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NEWS Tuesday, 16 March, 1999, 10:25 GMT
The chancellor's full speech - part two

"Children are 20% of the British people but 100% of Britain's future.

To build that future, this Budget provides a better deal for families and children.

Family life is the foundation of society, and our first principle in society's support for the family is that the interests of children must be paramount.

For the last third of this century families with children have been losers in the tax system.

Family tax burden

Their tax burden has risen by nearly 20% under successive governments - even though the time when children are growing up is the time when families need tax help most.

So it is time to reform the tax and benefit system to strengthen the family by putting children first.

What is today called the married couples' allowance is in fact neither restricted to marriage, nor restricted to couples, nor is it strictly an allowance.

It is in fact a tax credit paid at the same flat rate to married couples, single parents and unmarried parents living together.

Married couple's allowance

Far from recognising marriage it is now so confused that it can even be paid at twice the rate in the year of separation or divorce.

A married couple's allowance that can pay more for separation or divorce cannot be said to uphold the institution of marriage.

The last Government called the married couple's allowance an anomaly and reduced it from 40% to 15%, cutting its value in half.

If we were now to restrict the married couples' allowance to married couples only, as some propose, we would unfairly exclude, for example, widows with children, and wives who have been deserted and left to bring up their children alone.

So we will replace the married couples' allowance with a new family tax cut that will increase the amount that goes to help families with children.

This children's tax credit will give more - not less - help to families at the time they need it most, when they have their children and when their children are growing up.

Today's pensioner couples will retain the married couple's allowance.

And couples without children or whose children have grown up will benefit from other changes I will shortly announce.

The married couples' allowance is now worth 190 to married couples.

Children's credit tax

The children's tax credit, the tax cut for families, to be introduced from April 2001, will be worth 416, and as a result the typical family with children will be over 200 a year better off.

This tax cut for families represents the first recognition in the tax system for over 20 years of the extra costs of bringing up children.

So under my proposals the tax burden on the typical family will fall to the lowest level for 25 years.

I will introduce similar improvements in income support and the working families tax credit.

In the Budget last year I set down the two principles that govern my approach: that we must substantially increase support for families with children and we must do so in the fairest way.

Higher earning families

It is in fulfilment of these two principles that the children's tax credit will be tapered away for the higher earning family where there is a top rate taxpayer.

In the light of this reform, my Budget decision is that child benefit will not be taxed for taxpayers on the basic rate - or the top rate.

As our manifesto promised, child benefit itself will remain as it is, paid to all mothers, and rising annually with inflation.

When we came to power child benefit for the first child was 11.45 a week. Next month it will rise to 14.40 a week.

It has risen by 25% since we came to government - an increase of 150 a year.

Child benefit

I now propose a further increase in child benefit, well above the rate of inflation.

It will rise next April to 15 a week for the first child, 780 a year.

I will also raise the rate for the second and further children to 10 a week.

Support for children will be twice as high at the end of this Parliament as it was at the beginning. With the children's tax credit added to child benefit, families who were receiving 11 a week in 1997 for their first child will be receiving 23 a week, 1,200 a year.

And taking all our reforms together the maximum support for the first child will be 40 a week, 2,000 a year for families when they need it most.

Every child in the country in every family will get more - not less - support under this system, support ranging from 780 a year to 2,000 a year. And every child will receive more year on year.

Maried couples' allowance

When we came into power we found a chaotic, even counter-productive, system of child support that gave far too little help to mothers and did not provide enough to those who needed it most.

Child benefit had not been increased every year even in line with inflation.

The married couple's allowance could not fulfil its intended purpose.

Income support for children was based on family status not on family need.

Family credit failed to guarantee a living wage for working families.

What the benefits system gave with one hand, the tax system took away with the other.

Our long-term goal is to bring together the different strands of our support for children in the working families tax credit, in income support and in our children's tax credit and create an integrated and seamless system of child financial support paid to the mother, building upon the foundation of universal child benefit.

'Best system of family support'

Already with the changes we are making today, we are creating the best system of family support in the history of our country.

I have also considered the alternative case that has been advocated, for a transferable tax allowance for mothers who stay at home.

The better deal for mothers who stay at home is what we are doing from October this year - the working families tax credit.

A family with two children on 15,000 a year where the mother stays at home, would have received nothing under the old system of family credit.

Transferable tax allowances would give them 997.

Under the working families tax credit they will receive 1,460.

Where both parents need to work, we need to do more to help them balance the demands of making a living and having children.

With a million new childcare places now being created and from October our new childcare tax credit set at a maximum of 70 for one child and 105 for two children, Britain has a national childcare strategy for the first time in our history.

