Tag: Budget

Ed Davey – 2025 Response to the Budget Statement

The speech made by Ed Davey, the Leader of the Liberal Democrats, in the House of Commons on 26 November 2025.

We look forward to the Treasury Committee challenging the Government on the details of the Budget. This Government were elected on a promise to tackle the cost of living and grow the economy, and this is the second Budget in which they have failed to do either. For millions of people struggling with higher bills, all this Budget really offers is higher taxes.

The OBR sets it out in black and white: disposable income and living standards are down thanks to this Budget. Surely the Chancellor should have learned from her first failed Budget that we cannot tax our way to growth. Under the Conservatives, the UK’s tax burden reached its highest level since 1948 and it hit the economy, yet under this Budget the tax burden will hit an all-time high.

There is an alternative to all these Conservative and Labour taxes, and the shocking reality is that the Government know it: a new trade deal with Europe—a major new deal to cut the cost of living and grow our Toggle showing location ofColumn 410economy. The truth is that Boris Johnson’s Brexit deal has cost the Treasury £90 billion a year in lower tax revenue. Imagine if the Chancellor had adopted our plan to reverse those Brexit costs. Imagine how much more we could be helping families and pensioners across our country with the cost of living. Imagine how we could be ending the cost of living crisis today.

Sir Bernard Jenkin (Harwich and North Essex) (Con)

Will the right hon. Gentleman give way?

Madam Deputy Speaker

Order. You are a senior Member of the House, and I made it very clear earlier that no interventions should be made on party leaders.

Ed Davey

I am happy to talk to the hon. Gentleman in the Tea Room afterwards.

The Government know the damage that the Conservative-Reform Brexit deal has done to every family and business across our country, yet they choose to reject the single biggest policy for ending the cost of living crisis, turbocharging economic growth and boosting tax revenues without raising tax: a new trade deal with Europe. We need to properly fix our broken relationship with Europe, with a new customs union. We can grow our economy by freeing British businesses from the costs, barriers and red tape favoured by the Conservatives and Reform. Rather than trying to tax our way out of debt, as Labour is choosing to do, the Liberal Democrats would grow our way out of debt.

To be fair to the Chancellor, she has recently spoken about the terrible damage that the Conservatives’ Brexit deal has done to our economy—a deal that promised to save us £350 million a week, but which ended up costing the taxpayer £1.7 billion every week. But where is the Chancellor’s urgency and ambition to fix the problem that she rightly identifies? Today she did not even mention the huge hit to the Treasury from Brexit. She is like a doctor who has diagnosed the disease but refuses to administer the cure. She is refusing to take up our plan for a brand-new deal with the EU—a much better deal for Britain than anything the Government have pursued so far, with a new customs union at its heart.

Everyone but the most extreme Brexiteers now realises what a costly economic disaster the Brexit deal has been. Whether they are a young family struggling with ever higher food prices or a high street business just trying to survive the Chancellor’s latest new cost or tax, people are understandably looking for a credible economic policy to change their futures for the better, and it is crystal clear that only the Liberal Democrats are providing the leadership on our economy that people are crying out for.

There are some measures the Chancellor announced today that we do welcome. At last, she has decided to tax the big online gambling firms by raising remote gaming duty, as the Liberal Democrats have been calling for. Problem gambling is related to hundreds of suicides every year, so of course online casinos and the like should pay more tax on their huge profits. Her decision to scrap the rape clause is an excellent one. I may not have heard the Leader of the Opposition, but I was not sure if she welcomed that. I hope the Conservative party will welcome it. The Chancellor’s decision to scrap the two-child limit is excellent. It was in our general election manifesto, and I am glad that she is Toggle showing location ofColumn 411now enacting Liberal Democrat policy. It is clearly the most effective way of lifting children out of poverty, and it will save taxpayers money in the long term.

The biggest relief today for millions of families and pensioners is the action the Chancellor is taking to reduce energy bills, and we welcome it, but even after the Chancellor’s changes, the Budget will leave the typical household paying hundreds of pounds a year more on their energy bills than five years ago. More action will be needed, but we need action on energy bills that works.

Reform and the Conservative party pretend that the answer to rising energy bills is to scrap our climate commitments and stop investing in renewables. They could not be more wrong. The Conservative-Reform energy policy would put up bills and make the UK even more reliant on imported fossil fuels, with their volatile and high prices. That would be a disaster for our economy, a disaster for our environment, a disaster for jobs and a disaster for people struggling with energy bills. A major winner from Reform’s energy policies would be Vladimir Putin, which might explain why the hon. Member for Clacton (Nigel Farage) is so keen on them. I urge the Government not to listen to the Conservatives or Reform, but to be more ambitious in cutting people’s energy bills and to take up our plan to cut energy bills even more right now and cut them in half within a decade, finally giving families and pensioners the relief they need from this cost of living crisis.

