The press release issued by HM Treasury on 26 March 2002.

PRODUCTIVITY HIGH ON THE AGENDA FOR GOVERNMENT, BUSINESS AND UNIONS

“If you are starting up, growing a business, investing, taking people on, seeking new capital or working your way up in business – we are on your side” said Chancellor Gordon Brown today at a CBI/TUC productivity seminar at No 11 Downing Street.

Hosting the seminar alongside Trade and Industry Secretary Patricia Hewitt and Paymaster General Dawn Primarolo, the Chancellor confirmed the Government’s intention to go ahead with tax measures to support large companies, as set out in the Pre-Budget Report.

He said:

“In our first term we put stability and employment creation first.

In our second term, as we prepare for the sixth Budget we are able to build on this platform of stability and employment creation and our energies must now be directed to raising our country’s productivity.

Trade and Industry Secretary Patricia Hewitt and I want to create for the first time, a truly entrepreneurial culture that is not confined to the few but open to all: one where, in every community, people with ideas and initiative have the chance to start and succeed in business.

The new Britain of enterprise for all cannot be built on inadequate investment, low skills, boardroom complacency, workplace resistance to change, or on cartels or restrictive practices from whatever quarter they arise.

So Britain needs radical reform and modernisation of our product, capital and labour markets.

The Government is today publishing its Enterprise Bill which will open up competition, creating independent competition authorities and introducing criminal penalties for cartels.

In addition to opening up competition, we are today sending a message to the entrepreneurial, the innovative and dynamic: if you are starting up, growing a business, investing, taking people on, seeking new capital or working your way up in business – we are on your side.

A tax credit is already boosting research and development and encouraging innovation among smaller firms. And following extensive consultation with business, the Government is today publishing draft clauses for a new volume-based research and development tax credit for larger firms from 1 April. As supported overwhelmingly by business the credit will follow the simplest, most efficient design, based on a company’s total r&d spending – benefiting over £11 billion in expenditure carried out by the 1,500 large companies operating in the UK. Final details of the credit will be announced in the Budget.

And today I am publishing our proposals for large company tax reform: From 1 April capital gains and losses on substantial shareholdings will be exempt from corporation tax so that important business decisions on restructuring and reinvestment are made for commercial, rather than tax, reasons. In response to our consultation with business, I am today publishing draft legislation that extends the scope of our proposal to exempt even more shareholdings from tax – cutting tax for business by £150 million a year – benefiting some 5000 companies in the UK.

And today I am also announcing the introduction, from 1 April, of a tax relief for intellectual property, goodwill and other intangible assets to help business take advantage of new opportunities in the knowledge based economy. This relief will be worth £200 million a year to business rising to £350 million in the longer term – some 300,000 businesses are expected to benefit.

For large companies we have already cut corporation tax from 33p to 30p, the lowest rate of corporation tax in our history.

Our approach is one based on a broad base and low tax rates, that is stable and transparent, reflecting our belief in fair tax competition – and our opposition to harmful tax competition and niche regimes – so that companies make decisions to exploit real business opportunities, all reflecting our goal to make and keep the UK as the best place for international business.

And for entrepreneurs we have cut capital gains tax from 40p to 10p, overall a regime that is more favourable to enterprise than that of the US.

So the tax system promotes investment and helps business access the capital they need to thrive and grow, making the UK one of the most attractive locations for quality, long-term investment.

And together we are determined to enhance our productivity as a nation.”

The press release issued by HM Treasury on 26 March 2002.

Following detailed consultation the Government today confirmed its intention to go ahead with tax measures to support large companies from 1 April, as set out in the Pre Budget Report.

The Government also published draft clauses for a volume-based Research and Development tax credit for large companies, final details of which will be announced in the Budget.

The measures, which as the Pre Budget Report said would come into effect on 1 April, were announced in response to a PQ from Ian Stewart MP.

Commenting on the measures, the Chancellor said:

“In our first term we put stability and employment creation first. In our second term, as we prepare for the sixth Budget we are able to build on this platform of stability and employment creation and our energies must continue to be directed to promoting enterprise and investment and raising our country’s productivity.”