Maternity pay

From December 1999 all parents will be entitled to three months unpaid leave for each child. But currently up to 15% of working mothers-to-be are not entitled to any maternity pay. This is wrong.

Today's Budget will ensure that all mothers in work earning 30 a week or more 95% of all women in work - are entitled to maternity pay and to 18 weeks of maternity pay. This is family friendly employment in action.

Every year a quarter of a million children, even at the minute they are born, are born into poverty. This too is wrong.

Our Sure Start Programme for the under threes, beginning next month, will ensure that the full resources of health visitors, primary care and schools are there to give every young child a better chance.

Grant for the new born

Today I can announce a new Sure Start Maternity Grant for the new born: government offering more help to parents in return for parents meeting their responsibilities.

Help amounting to 200 will be conditional, linked to keeping appointments for child health advice and child health check ups.

When we came into power, one child in every three in our country was in poverty.

With our measures today 700,000 children are being lifted out of poverty. Families with children are better off.

Instead of a past that developed only some of the potential of some of our children, the future depends on developing all of the potential of all our children.

The elderly

As this Budget creates a better deal for those starting out in life, this Budget will today provide a better deal for those who have worked hard all their lives - our elderly.

Today I announce new measures to help all pensioners: for those who are poor, for those with incomes above benefit level who are not wealthy, indeed for every retired person and every retired couple, taxpayers and non-taxpayers alike - a better deal in the minimum pension guarantee, in the winter allowance, and on savings and tax.

This government created a minimum income guarantee for pensioners.

Today I can confirm that next April this minimum income guarantee will be increased not just in line with prices but in line with earnings.

As a result of the changes we are making, the minimum income guarantee for the single pensioner will be 78 a week, nearly 500 a year higher than when this government came to office.

Pensioner couples will have a minimum income guarantee of over 121 a week, nearly 800 higher a year than in 1997.

Winter fuel

As a result of the measures already taken - our cut in VAT on fuel with tougher regulation and the winter allowance - pensioners are saving 108 on their fuel bills and the poorest pensioners are saving 140.

I can announce today that we will do more. The winter allowance is currently paid to all 8m elderly households at 20.

I have decided to raise it to 100 for all 8m elderly households.

And this is not a one time need or a one time decision. In future years the winter allowance will also be 100 - for all 8m elderly households.

To help the elderly get more out of their savings I have asked National Savings to issue a new pensioners bond.

With the shorter term deposits that pensioners want, this new bond will offer the returns that pensioners need.

And I have a further improvement, a tax cut for the elderly. I am announcing a reform that will ensure that a total of seven million elderly men and women will now be outside the income tax system.

For pensioners I have decided to raise the personal tax allowance in excess of inflation.

Single pensioners will not pay any tax until they have an income of 5,720.

Older pensioner couples who both use their personal allowances to the full will now not pay tax until they have incomes above 15,000.

Two hundred thousand more pensioners will not have to pay income tax.

Now, in total, two thirds of pensioners will not have to pay income tax.

Taken together the measures I have already announced add up to an additional 3bn, a better deal for the elderly that makes the typical pensioner household 240 a year better off.

Cigarettes and alcohol

To help pay for this, from today excise duty on tobacco will rise by the normal escalator, 5% above inflation.

Organised smuggling, which is now a 1.5bn a year racket, will not be permitted to undo a policy on cigarettes which successive British governments have adopted for good and urgent health reasons.

As the Government strengthens its anti-smuggling strategy, we will target new resources to detect, prevent and punish this costly form of organised crime.

I have decided to freeze the duty on spirits, on beer and on wine at its current level.

There will be no tax rise on alcohol this side of the millennium.

And I will cut the tax on pools from 28 March by one third, from 26.5% down to 17.5%.

On this basis the pools companies have agreed future funding of around 20m a year for the Football Trust and the Foundation for Sport and the Arts.

Details of this, of minor duty changes and of measures to combat tax avoidance are published this afternoon.

Insurance premium tax will rise by one pence in the pound from July 1, although 80% of insurance underwritten in Britain will remain exempt.

No increase on VAT

On VAT, today I propose there will be no increase in rates and no extension of VAT.

I have also decided to make no change to stamp duty on property sales up to 250,000.

For property sales above that, the rates will be raised by 0.5% from next Tuesday. 96% of home sales are unaffected.

A Britain of strong families is also a Britain of strong communities.

Each year 1.2 million people give of their time in voluntary work.

Millions more give money to our national charities.