While there are some things to welcome, as I have just done, there are quite a lot of measures in the Budget that will cause a lot of pain and unfairness, all of which could have been avoided if the Chancellor had gone for growth with Europe instead. Her plans to tax salary sacrifice will be hugely damaging to savings and pensions, and it looks like it is another NI hit on workers. Why, oh why, when the electricity vehicle market still needs a boost to get going, is she taxing electric vehicles? If she was not spending £1.8 billion on digital ID, many of these tax rises would not have been needed in the first place. Her failure to U-turn on the family farm tax is a huge error. If the Chancellor was really looking to tax those with the broadest shoulders, why not put a windfall tax on the big banks that are making billions at the taxpayer’s expense due to the side effects of quantitative easing?

The worst tax hike of this Budget by far—the biggest tax rise in this Budget—is the Chancellor’s decision to repeat the Conservative policy of freezing income tax thresholds. Freezing these thresholds reduces the amount that people can earn tax-free and hits the lowest-paid the hardest. I have to say that hearing the Conservative leader criticising it now rings incredibly hollow—and I think the “Member for Bark-shire” was objecting to her comments. The Leader of the Opposition cheered Conservative Budget after Conservative Budget that did exactly the same thing as the Chancellor has done—raising taxes on the low-paid. The Conservatives dragged an extra 4 million people on very low incomes into paying income tax, and an extra 3.5 million people into paying the 40p rate. The OBR says that this Government are now planning to drag a further three quarters of a million low-paid workers into tax and nearly 1 million people into the 40p rate. Someone on the average salary is paying an extra £582 this year because of the Conservatives’ policy, and under the Chancellor’s plans they will pay an extra £300 a year by 2031.

Contrast that with our record on income tax. We raised the personal allowance by £4,000. We cut income tax by £825 for millions of people, and took 3.4 million of the lowest-paid out of paying income tax altogether. It is clear that the Liberal Democrats are the only party that believes in cutting income tax for ordinary people; Labour and the Conservatives make them pay more.

As well as adding income tax pain to families struggling with the cost of living crisis, the Budget will add to the cost of doing business crisis facing Britain’s hospitality sector, on which the Chancellor went nowhere near far enough. Our high streets are suffering. Pubs, restaurants, cafés, caravan parks, zoos and even our beloved theme parks are struggling against higher business rates and the Government’s misguided jobs tax. The Liberal Democrats called on the Chancellor to help them with an emergency 5% VAT cut for hospitality for the next 18 months. That would have been a lifeline for some of our most beloved local businesses and for people’s jobs, boosting local economies across Britain, and it is very disappointing that the Chancellor has not listened to our calls.

Finally, can I say how disappointed I am at how little there was for carers in this Budget? As a carer myself for much of my life, I am determined to speak up for the millions of carers less fortunate than I am—the millions of family carers and care workers who make enormous sacrifices looking after loved ones, the carers who keep our NHS going and the carers who keep our society going. They deserve far more support from the Government, and I will keep pressing their case.

I do welcome the carer’s allowance review, but it confirms our argument that the carer’s allowance system is out of date and in need of urgent change, and we are yet to hear commitments to such changes. I welcome the decision to reassess cases where overpayment has caused huge hardship, but with those changes not coming into force for another year, the Government must instruct the Department for Work and Pensions to immediately suspend repayments during that delay and swiftly deliver compensation. More needs to be done to help family carers juggle their jobs with their caring responsibilities, and we urgently need the social care commission to actually start fixing the system on a cross-party basis and make sure that our loved ones get the care they need. The Chancellor cannot claim to be supporting our NHS properly, however much money she puts in, while she and Treasury officials keep blocking the social care reforms that alone can transform the health service across the country and boost our economy.

A caring society, a growing economy and a plan to drive down household bills, boost high streets and go for growth with Europe—that is the vision the Chancellor should have set out today. Instead we got a low-growth, high-tax Budget from a Government who I fear are just not listening.

November 27, 2025
Rachel Reeves – 2025 Budget Statement

The statement made by Rachel Reeves, the Chancellor of the Exchequer, in the House of Commons on 26 November 2025.

It is my understanding that the Office for Budget Responsibility’s “Economic and fiscal outlook” was released on its website before this statement. This is deeply disappointing and a serious error on its part. It has already made a statement taking full responsibility for its breach.

We are rebuilding our economy. Over the last 16 months, we have overhauled our planning system to get Britain building; forged new trade deals with the United States, India and the European Union; reformed our visa system to bring the brightest and the best to Britain; changed the fiscal rules that we inherited from the Conservatives; and raised public investment to its highest level in four decades. In last year’s Budget, I raised taxes on business and the wealthiest to close the £22 billion black hole in the public finances left by the Conservative party. We used that money to fund the biggest ever settlement for our national health service.

