility, an opportunity for the Scottish people to hold the Scottish Government to account in a much clearer and more straightforward way...

But there is still a long way to go on implementation, and I have highlighted some of my concerns about the Scottish Government’s progress on some areas of implementation.”

Government Announces New Legislation to Block Tax Avoidance Involving Manufactured Overseas Dividends

Mon, 19 Sep 2011 19:29:23 GMT

The Government has announced that it is introducing new legislation, effective from today, to block a tax avoidance scheme involving Manufactured Overseas Dividends (MODs).

The scheme could have resulted in companies, particularly in the financial sector, offsetting or claiming repayment of UK income tax that had in fact never been paid. This could have led to a significant loss of tax receipts, had the Government not taken action.

The new legislation clarifies the corporation tax treatment of MODs. It has been drawn up to counter the newly disclosed avoidance scheme, in which the recipient of a MOD claims to have received it under deduction of UK income tax and seeks to set this off against a corporation tax liability or have it repaid, despite no UK income tax having been paid.

The draft legislation, published today by HMRC, will put beyond doubt that no set-off or repayment of income tax can be made in such cases.

David Gauke, Exchequer Secretary to the Treasury, said:

“It is essential that everyone pays the right amount of tax at the right time, in order to both provide funding for public services and maintain fairness for the taxpayer, and the Government is determined to reduce tax avoidance.

We have acted quickly to prevent the use of this particular scheme and we will not hesitate to close down other schemes representing a significant risk to the Exchequer as we become aware of them.”

As this is an area where there is repeated avoidance, in addition to the new legislation, the Government will conduct a wider review of the tax rules on MODs, following Budget 2012, to simplify the rules and reduce further opportunities for avoidance.

Any changes made following the consultation would not come into effect before 1 April 2013.

HM Treasury - Agreement with Switzerland to Secure Billions in Unpaid Tax

Mon, 29 Aug 2011 11:57:59 GMT

The Government is initialling an historic agreement with Switzerland to tackle offshore tax evasion.

The agreement will resolve the long-standing abuse of Swiss banking secrecy by those who seek to conceal the proceeds of tax evasion and is expected to secure billions of pounds of unpaid tax for the UK exchequer from 2013.

Under the terms of the agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities, leaving those who have already paid their taxes unaffected. As a gesture of good faith Swiss banks will make an up-front payment from Switzerland to Britain of CHF 500m.

From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts. This will be accompanied by a new information sharing provision which will make it easier for HM Revenue and Customs to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.

The agreement with Switzerland is the latest step in HMRC’s crackdown on offshore tax evasion, which includes the agreement of the Liechtenstein Disclosure Facility, the creation of a new dedicated team of investigators to catch those hiding money offshore and ongoing work to put in place information sharing arrangements with other countries.

George Osborne, Chancellor of the Exchequer, said:

"Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-abiding taxpayers are forced to pay even more. That is why this Coalition Government made it a priority to go after those who don't pay their fair share. We will be as tough on the richest who evade tax as on those who cheat on benefits. The days when it was easy to stash the profits of tax evasion in Switzerland are over.”

David Gauke, Exchequer Secretary to the Treasury, said:

“I am delighted that, through our constructive discussions with the Swiss Government, we have secured the best possible deal for UK taxpayers. This historic agreement will enable us to collect billions of pounds from those who have for too long evaded their responsibility to pay UK tax by abusing Swiss banking secrecy. The message is clear: there is no hiding place for tax cheats.”

Dave Hartnett, Permanent Secretary for Tax at HMRC, said:

“The world has changed for tax evaders. A few years ago, nobody would have anticipated that we would conclude an agreement with Switzerland to tackle tax evasion. However, with the clear wish of Switzerland as well as the United Kingdom to ensure that tax is paid as it should be, we are embarking on a new course which preserves important principles for each jurisdiction, and will be fair for all UK taxpayers. Our strategy is working. We will secure significant sums of tax that some had thought we would never see. Not only does this agreement settle past liabilities and make arrangements to secure correct taxation in the future, it also gives HMRC more scope to find out about Swiss accounts.”

The agreement is expected to come into force in 2013, following scrutiny by Parliament and after ratification procedures in Switzerland are complete.

Government Announces 11 New Enterprise Zones to Accelerate Local Growth

Mon, 22 Aug 2011 07:20:25 GMT

The location of eleven new Enterprise Zones, designed to boost local growth and create over 30,000 new jobs by 2015, have been announced by the Prime Minister, David Cameron, the Chancellor of the Exchequer, George Osborne, and the Communities Secretary, Eric Pickles.