The package consists of:

• An exemption for gains and losses on substantial shareholdings to ensure that important business decisions on corporate restructuring and reinvestment are made for commercial, rather than tax, reasons. It will reduce the tax burden on business by £150m a year.
• A new regime for providing relief to companies for the costs of intellectual property, goodwill and other intangible assets to encourage business to take advantage of new opportunities in the emerging knowledge-based economy. It will be worth around £200million to UK businesses, rising to a maximum of £350 million in the longer-term
• A new tax credit to boost research and development among larger companies, benefiting over 1,500 large companies operating in the UK, spending over £11bn.

Reforming and modernising the corporate tax regime

The Government is committed to reforming and modernising the corporate tax regime to promote entrepreneurial spirit and boost the UK’s competitiveness in the global business environment.  Business has contributed significantly to the design of the new measures announced today through wide-ranging consultation. From 1 April 2002 there will be:

• A tax exemption for companies disposing of substantial shareholdings which will ensure that around 5,000 UK based companies and groups will be able to restructure quickly and flexibly to respond to emerging global opportunities
• The exemption will mean that capital gains on sales by trading companies and groups of most shareholdings of 10% or more in trading companies will not be taxable.   By removing this charge, groups wishing to restructure for commercial reasons will be able to do so without essential business decisions being constrained by the tax system.
• The reduction to 10% for a shareholding to be substantial is in response to representations made by business on the draft legislation published last November.
• Revised draft legislation, reflecting responses to the draft published in November 2001, will be available on the Inland Revenue website later today.
• A new relief for the cost of intangible assets (including intellectual property and goodwill) will encourage business to take advantage of new opportunities in the knowledge-based economy. Up to 30,000 businesses stand to benefit from the measure.
• The new regime modernises the corporate tax base and marks a further step in the Government’s programme of corporate tax reform.  It provides relief for the cost of acquiring intangible assets where none had previously been available.

Supporting innovation

Research and development (R&D) is one of the key drivers of innovation and is critical to closing the productivity gap with our competitors to deliver rising living standards for all. From 1 April 2002:

• A new tax credit to encourage R&D by large UK companies will apply to R&D spending. The credit, which will follow a simple volume approach based only on the total of R&D spending by a company, will help over 1500 large companies operating in the UK, spending over £11bn on R&D.
• This new measure complements a similar tax incentive for small and medium companies (SMEs) brought in by Budget 2000, which will continue. It extends a tax credit to all companies not previously included i.e. to all non SME companies. So all UK companies performing R&D will now have access to an R&D tax credit.
• Details of the draft legislation will be available on the Inland Revenue website.

Further details of how much the R&D tax credit will be worth will be announced in the Budget.

The press release issued by HM Treasury on 20 March 2002.

New projects to create safer schools and hospitals, help find missing persons, deal with abandoned vehicles, provide an electronic adviser for young people, and to deliver flood warnings by e-mail and text message are among 75 local and national partnership schemes awarded a total of £68 million under the Invest To Save Budget (ISB) initiative, Treasury Chief Secretary Andrew Smith announced today.

Announcing the awards, Mr Smith said :

“These projects offer exciting and innovative ways of working and delivering better public services directly to users at local level across the country. They offer benefits for young and old, individuals and businesses, and for whole communities. I am particularly pleased that voluntary and community sector bodies are leading projects in this year’s awards for the first time.

“In most cases these projects will initially deliver benefits locally, but we expect them to identify new and better ways of working which can be adopted and adapted in all communities.

“But ISB is about more than just investing now to help current service users. It is also about improved efficiency and effectiveness generating savings to help fund further improvements and keep costs down for the taxpayer in the future.”

Cabinet Office Minister Lord Macdonald said :

“I congratulate all these projects for taking the initiative to work with others to make a difference. Improving public service delivery is the priority for this Government and these projects offer considerable potential in terms of both better services to the public and more efficient management of public resources. They are innovative, but this innovation is placed alongside effective approaches to risk identification and management.”

ISB is a joint Treasury and Cabinet Office initiative that provides support for projects that involve two or more public bodies working together to deliver services that are innovative, locally responsive and more efficient. ISB will have provided about £380 million to such schemes by the end of 2003-2004.