Those were the fair and necessary choices. We faced opposition to them—from opponents to planning reform who will always demand that the future is built somewhere else, not in their backyard; opponents to trade who want to take us down the path of isolation and division; opponents to investment who believe that the only good thing a Government can do is get out of the way; opponents who insist that the only way to balance the books is to cut public spending; and opponents who say that we do not need to balance the books at all. But we made these choices for a reason: because after 14 years of Conservative Government, working people demanded—and deserved—change, with investment, not cuts, to our public services; stability for our public finances, which is the single most important factor in getting the cost of living down; and economic growth, which is the best means of improving wages, creating jobs and supporting public services. That is what our plan, this Government and our Prime Minister are all about.

Today’s Budget builds on the choices that we have made since July last year to cut NHS waiting lists, to cut the cost of living, and to cut debt and borrowing. No doubt, we will face opposition again, but I have yet to see a credible or a fairer alternative plan for working people. [Interruption.] These are my choices: the right choices for a fairer, a stronger and a more secure Britain.

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. There is far too much noise. I expected so much better from you, Dr Luke Evans; you are meant to be a leader in your community. Simmer down.

Rachel Reeves
I am happy for them to shout as much as they like, Madam Deputy Speaker, as long as they do it from the Opposition Benches, where they cannot cause any more damage.

I said that there would be no return to austerity, and I meant it. This Budget will maintain investment in our economy and in our national health service. I said that I would cut the cost of living, and I meant it. This Budget will bring down inflation and provide immediate relief for families. I said that I would cut debt and borrowing, and I meant it. Because of this Budget, borrowing will fall as a share of GDP in every year of this forecast. Our net financial debt will be lower at the end of the forecast than it is today, and I will more than double the headroom against our stability rule to £21.7 billion, meeting our stability rule, and meeting it a year early. These are my choices—not austerity, not borrowing, not turning a blind eye to unfairness. My choices are a Budget for fair taxes, strong public services and a stable economy. That is the Labour choice.

Growth is the engine that carries every one of our ambitions forward, through stability, investment and reform. It is the platform from which British ambition can finally get moving again. Growth does not just appear out of thin air; it is built, patiently and stubbornly, by people who take risks; by founders who bet their savings on an idea; by firms breaking into new markets, developing new technologies and creating new jobs and new opportunities; and by the men and the women who work hard every day, in all parts of our country. Our job is not to watch from the sidelines, but to partner with them, backing them every step of the way, and to match private enterprise with public ambition.

I thank my team of officials at the Treasury for their hard work in preparing this Budget. In the spring, the Office for Budget Responsibility forecast that our economy would grow by 1% this year. I said then that Britain would defy the forecasts, and defy them we have. The OBR has upgraded Britain’s growth for this year from 1% to 1.5%, reaching the same conclusions as the International Monetary Fund, the OECD and the Bank of England, which have already upgraded their forecasts.

Today, the OBR has published the result of its review of the supply side of the economy. It is clear that this is not about the last 14 months; it is about the previous 14 years, the legacy of Brexit and the pandemic, and the damaging decisions by the Conservative party, which cut public spending, leaving communities and entire regions behind, starved our economy of investment, and weakened our public services.

As a result of its review, the OBR is reducing its expectations for productivity growth by 0.3 percentage points to 1% by the end of the forecast. It says today:

“Real GDP is forecast to grow by 1.5% on average over the forecast period…due to lower underlying productivity growth.”

There is an impact on our public finances too. The OBR says that its productivity forecast will mean £16 billion less in tax receipts by 2030. Those forecasts are the Tories’ legacy, not Britain’s destiny. [Interruption.]

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. It is very hard to hear the Chancellor over all the shouting. Mr Holmes, you promised me yesterday that you would be on your top behaviour in the first few minutes. I call the Chancellor.

Rachel Reeves
We beat the forecasts this year, and we will beat them again by boosting trade, not blocking it; by increasing investment, not cutting it; by championing innovation, not stifling it; and by backing working people, not making them poorer. Brick by brick, we have been building our economy—building roads, building homes, and getting spades in the ground and cranes in the sky.

Growth begins with a spark from an entrepreneur. Half of new jobs in Britain are created by scale-up businesses, and we want those jobs created here, not somewhere else. Our job is to make Britain the best place in the world to start up, to scale up and to stay. We are widening eligibility for our enterprise incentives, so that scale-ups can attract the talent and capital that they need; expanding the enterprise management incentive, so that more companies can offer tax-relieved share options; re-engineering our enterprise investment and venture capital trust schemes, so that they do not just back early-stage ideas, but stay with companies as they grow; and introducing UK listings relief, with a three-year exemption from stamp duty reserve tax for companies that choose to list here in Britain.

To continue this work, I am launching a call for evidence on how our tax system can better back entrepreneurs, and a targeted review with founders and investors at its heart, to make the UK an even more attractive place to grow a business. We are sending a simple message to the world: “If you build here, Britain will back you.”

Our retail investment system should do the same. The UK has some of the lowest levels of retail investment in the G7, and that is not only bad for businesses, which need that investment to grow; it is bad for savers, too. Someone who had invested £1,000 a year in an average stocks and shares individual savings account every year since 1999 would be £50,000 better off today than if they had put the same money into a cash ISA. So from April 2027, I will reform our ISA system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance. Thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the ISA market, including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays, have signed up to launch new online hubs to help people invest here in Britain.