At Budget the Government announced 11 Enterprise Zones in some of the country’s largest cities, including Manchester, Birmingham, Merseyside and Newcastle, as well as inviting applications for 10 more in other areas.

The strength of the applications from Local Enterprise Partnerships was such that Government has agreed to increase this invitation to 11. The location of Zones in the Black Country, Tees Valley and the North East have also been agreed today.This brings the total to 22 Enterprise Zones across the country, helping to create thousands of new jobs by 2015. The Zones will attract hundreds of new start up firms, with simplified planning rules, super-fast broadband and over £150 million tax breaks for new businesses over the next 4 years.

Alongside the new Zones, the Government is also announcing today that it will make enhanced capital allowances available for plant and machinery investment to a limited number of Enterprise Zones in Assisted Areas, including the Tees Valley and North East. With effect from 2012, companies setting up in these areas will be eligible to claim enhanced first year allowances for plant and machinery, giving them an upfront cash flow benefit.

The introduction of Enterprise Zones is just one of over 100 reforms being taken forward as part of the Government’s Plan for Growth, announced at Budget 2011, to create the conditions for strong, sustainable and balanced growth.

The second wave of Enterprise Zone will be located in:

Humber Estuary Renewable Energy Super Cluster;
Daresbury Science Campus, near Warrington and Runcorn;
Newquay AeroHub in Cornwall;
The Solent Enterprise Zone at Daedalus Airfield in Gosport;
MIRA Technology Park in Hinckley Leicestershire;
Rotherwas Enterprise Zone in Hereford;
Discovery Park in Sandwich, Kent and Enterprise West Essex in Harlow;
Science Vale UK in Oxfordshire;
Northampton Waterside;
Alconbury Airfield, near Huntingdon in Cambridgeshire; and
Great Yarmouth in Norfolk, and Lowestoft in Suffolk.

Ministers are urging areas that missed out today to remain ambitious and pursue their innovative ideas to foster local enterprise.

The Prime Minister, David Cameron, said:

“We are determined to do everything we can to make Britain the best place in the world to start and grow a business.

“Enterprise Zones are a major step towards delivering this; cutting business taxes, easing planning restrictions and giving business the tools they need to invest and expand.

“These new Enterprise Zones will be trailblazers for growth, jobs and prosperity throughout the country.”

The Chancellor, George Osborne, added:

“It is vital that we create balanced economic growth across the country. It is time for us to help every part of the country to grow and realise its potential.

“Enterprise Zones are a critical part of our Plan for Growth and will support economic development and create over 30,000 new jobs by 2015. The zones will benefit from over £150 million in tax breaks over 4 years, new superfast broadband, lower levels of planning control and the potential to use enhanced capital allowances.”

Communities Secretary, Eric Pickles, said:

"Too many of our towns and cities have been left behind, but the answer has never been to impose ineffective sprawling regional structures. It is local business and commerce that drive the private sector growth, jobs and wealth this country needs. This Government's job is to foster local enterprise and create the conditions for businesses to thrive in. That is why low tax, low regulation Enterprise Zones are being planted across the country and will give businesses all the incentives they need to grow their local economy and create thousands of new local jobs."

Business Secretary, Vince Cable, said:

"Enterprise Zones are creating an environment for businesses to grow in places with the most potential. Those the government is announcing today, on top of those already approved, show the range of ambitious plans in place across the country.

"Local Enterprise Partnerships have worked closely with businesses in their communities to put forward a range of high-quality proposals. The successful bids they will now take forward are going to help inject new growth into their economies.

"Across England, these Zones will generate new jobs, investment in areas that can benefit, and develop high-tech products that will secure long-term sustainable prosperity."

HM Treasury - Capital Allowances Loophole Ended

Sun, 14 Aug 2011 10:59:07 GMT

The Government has bought forward the closure of a loophole which allowed businesses to accelerate capital allowances claims for plant and machinery and obtain advantageous early tax relief.

The change, which will come into effect immediately, was announced today by Economic Secretary to the Treasury Justine Greening.

The closure of the loophole, which was originally proposed for April 2012, has been brought forward because of evidence that not doing so could lead to the loss of significant revenue to the Exchequer. Legislation, which will have effect from today, will be introduced in the 2012 Finance Bill.Further details on the change will be available on the HMRC website.

The Economic Secretary to the Treasury, Justine Greening said:

“The Government is determined to reduce tax avoidance in order to protect the Exchequer, which provides funding for public services, and maintain fairness for the taxpayer. By ending this loophole today we will preserve important revenue while maintaining a fair system of capital allowances to support business investment.”