Giving Age

The Prime Minister has rightly called for our age to become a Giving Age.

I want us to mark the Millennium in the best way, by making the year 2000 the giving year.

In the last Budget we introduced Millennium Gift Aid. For every 100 a British citizen donates to Third World causes before the end of the year 2000, the Government will contribute 30.

When Millennium Gift Aid is launched on March 18 I urge British people to give more to those who have too little.

As governments make their contribution to Third World debt relief, all of us can make a contribution to Third World poverty relief.

Today in our consultation document on tax and charities, we propose extending the tax advantages of Millennium Gift Aid.

Tax relief for charities

We propose that every charity, national and international, should be able to benefit from this new tax relief.

We propose in future for every 100 a British citizen donates to any charity, the Government will contribute 30.

Instead of charity seen in the old way, the rich bestowing favours on the poor, I want a democracy of giving, where all those who can, help all those who can't.


Most fundamentally the tax reforms of this Budget provide a better deal for the hard working majority - a ladder of opportunity for those who want to work their way up, a chance to keep more of what they earn and, for all, a fundamental guarantee that work will pay.

Our reforms in national insurance will give employers an overall tax cut of 1.5bn and employees an overall tax cut on work of 2.5bn - an average of 130 per year per employee.

This April, as I implement the Report by Martin Taylor, I am abolishing the perverse tax on work, the entry fee every employee has to pay simply to be part of the national insurance system.

Tax cut for employees

From this tax cut on work worth over 1.4bn a year, every one of 20m employees will gain 69 a year.

Over two financial years, I will further align the starting point with that of income tax so that no one will have to pay either National Insurance or income tax for the first 87 of their weekly earnings.

From this tax cut on work worth 1.8bn a year, every employee will gain 99 a year.

From April 2001 therefore the lower limit for employees, self-employed and employers National Insurance will be harmonised at 87 a week, the same as income tax.

'Upper limit will rise'

As with the lower earnings limit which is rising faster than inflation, the upper limit will rise to 575 and to complete our reforms we will also align employers National Insurance and income tax in the treatment of benefits in kind.

I also propose to extend to the self-employed national insurance rights to the full maternity allowance.

Again, to implement the recommendations of the Taylor Report, we will align National Insurance arrangements for the self-employed closer to those of employees: reducing the unfair entry fee from 6.35 a week to 2, and setting the Class Four threshold at the same point as the personal income tax allowance.

But I will set contributions at a lower rate than envisaged by the Taylor Report, at 7% in contrast with the 10% employees pay.

New Deal

Two hundred and thirty thousand young people are already benefiting from the New Deal.

Now we must bring in those young unemployed who, for whatever reason, have yet to join.

I say to them, this will be our New Deal for 1999: better provision but tougher conditions.

Our responsibility is to offer training and intensive coaching. In return their responsibility is to come into the New Deal, get the skills and prepare to take up a job.

To help lone parents make the transition into jobs, benefits will continue when they first start work.

For them and others the working families tax credit will make work pay more than benefits.

Guaranteed minimum income

Every working family will be guaranteed a minimum income, to be introduced in October not at the previously announced rate of 190 a week but at 200 a week, more than 10,000 a year.

No income tax will be paid until earnings reach 235 a week.

This is a tax cut available to 1.4m families helping 3m children.

I now propose that over time we extend this principle.

The old tax system set a personal allowance that failed to ensure that work paid, and also made thousands pay tax even as they were forced to claim benefits.

Not just families but all who work will be guaranteed a minimum income, and this minimum income will be paid through targeted tax cuts and credits.

No one who is in work should, in future, have to go to the benefits office to receive a living income.

Over 50s returning to work

We start in this Budget with a minimum income guarantee. A new deal, for over 50s returning to work.

Nearly 30% cent of men over 50 are outside the Labour force, twice as many as 20 years ago. We need their talents.

For those unemployed for six months or more, we will create a new employment credit which will guarantee a minimum income of 9,000 a year, for their first year back in full-time work, at least 170 pounds a week.

And over time I want this better deal for work to include help with housing costs, not just help with rent but also help for homeowners going back to work.

Taking a job should not put them in danger of losing their homes.

Successive governments have lowered mortgage tax relief from 40% to 10% of interest costs and frozen the limits at the first 30,000 of a mortgage.

Today the allowance is worth an average of 2.50 a week. In the last year mortgage rates have come down significantly and I now recognise that there is a consensus across this House to complete the phasing out of Miras.

As we do so we will ensure that families are better off.

The 10p rate

We said in our manifesto that we would introduce a 10p starting rate of income tax for individuals when it was prudent to do so.