At this Budget, consistent with the commitments in our corporate tax road map, I will retain our competitive corporation tax rate, the lowest in the G7, and retain our generous full expensing offer for business investment. I will also introduce a new 40% first year allowance, so that businesses can write off more of the cost of their investment up front, while reducing main rate writing-down allowances in line with fiscal constraints.

Private investment is the lifeblood of economic growth, but growth needs public investment too. When faced with challenges, previous Chancellors have chosen to decrease, delay or cancel capital spending, but low investment is the cause of our productivity problems, not the solution. So my choice is not cuts, not stagnation, but to maintain the additional £120 billion of investment that I provided at the spending review: in transport to link our towns and cities; in energy infrastructure to power our businesses; and in housing, so that people can live near good jobs and growing businesses that pay decent wages. That is the Labour choice.

I am grateful to the Financial Secretary to the Treasury for his work in driving our growth agenda forward. As we allocate investment for the infrastructure that is the backbone of economic growth across our country, today I will commit investment for the lower Thames crossing, and we are continuing to drive investment in city region transport, in the midlands rail hub and the trans-Pennine route upgrade, along with our commitment to the northern growth corridor, including Northern Powerhouse Rail.

It this Labour Government that have overhauled our planning system, and I will today provide further funding to increase planning capacity through a new skills offer, as has been called for by the British Chambers of Commerce and the Confederation of British Industry. It is this Labour Government that have invested in nuclear power: in Sizewell C and in Culham. We are taking forward our commitment to slash electricity prices for thousands of manufacturing businesses, as Make UK and many others have called for. Today, I am pleased to welcome John Fingleton’s report—an ambitious plan to cut the red tape that has tied our nuclear industry in knots for decades—and within three months we will set out our plan for delivering his recommendations.

We are proud of our industrial heritage and we are determined to build the industry of the future so that we buy, make and sell more here in Britain. That is why, as we increase defence spending, we are investing in Portsmouth, in Barrow and in Plymouth, and I am pleased to be supporting Team Derby, an initiative to drive growth in one of our defence industry hubs. It is why we stepped in to save British Steel in Scunthorpe and invested in Sheffield Forgemasters. It is why we have changed Government procurement so we can buy British when it is crucial to our national security. For steel, for shipbuilding and today for AI, we are driving innovation and building that great industry here in Britain.

But it is not just what we invest in that matters; it is how we invest—putting money and power back in the hands of local and regional leaders. Today, we are devolving £13 billion of flexible funding for seven mayors to invest in skills, business support and infrastructure. I am extending the business rates retention pilots in the west of England, Liverpool city region and Cornwall until 2029, and providing £30 million for the Kernow industrial growth fund for sectors like critical minerals and marine innovation. I am establishing the Leeds city fund, a long-term agreement to retain business rates to fund local regeneration projects like the development of Leeds south bank, and I am allocating £20 million for the new Peterborough sports quarter and £16 million for a science centre in Darlington from the growth mission fund.

The benefits of investment and growth must be built and felt in every part of our United Kingdom, so we are providing an additional £370 million for the Northern Ireland Executive, £505 million for the Welsh Government and £820 million for the Scottish Government over the spending review period through the Barnett formula. Sorry, I didn’t quite catch that from the SNP. Did they not show up? Perhaps they didn’t hear us: £820 million for the Scottish Government over the spending review period because Anas Sarwar asked us to. I am making targeted investments in our industrial strategy sectors across the UK.

In Northern Ireland, I am providing £17 million to support businesses and strengthen the UK internal market, and backing advanced manufacturing through the Northern Ireland enhanced investment zone. Wales will be the host for two AI growth zones, creating more than 8,000 jobs supported by a £10 million investment in the semiconductors critical for that industry. We are building the UK’s first small modular nuclear reactors with Rolls-Royce at Wylfa in Anglesey—two Labour Governments working together in Wales to deliver for the people of Wales.

In Scotland, I am committing over £14 million for low-carbon technologies in Grangemouth, £20 million to renew infrastructure at Inchgreen in Inverclyde and £20 million to redevelop Kirkcaldy town centre and seafront with construction starting next year. That is on top of the UK’s biggest ever warship export deal with the Norwegian Government to build frigates in Glasgow, supporting 4,000 jobs. Investment opposed by the SNP, jobs opposed by the SNP, defence opposed by the SNP, but secured by this Labour Government.

A growing economy needs strong foundations of economic stability, with borrowing and inflation down and investment up. That is good for business, and it is good for working people so they have more money in their pockets. Economic stability, safeguarded by iron-clad fiscal rules, is our best defence against rising prices and the best way to improve living standards.

We have all seen the alternative. Three years ago, in their clamour to cut taxes for the richest, the Tories under Liz Truss crashed the economy, sent mortgage rates spiralling and brought pensions to the brink. [Interruption.] They are being so loud, and yet I can’t even hear them now. I know that the leader of the Green party is a keen hypnotherapist, and believes that he can achieve remarkable things using only the power of his mind. Unfortunately, the only things getting bigger under his approach would be the deficit and the rate of inflation.