The 75 projects receiving new funding this year include :

Showcase Hospitals and Schools : a project to reduce violent and property crime through an integrated approach to safety and security in at least four showcase schools and three showcase hospitals across England and Wales. It will make use of existing and emerging technologies to make hospitals and schools a safer and more secure environment for staff, patients and pupils, reduce the fear of crime, and improve the quality of service provided in ways which can be implemented in all schools and hospitals.

Missing persons project : a Home Office led project to develop and deliver a comprehensive and cohesive system and strategy for dealing with missing persons, including the integration and updating of information technology systems between police, local authorities and voluntary sector and community bodies across the country.

Abandoned vehicle project : proposed by Sussex Police, this project aims to help local authorities remove abandoned vehicles from streets and public places more swiftly, saving significant amounts of tax and community charge costs and tackling a root cause of social problems and blight in local communities.

“E-Pal” : a project to provide an on screen or text messaging electronic or virtual personal adviser to offer advice and guidance to young people, help with job applications, access work placements and identify suitable training opportunities. E-Pal, created by a leading edge professional games software house, will contain input from local employers, trainers and educators as well as being linked into national schemes such as Connexions Direct and Learn Direct.

Severe Weather Warnings, Informing the Public : a project linking the Environment Agency, the Meteorological Office and Redcar and Cleveland Borough Council to provide advance public warning and information systems for severe weather (including flooding) via multi-media communication including e-mail, internet, SMS text messaging, digital TV, mobile and fixed telephones and fax

The press release issued by HM Treasury on 14 March 2002.

The Government’s determination to support families across Northern Ireland and ensure everyone has a real opportunity to work was highlighted by Treasury Minister Dawn Primarolo today.

The Minister was meeting staff and users of Ballybeen Women’s Centre in Belfast as part of a series of visits by Treasury Ministers to discuss the Government’s Pre Budget Report proposals throughout the UK.

Dawn Primarolo said:

“Since 1997 employment in Northern Ireland has grown by 25,000 and 60,000 people are better off thanks to the National Minimum Wage. But the Government is committed to doing more to support families, extend opportunity to all and make work pay.

For example, the children’s tax credit, the first recognition of children in the tax system in a generation, provides up to £520 extra a year for up to 125,000 families in Northern Ireland. The working families tax credit is making work pay for nearly 40,000 families in Northern Ireland. And over 4,000 parents in Northern Ireland claim the childcare tax credit component, which has been vital to helping lone parents back into the work place.

For the first time, through tax credits, the tax system is paying money to families rather than taking it, encouraging families to work without stigmatising them. And we are building on this.

A new system of tax credits to be introduced next year will extend the principle of the working families tax credit to make work pay for those without children as well. And for the first time all support for children will now be paid to the main carer – usually the mother. That is the best way to strengthen families.

We will continue to reform the tax and benefit system to ensure work pays while extending employment opportunity to all. The New Deal has already helped 11,700 young people in Northern Ireland into jobs. In the Pre Budget Report we extended this to incorporate tailored pathways for young people, a pilot mentoring scheme and the New deal for Partners.

The Northern Ireland economy is now growing. The local economy has performed relatively strongly over recent years. I am confident the measures we have introduced since 1997 and the extra support announced in the Pre Budget Report will ensure we have the right framework in place to help it do even better in the future.”

The press release issued by HM Treasury on 13 March 2002.

Gordon Brown today announced that Sir Howard Davies? appointment as Director and Chairman of the FSA is to be extended until 31 January 2004.

Gordon Brown said:

“At a time when the FSA has just taken on its full regulatory powers and is establishing itself as a fully independent single regulator it is invaluable to have Sir Howard remaining in post with his breadth of experience”.

1. Sir Howard Davies initially became Chairman of the Securities and Investments Board on 1 August 1997, which on 28 October 1997 was renamed the Financial Services Authority.  He previously served for two years as Deputy Governor of the Bank of England, three years as Director General of the CBI, and for five years was Controller of the Audit Commission.  Other experience includes working for McKinsey & Company, working as Special Adviser to the Chancellor of the Exchequer and two years as Private Secretary to the British Ambassador in Paris.