I repeated in the last Budget that we would introduce the 10p starting rate when it was prudent to do so.

However, I have to tell the House that this 10p rate will not start in April 2000, like other income tax changes we are making today.

It is prudent, instead, for people to get the benefit of the 10p starting rate now.

So it will take effect in April 1999, a 10p starting rate on the first 1,500 of income, the lowest starting rate of tax since 1962, and it will be delivered a few weeks from today.

People will see it in their pay packets in May.

Nearly two million people will see their income tax bills cut in half, and take home 90 pence of every pound they earn.

The new income tax structure will this year be 10p, 23p and 40p. And income tax allowances, income limits and tax thresholds will rise as usual in line with inflation.

The tax rates on savings will remain unchanged.

Less tax all round

So this is a Budget with a 10p starting rate of income tax. A 10p starting rate of small business tax, a 10p long term rate for capital gains tax.

The maximum small business tax is now down to 20p and corporate tax for big companies down to 30p.

The tax cuts I have made today are tax cuts for a purpose, tax cuts that encourage work and make work pay, that help all middle and lower income families, tax cuts for the many and not just the few and at the best time for the economy.

I can confirm that the share of tax in national income will fall next year.

And the tax burden on the typical family with children will fall below 20% for the first time in 20 years.

Modernising public services

I have one set of further announcements to make. After long years of neglect, step by step this Government is rebuilding Britain's public services.

On top of the 40 billion extra we are already investing in education and health, we will today allocate increased resources for our key public services.

We have identified specific areas where step changes can be made through additional investment from the Capital Modernisation Fund.

We are allocating an additional 170 million for crime prevention in areas where crime is highest. The Home Secretary will make a detailed statement to the House.

For public transport, in addition to the rural transport fund, we will make a further allocation to be announced by the Deputy Prime Minister.

For Northern Ireland, today we allocate additional capital spending of 50 million, for Wales of 80 million, for Scotland of 165 million.

Full details of new investments will be given by the Secretaries of State.

The 19 billion pounds extra we are already providing for education will finance smaller class sizes, more nursery education, better pay for better teachers, our drive to improve literacy and numeracy - and we will help 700,000 more young people to go on to further and higher education.

But, so that every child will have that chance, we need specific and targeted help for our inner city schools.

For upgrading their technology, the Secretary of State for Education will receive an additional 100 million.

And for every school we will not only invest in new technology; as a result of our prudence in the last year, and following the huge take-up of the additional money provided last year, we are able this month to make another extra and larger allocation for school books: 2,000 pounds to every school in every constituency in every part of the country, immediate new resources of 60 million for a total of 10 million new books in all.


I turn to the NHS.

21 billion pounds extra money is making possible the largest hospital building programme since the war: A 1 billion investment in modern technology in the health service; the recruitment of 7,000 new doctors; 15,000 more nurses; and a fair pay award for nurses.

The Government's new programme, NHS Direct, is a proven success.

And later this week the Secretary of State for Health will announce detailed proposals not only to extend it to all of the country by the end of next year, but to carry NHS Direct right into communities - with a network of health centres and drop-in centres where people can get immediate advice about treatment.

We have already provided additional resources for upgrading one-third of all accident and emergency units that need modernisation.

Today we go further. To enhance in every part of the United Kingdom the health care that people most urgently require we today make an additional and immediate cash allocation, to be spent in the next 12 months, for the upgrading of every single accident and emergency unit which needs it, in every part of Britain.

For this and other improvements which the Secretaries of State for Health, and Scotland, Wales, and Northern Ireland will announce, I am providing for the NHS almost half a billion pounds of extra investment today.

Throughout the public services, more than a 1 billion of additional new investment, on top of the 2 billion pounds I have allocated to families and pensioners.

Public services in the months and years ahead - safe in this Government's hands.

I have a final announcement.

We promised to get inflation and interest rates under control, to sort out the public finances, to make this the Government of economic competence and we have.

We promised to invest billions more in health and education and we have.

We promised we would cut youth unemployment and we have.

And I can confirm to the House that, while rebuilding our public services, our prudence in office also enables us to hold to our pledge made at the election not to raise the basic rate of income tax.

In fact, to reward work and ensure working families are better off, I will match the new 10p starting rate of income tax this April with a cut from next April in the basic rate of income tax to 22p, the lowest basic rate of tax for 70 years.

Today's Budget is a better deal for work, a better deal for the family, a better deal for business - for a Britain now united around values of fairness and enterprise, and I commend this Budget not just to the House but to the country.

The speech - part one

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