For all the damage that the Conservative cuts did to our schools and hospitals, they also doubled the national debt. Our net financial debt this year will be £2.6 trillion, 83% of GDP, meaning that today £1 in every £10 the Government spend is on debt interest—not on paying down that debt, but just on paying the interest on the debt we inherited from the Conservatives.

My fiscal rules will get borrowing down while supporting investment: the stability rule—that day-to-day expenditure must be met through tax receipts—and the investment rule, which allows me to increase investment while getting debt on a downward path. Those fiscal rules are non-negotiable. I met them at the Budget last year, I met them in the spring and I have met them today.

While the current Budget balance is in deficit by £28.8 billion in ’26-27 and £4.6 billion in ’27-28, it moves into a surplus of £3.9 billion in ’28-29, £21.7 billion in ’29-30 and £24.6 billion in ’30-31—more than doubling our headroom against the stability rule and meeting that rule a year early, too. Our net financial debt is 83.3% in ’26-27, 83.6% in ’27-28, 83.7% in ’28-29, falling to 83.0% in ’29-30 and 82.2% in ’30-31. I said we would cut the debt and we are, with debt down by the end of the forecast. Going forward, to support our commitment to a single fiscal event and to further strengthen our economic stability, I will follow the recommendations of the International Monetary Fund by assessing the fiscal rules just once a year at the Budget.

Despite the challenges we face on productivity, the path of our deficit reduction remains broadly the same as in the spring. Public sector net borrowing is due to be £112.1 billion or 3.5% of GDP in ’26-27, 3.0% in ’27-28, 2.6% in ’28-29, 1.9% in ’29-30 and 1.9% in ’30-31, ending at £67.2 billion, translating into an increase in the net cash requirement next year of £4.2 billion, taking the total to £133.3 billion. According to the IMF, we are due to reduce borrowing more over the rest of this Parliament than any other G7 economy.

The Conservatives crashed the economy; we are protecting it. The Conservatives lost control of debt; we are getting debt down. The Conservatives let inflation and interest rates go through the roof, but since Labour took office the Bank of England has cut interest rates five times. I have made my choices: not reckless borrowing, not dangerous cuts, but stability for our economy, security for our public finances and security for family finances, too. Those are the Labour choices.

Tory austerity left classrooms crumbling and waiting lists sky high, weakened our productivity and choked our economic growth, and now the Conservatives propose a further £47 billion of cuts to our public services. That is the equivalent of cutting every police officer in our country twice over. Then there is Reform, which promises more than £100 billion of cuts with no detail on where those cuts will come from or who will pay for them—a recipe for devastating damage to our public services.

People voted for Labour because they want roads that are not full of potholes, police on our streets, and an NHS that is there when they need it. We are delivering that. Waiting lists are down by 230,000, and we have already delivered not just the 2 million additional appointments that we promised, but an additional 5.2 million appointments since the general election.

I joined the Labour party almost 30 years ago because I could see that the Conservative Government I grew up under did not care much about schools like mine. Textbooks were rationed—[Interruption.] I know that many of you were not at schools like mine. [Interruption.]

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. There is far too much noise, far too much excitement. People need to calm down a little.

Rachel Reeves
The Tories do not want to hear what they did to schools like mine, but I will tell them. Textbooks were rationed, libraries closed and kids herded into portacabins in the playground. I came into politics to change that. The money that I allocated at the spending review will fix the crumbling classrooms that the Conservatives left behind, and build the schools they promised but never delivered.

Today, thanks to representations from my hon. Friends the Members for Wolverhampton North East (Mrs Brackenridge) and for Leeds South West and Morley (Mark Sewards), I will provide £5 million for libraries in secondary schools, building on the £10 million commitment to ensure that every primary school has a school library within this Parliament. Thanks to representations from my hon. Friends the Members for Bournemouth East (Tom Hayes) and for Luton North (Sarah Owen), I am providing £18 million to improve and upgrade playgrounds across England. Let there be no doubt that this Government are on the side of our kids and will back their potential.

I will not allow the legacies of Conservative neglect to stain our society. Last year, I made changes to the Mineworkers’ Pension Scheme to ensure that its members receive the fair pensions that they are owed. This year, with thanks to the Minister for Pensions for all his work on this subject, I can go further. I have heard representations from Labour coalfield MPs, including my hon. Friends the Members for Bassetlaw (Jo White), for Blyth and Ashington (Ian Lavery), for Barnsley South (Stephanie Peacock), for Mansfield (Steve Yemm) and for Llanelli (Dame Nia Griffith), and I can today announce that I will transfer the investment reserve fund of the British Coal staff superannuation scheme to its members, so that the men and women who worked in our coal industry get a fair deal in their retirement, too. And there is more. Having heard representations from my hon. Friends the Members for Banbury (Sean Woodcock) and for Edinburgh South West (Dr Arthur), I will index for inflation on pensions accrued before 1997 in the pension protection fund and the financial assurance scheme, so that people whose pension schemes became insolvent—no fault of their own—no longer lose out as a result of inflation.