The press release issued by HM Treasury on 13 March 2002.

Improved scrutiny of Government bodies and greater accountability for the use of public funds were announced by Treasury Chief Secretary Andrew Smith today.

In its Response to the report “Holding to Account: The Review of Audit and Accountability for Central Government” by Lord Sharman, the Government has accepted the main recommendations directed to the Government and supports those addressed to other bodies.

The main effect of these recommendations will be to give the National Audit Office new powers of audit and access to documents.  It will also provide better scrutiny of the performance of public sector bodies and improve transparency.

Announcing publication of the Government Response, Mr Smith said:

“I am grateful to Lord Sharman for producing such a comprehensive review of audit and accountability in central government.  We have accepted all his recommendations directed mainly to the Government either in their entirety or in principle, and support his recommendations directed to other bodies.  The existing arrangements had developed over many years and Lord Sharman has set out the way forward for the 21st century.

“This report provides an excellent basis for Parliamentary scrutiny of the way taxpayers’ money is used. It retains the fundamental features of the current arrangements, while giving the Comptroller and Auditor General new statutory powers to ensure he can do his job independently.

“This will strengthen accountability of the Government to Parliament. It will also strengthen the move towards better management and innovation in central Government. I welcome the C&AG’s assurances that he will not use his new powers to impose extra burdens on private sector bodies that are holding documents that he needs to see. ”

The Response paves the way for increased Parliamentary scrutiny of central Government and improvements in the structure of accountability of the Executive to Parliament by:

• agreeing that the National Audit Office (NAO) should audit all non-Departmental public bodies (NDPBs).
• agreeing that, where the NAO needs to see documents, held by   bodies outside Government, it should normally have legal powers of access to them.
• inviting  the NAO  to validate the data systems used in reporting on Public Service Agreement (PSA) targets.
• supporting arrangements to promote the quality and transparency of central Government audit.
• ensuring that the new arrangements do not place bigger burdens on the private sector.

The press release issued by HM Treasury on 12 March 2002.

The Commonwealth Education Fund (CEF), officially launched today by the Chancellor Gordon Brown to mark Her Majesty The Queen’s Golden Jubilee year, will help Commonwealth developing countries to achieve the Millennium Development Goals in education so that every child in the Commonwealth completes a primary education by 2015.

At present, 75 million primary school-age children in the Commonwealth do not attend school.

In the presence of Her Majesty The Queen at the Commonwealth Parliamentary Association Conference in London, the Chancellor outlined his plans for the CEF.  Mr Brown’s speech followed an earlier visit to Allfarthing Primary School in Wandsworth which is ?twinned? with the Presbyterian Experimental Primary in Tamele, Northern Ghana.  Accompanied by television personality Davina McCall, a supporter of Comic Relief, and Mike Aaronson, Director General of Save the Children, the Chancellor spoke to the children about their links with the school in Ghana and saw for himself the benefits of the ‘twinning’ programme.

The Chancellor announced that:

•  Sir Edward George, Governor of the Bank of England, will chair the Fund;
•  ActionAid, Oxfam and Save the Children will jointly administer the majority of CEF resources through a strategic fund.

Alongside the £10 million Government commitment to the fund, money raised by business will be matched pound for pound by the Government; the Government will also match pound for pound funds raised for education in Commonwealth developing countries by Comic Relief’s Sport Relief.

While most of the funds from the CEF will be invested in expanding access to education in the Commonwealth’s poorest countries, the Government will also expand its work to develop links between schools in Commonwealth countries and the UK, to raise children’s development awareness.

The press release issued by HM Treasury on 7 March 2002.

The International Monetary Fund has “commended” the UK Government “for the impressive performance of the UK economy”.

According to the latest assessment by experts at the IMF, “a strong policy framework, sound macroeconomic policies and sustained structural reform were key to this remarkable performance”.

At a discussion in Washington on 4 March, the IMF Board of Directors noted that the outlook for the UK economy is subject to risks, but agreed “the current slowdown is likely to be relatively brief”. They judged the UK’s economic policies to be appropriate in the present economic climate and noted that “fiscal credibility earned from a strict adherence to a sound policy framework has greatly improved the UK’s flexibility to respond to new challenges”.