HM Treasury - Four New Enterprise Zones Set Up to Boost Local Growth

Mon, 01 Aug 2011 10:53:09 GMT

The locations of four more Enterprise Zones and a progress report showing that the Government has already met or reached significant milestones on over 100 of the 137 reforms unveiled in the Plan for Growth in March 2011 were announced last Friday by the Prime Minister, David Cameron, and Chancellor of the Exchequer, George Osborne.

The four Enterprise Zones in Birmingham, Bristol, Leeds and Sheffield, selected by their local enterprise partnerships, will accelerate local economic growth and could create over 24,000 new jobs by 2015. The zones will benefit from discounts on business rates, new superfast broadband, lower levels of planning control and the potential to use enhanced capital allowances. The Government will announce the location of a further ten Enterprise Zones shortly.

It comes on the day that the Government also announced plans to scrap or simplify more than 160 out of 257 regulations in the retail sector. This will free the public and retailers from rules that are unnecessarily burdensome, overly bureaucratic or completely redundant.

The introduction of Enterprise Zones is just one of over 100 major reforms being taken forward by the Government to create conditions for strong, sustainable and balanced growth. The Government has today published a progress update against the reforms announced in the Plan for Growth.

In four months, the Government has made significant progress, working in partnership with business to fundamentally assess what every part of Government is doing to provide the conditions for private sector growth, including:

Major reform of planning policy through a new National Planning Policy Framework which plans to radically streamline over 1,000 pages of planning policy to just 52 pages, underpinned by a new draft presumption in favour of sustainable development, so that the default answer is “yes” to planning proposals that support sustainable development.
Reforms to the tax system to support business growth, including a reduction in corporation tax to 26 per cent this year, and 23 per cent by 2014 to make the UK rate the lowest in the G7, as well as detailed plans to establish a Patent Box, reform Controlled Foreign Company rules and provide additional R&D support for small and medium sized businesses.
A stop to the tide of regulation, including publishing the first results from the Red Tape Challenge, the prevention of over £350 million worth of new regulations earlier this year, including the costly extension of the right to request time to train to small and medium sized enterprises, and the introduction of a moratorium exempting all UK micro businesses and start-ups from new domestic regulation for the next three years.
Working in partnership with business, the launch of the Business Growth Fund by five major UK banks to support established and growing businesses through a £2.5 billion fund.
Funding for an additional 50,000 apprenticeships over the next four years and doubling the number of new University Technical Colleges, supporting young people to gain vital skills demanded by business.

A further 45 reforms are due to reach a significant milestone by the end of 2011, including a new £50 million Business Angel Co-investment Fund and the launch of the first Technology and Innovation Centre.

The Prime Minister, David Cameron, said:

“I am determined that we should drive growth in every town, city and community in the country. For too long our economy has been dependent on just one corner of the country and too few industries.

“But it won’t be Ministers in Whitehall who can drive this growth; it will be those with the great business idea who are ready to start up, the entrepreneurs who want to grow their company, the businesses looking to expand into new markets.

“That is why we are getting behind them, cutting business taxes, freeing them from red tape, easing planning restrictions and rolling out Enterprise Zones to spark business growth around the country.

“It is our dynamic businesses large and small that are on the frontline of our economic recovery and we are committed to do all that we can to ensure that they can thrive.”

The Chancellor, George Osborne, added:

“The British economy is continuing to grow and has created over 500,000 private sector jobs in the past year. The difficult decisions on the deficit have made the UK a safe haven in the recent economic storm.

“Four months ago, I announced an ambitious Plan for Growth, having consulted with over 1000 businesses, to tackle the serious long-term issues in our economy. We have already made significant progress on regulation and planning, publishing a new National Planning Policy Framework and slashing burdensome regulation. The confirmation of the location of four new Enterprise Zones is just one important step that we are taking to boost growth across the country.”

The Communities Secretary, Eric Pickles, said:

“Today we are giving the go-ahead to sites in Birmingham, Bristol, Leeds and Sheffield because they have the pedigree to accelerate growth and create thousands of new jobs. Our low-tax, low-regulation Enterprise Zones will help make our country the best place in Europe to start and grow a business.

“With ten more Enterprise Zones still to come it’s great to see the local ambition and innovation that emerges when central Government steps back and gives local areas the chance to shape their own economy.”

The Business Secretary, Vince Cable, said:

”One of the most important things we can do to help private businesses create jobs and boost growth is to reduce the barriers businesses currently face and give them extra flexibilities to operate.

“Enterprise Zones will do exactly that, bringing in benefits to the local communities and securing investment.

“I’m delighted that Enterprise Zones are gaining momentum and we are able to confirm more locations. This will help the work local enterprise partnerships are already doing to help roll out their zones and ensure that they are a success.”