Last year, I also provided funding to compensate the victims of the infected blood scandal, after the previous Government failed to budget for the costs of compensation. This year, I have listened to representations from my hon. Friends the Members for Eltham and Chislehurst (Clive Efford) and for Edinburgh South West. I thank the Minister for Employment for her representations over many years on this subject. As a result, I will exempt all payments from the infected blood scheme from inheritance tax, regardless of the circumstances in which those payments are passed down. That is how we should be spending taxpayers’ money: on dealing with injustices and building strong public services, not on waste and inefficiency.

At the spending review, I set out an ambitious target for £14 billion of efficiencies per year by 2029. I am grateful to the Chief Secretary to the Treasury for driving that work forward, realising savings through artificial intelligence and automation, and by scrapping NHS England and reducing back-office staff by 18,000. At this Budget, I will find a further £4.9 billion of efficiencies by 2031, by getting rid of police and crime commissioners, cutting the cost of politics and local government, and selling Government assets that we no longer have any use for.

These savings will be required across Government, but for our national health service, I will invest all those savings back into the care that people rely on—more nurses, more GPs and more appointments, restoring the services that faltered under years of Conservative decline and investing in the future of our national health service. Today, I am announcing £300 million of investment in technology to improve patient service, and 250 new neighbourhood health centres, expanding more services into communities so that people can receive treatment outside hospitals and get better, faster care where they live. More than 100 of those centres will be delivered by 2030, including in Birmingham, Truro and Southall. The Labour party founded our national health service, and we will renew our national health service.

I will take the same approach for defence spending that I take for NHS spending, reinvesting savings back into our national security. In our age of insecurity, Britain will continue to stand with our allies, working in collaboration to secure a sustainable ceasefire for Ukraine, and maintaining our commitment to NATO, with the UK set to spend 2.6% of GDP on defence by April 2027.

The public rightly expects that we stamp out fraud, error and waste, and put that money to good use in our schools, hospitals and other frontline services. My right hon. Friend the Home Secretary has already announced that she will claw back excess profits from the use of hotels to house asylum seekers, as we phase out the use of those hotels entirely. And we will consult on reforms to indefinite leave to remain and access to taxpayer-funded benefits.

The introduction of digital ID will break the link between illegal migration and illegal working, and His Majesty’s Revenue and Customs and the fair work agency will crack down on the illicit businesses that blight our high streets and undercut legitimate firms, enforcing the minimum wage, investigating dodgy businesses and increasing scrutiny of the gig economy, as well as tracking down fraudulent business owners who vanish without paying their taxes. I thank my hon. Friends the Members for Great Grimsby and Cleethorpes (Melanie Onn), for Leigh and Atherton (Jo Platt) and for Kensington and Bayswater (Joe Powell) for their representations on this subject. I will take further steps to prevent and track down unpaid tax. Together, these reforms will raise nearly £10 billion a year by 2030, including through new powers for HMRC to pursue the promoters of tax avoidance schemes.

I am building on our successful use of targeted checks on welfare claims to root out fraud and error and to prevent public money from being paid to people who are not entitled to it. I thank Tom Hayhoe, the covid corruption commissioner, for his work in helping to chase down nearly £400 million from dodgy pandemic spending and contracts. Tory contracts handed out by Tory Ministers to Tory peers and Tory friends—[Interruption.] That money belongs in our schools, in our hospitals—[Interruption.]

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. It is so noisy in here we can barely hear the Chancellor. Everybody needs to calm down.

Rachel Reeves
I would not want any hon. Member to miss this. We are chasing down that money and have almost £400 million back from dodgy pandemic spending and contracts. Tory contracts handed out by Tory Ministers to Tory peers and Tory donors. That money belongs in our schools and in our hospitals, and we are getting it back.

Finally, we are ramping up sanctions on Russia and freezing known Russian assets. Let me be clear, I do not mean the hon. Member for Clacton (Nigel Farage). Under the Conservatives —[Interruption.]

Madam Deputy Speaker
Order. We do not need commentary from the Back Benches. Mr Dewhirst, you are so loud; it is remarkable how far your voice carries.

Rachel Reeves
Under the Conservatives, the cost of our welfare system increased by nearly 1 percentage point of GDP—equivalent to £88 billion in just five years. The broken welfare system that we inherited wrote off millions of people as too sick to work. We will reform that system, so that it is a system that does not count the cost of failure, but rather one that protects people who cannot work and empowers those who can.

We have brought back face-to-face assessments for disability benefits—those are the face-to-face assessments that the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride), got rid of when he was Work and Pensions Secretary. Our changes to universal credit will get 15,000 people back into work—a figure confirmed today.