The Directors welcomed “plans to increase public investments in education and infrastructure” and “recent measures to improve the efficiency and effectiveness of public services”, and endorsed the Government’s objective of “raising productivity through targeted reforms aimed at identifiable market failures”, including measures introduced to strengthen the competition regime.

Commenting on the IMF’s report, the Chancellor, Gordon Brown, said:

“I welcome the IMF’s endorsement of the Government’s economic policy which provides clear support for the new framework for monetary and fiscal policy. Greater global instability means that we must not relax our fiscal disciplines and continue to work within the tough fiscal rules that we set out in 1997 and have stuck to throughout.

I also welcome recognition of the importance of the Government’s commitment to raising productivity, strengthening competition and to tackling low skills and child poverty.”

As in the previous two years, at the request of the UK Government the IMF is today publishing its Article IV staff report on the UK economy in full, along with the record of the IMF board discussion, and the UK’s statement in the board meeting.

The press release issued by HM Treasury on 25 April 2002.

Paul Boateng, Financial Secretary to the Treasury, today announced further details about the Government’s plans to modernise the taxation of the haulage industry.

At a meeting with representatives from the haulage industry and environmental, motoring and business organisations, Paul Boateng said:

“The Government is committed to ensuring that hauliers from overseas pay their fair share for using UK roads. Following consultation and Chancellor Gordon Brown’s recent Budget announcement, we are today publishing more details about how we intend to deliver this commitment.

“We have decided to introduce a new lorry road-user charge that will be related to the distance travelled on UK roads and will apply to lorry operators using UK roads regardless of their nationality. However, we recognise that the UK haulage industry already pays towards the costs it imposes in the UK. We will therefore ensure that the UK haulage industry does not pay any more as a result of this charge by introducing offsetting tax reductions when the charge is introduced. We aim to introduce this new charge in 2005 or 2006.

“Our decision to modernise the tax system in this way follows intensive consultation. I am delighted that this policy has been backed by the haulage industry, environmental organisations and other stakeholders. It shows how – through working together – we can achieve real reforms that bring together our concern for the environment with the needs of the haulage industry.”

John Spellar, Minister for Transport, said:

“This is an important day for the haulage industry. It demonstrates the Government’s commitment to modern, competitive and environmentally-responsible haulage, building on other recent announcements such as the reforms to lorry vehicle excise duty and the £100m Haulage Modernisation Fund.

“The progress report we are publishing today sets out more details about why we have chosen to introduce a distance-based rather than time-based charge, our preliminary thoughts about how the charge will work and the next steps in implementing this policy. It will help to ensure that foreign hauliers pay their fair share.”

The report, Modernising the taxation of the haulage industry – progress report one, outlines:

why the Government has chosen to introduce a distance-based rather than time-based lorry road-user charge – drawing on the responses to a consultation exercise and further analysis; some preliminary thoughts about the nature of the charge – for example, the Government is considering applying the charge to all roads and varying the charge according to the weight and axle structure of lorries; and the key next steps.

The press release issued by HM Treasury on 17 April 2002.

The Financial Secretary to the Treasury, Paul Boateng, and the Environment Minister, Michael Meacher, today launched a consultation on possible changes to the Landfill Tax Credit Scheme (LTCS).

The consultation paper seeks views on the priorities for funding as well as potential funding mechanisms for the scheme, ranging from retaining it in its current form to replacing it with a public spending programme.

Paul Boateng said:

“Consulting on the landfill tax credit scheme allows us to benefit from the views and experiences of the waste industry, environmental groups, local people and other interested stakeholders. The Government is very interested in hearing the views of all who have an interest in this scheme. We are seeking views on what the priorities for funding should be from the revenue currently going through the scheme. These could include sustainable waste management, local community projects or other wider Government objectives. We also want opinions on the best way of delivering these objectives.”

Mr Meacher said:

“The landfill tax credit scheme has funded local environmental projects as well as work on sustainable waste management.  This consultation seeks views on how we can enhance the environmental benefits of this funding still further.”