The former Heath Secretary, Alan Milburn, will review the causes of rising youth inactivity, and we are already taking action. I am grateful to the Federation of Small Businesses and Small Business Britain for their representations on apprenticeships, and today I am announcing funding to make the training for under-25 apprenticeships completely free for small and medium-sized enterprises. I am funding our new youth guarantee, providing £820 million over the next three years to give the young people who were let down by the Conservatives the support and opportunity they deserve, guaranteeing every young person a place in college, an apprenticeship or personalised job support. After 18 months, 18 to 21-year-olds will be offered paid work, not benefits.

The Motability scheme was set up to protect the most vulnerable, not to subsidise the lease on a Mercedes-Benz, and so I am making reforms that will reduce generous taxpayer subsidies. Motability have confirmed that it will remove luxury vehicles from the scheme, getting the scheme back to its original purpose of offering cost-effective leases to disabled people.

Taxpayers’ money should not be spent on pensions for people abroad who only lived here for a couple of years and may never have paid a penny of tax. The Conservatives allowed thousands of people living abroad to buy their way into the state pension for as little as £3.50 a week, debasing the purpose of our pension system. I will abolish access to class 2 voluntary national insurance contributions for people living abroad, increasing the time that someone has to live or work in Britain to 10 years, and increasing the contributions they must pay. These reforms improve our welfare system: they support our young people; protect those who need it most; and put an end to Conservative waste and unfairness.

To break the cycle of austerity we need a fair and sustainable tax system, one that generates revenues to fund the public services we all use, and supports investment to grow our economy. That does mean that today I am asking everyone to make a contribution. The previous Conservative Government froze personal tax thresholds from 2021 until 2028. Today, I will maintain all income tax and equivalent national insurance thresholds at their current level for three further years from 2028—[Interruption.]

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. The noise is far too high.

Rachel Reeves
The Leader of the Opposition supported these freezes when her party made them; she might want to forget about that, but the British people never will.

At the same time, we are ensuring that people only in receipt of the basic or new state pension do not have to pay small amounts of tax through simple assessment from April 2027. I will also keep the plan 2 student loan repayments threshold at its 2026-27 level for three years.

I know that maintaining the thresholds is a decision that will affect working people. I said that last year and I will not pretend otherwise now. I am asking everyone to make a contribution, but I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer, and to ensure the wealthiest contribute the most.

The Conservatives knew that our tax system did not work. Time and time again, they ducked the necessary reforms, leaving a system unfit for a changing economy, with unfairness that they refused to address. Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary, because no national insurance is charged on property, dividend or savings income. It is not fair that the tax system treats different types of income so differently, and so I will increase the basic and higher rate of tax on property, savings and dividend income by 2 percentage points, and the additional rate of tax on property and savings income by 2 percentage points. Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings.

I also believe that, as well as narrowing the gap between the tax on income from assets and income from work, a fair society is one where the wealthiest pay their fair share. The reforms I made last year will raise an additional £8 billion a year by 2030 from wealth. I increased taxes last year on private equity, private schools and private jets, and I abolished the non-dom tax regime. This year I will make two changes to cap trust charges and prevent avoidance. I reformed inheritance tax on agricultural and business assets and this year—[Interruption.] This year I am aligning those reforms with wider inheritance tax rules by allowing the transfer of the 100% relief allowance between spouses, balancing the taxation of these valuable assets with the realities of family life.

In this Budget, I will take further steps to deal with a long-standing source of wealth inequality in our country. A band D home in Darlington or Blackpool pays just under £2,400 in council tax, nearly £300 more than a £10 million mansion in Mayfair, and so from 2028, I am introducing the high value council tax surcharge in England, an annual £2,500 charge for properties worth more than £2 million, rising to £7,500 for properties worth more than £5 million. This will be collected alongside council tax, levied on owners, and we will consult on options for support or deferral. This new surcharge will raise over £400 million by 2031 and will be charged on less than the top 1% of properties.

Reliefs in our tax system cost the taxpayer billions of pounds a year, but many of them no longer serve their original purpose. The Government rightly provides generous tax relief for people paying into a pension, relieving income tax on all contributions and on the investment itself, as well as national insurance relief on employer contributions, at a cost of over £70 billion a year to the Exchequer. This Budget makes no changes to those reliefs or to the tax-free lump sum.

However, salary sacrifice for pensions, which was intended to be a small part of our pensions system, is forecast almost to treble in cost to other taxpayers, from £2.8 billion in 2017 to £8 billion by 2030, with the greatest benefit going to the highest earners, or to those in the financial services sector putting their bonuses into pensions tax-free, while those on the minimum wage or whose employers do not offer salary sacrifice do not benefit at all. That is not sustainable for our public finances, putting pressure on the tax that everyone else pays.

I am therefore introducing a £2,000 cap on salary sacrifice into a pension, with contributions above that taxed in the same way as other employee pension contributions. It is a pragmatic step so that people, especially on low and middle incomes, can continue to use salary sacrifice for their pension without paying any more tax than they do now.

To give individuals and employers time to adjust to these new arrangements, these changes will come into effect in 2029.

The coalition Government introduced 100% relief from capital gains tax on business sales made to employee ownership trusts, creating a route for gains to go completely untaxed when businesses are sold. I will reduce that relief to 50%, retaining a strong incentive for employee-owned companies. As we work towards doubling the size of the co-operative economy, the Department for Business and Trade will launch a call for evidence on how we can better support co-ops to grow. As a result of the changes that I have made to capital gains tax this year and last year, receipts are forecast to increase from £14 billion this year to £30 billion by 2030.

To support our high streets, I am announcing a package of regulatory changes, as called for by UKHospitality and the British Retail Consortium. I will support the great British pub through our new national licensing framework, encouraging councils to back our pubs and to back late-night venues with greater freedoms. For business rates, I will introduce permanently lower tax rates for over 750,000 retail, hospitality and leisure properties—the lowest rates since 1991, paid for through higher rates on properties worth more than £500,000, such as the warehouses used by online giants. Alongside this, I will introduce a package of support worth over £4.3 billion over the next three years for a property of any size seeing a large increase in their bill. To support a level playing field in retail, I will stop online firms from undercutting our high street businesses, by ensuring that customs duty applies on parcels of any value.

I will reform our motoring taxes, exempting search and rescue vehicles from vehicle excise duty, as called for by my hon. Friends the Members for Na h-Eileanan an Iar (Torcuil Crichton) and for Whitehaven and Workington (Josh MacAlister). All cars contribute to wear and tear on our roads, so I will ensure that drivers are taxed according to how much they drive, not just by the type of car they own, by introducing the electric vehicle excise duty on electric cars. That will be payable each year alongside vehicle excise duty at 3p per mile for electric cars, and 1.5p for plug-in hybrids, helping us to double road maintenance funding in England over the course of this Parliament.

Alongside that, I am providing support to boost our British car industry: increasing the threshold for the expensive car supplement on electric vehicles to £50,000, saving over a million motorists £440 a year; providing £1.3 billion additional funding for the electric car grant, extending it to 2030, taking total funding to £2 billion; and delaying changes to the employee car ownership scheme. In addition, we are investing a further £200 million to accelerate the roll-out of EV charging, as well as 100% business rates relief for EV charge points for the next decade, with thanks to my hon. Friend the Member for Camborne and Redruth (Perran Moon) for his representations on that policy.

I will improve competition in our taxi industry by ending ride-hailing companies’ use of a discount scheme intended for coach tours, as called for by Steve McNamara, general secretary of the Licensed Taxi Drivers Association: legislating to restrict access so that everyone pays fairly, and protecting £700 million of tax revenue each year.

I am responding to our consultation on landfill tax, and listening to representations particularly from our house building industry. I will not converge towards a single rate, but I will prevent the gap between the two rates from widening, to balance the need to address tax avoidance in the current structure. I will today publish Ray McCann’s report into the loan charge, along with the Government’s response, setting out a new settlement opportunity that will finally allow people to finalise their position and draw a line under this long-standing issue. I thank my hon. Friend the Member for Milton Keynes Central (Emily Darlington) for her representations on this subject.

I will continue with the planned uprating for tobacco duties that I set out last year, and uprate alcohol duties by inflation, alongside our plans to introduce a vaping products duty in 2026, and the changes to the soft drinks industry levy announced by my right hon. Friend the Health Secretary yesterday. I thank the Exchequer Secretary to the Treasury for his work on all the tax measures in this Budget.

I will also reform gambling taxes in response to the rise in online gambling. Remote gaming is associated with the highest levels of harm, and so I am increasing remote gaming duty from 21% to 40%, with duty on online betting increasing from 15% to 25%. I am making no change to the taxes on in-person gambling or on horseracing, and I am abolishing bingo duty entirely from April next year. Taken together, my reforms to gambling tax will raise over £1 billion per year by 2031.

As a result of the tax reforms I have made today, I can confirm that I will not be increasing national insurance, the basic, higher or additional rates of income tax, or VAT. I have kept everyone’s contribution as low as possible, through reforms to make our tax system stronger, closing loopholes, ensuring that the wealthiest pay their share, and building a tax system that is fairer for the future as our economy changes.

On the day I became Chancellor, I said that I would judge my time in office a success if I knew that ordinary children from working-class backgrounds were living more fulfilling lives—their horizons expanded; their potential realised. I joined the Labour party, I came into politics, because I believe that every child has equal worth and deserves an equal chance to achieve their promise. The biggest barrier to equal opportunity is child poverty, because for every child that grows up in poverty, our society pays a triple cost.

The first and heaviest is to the child: going to school hungry; waking up in a cold home, or in another B&B. While other children enjoy the advantages of parents with time to help with homework, or a quiet space at home to work in, too many go without. There is also the cost of supporting a family in poverty, which ends up in the lap of overstretched councils that can do no more than shunt them into temporary accommodation, at huge cost to local taxpayers. Then there is the future cost to our economy and our society, of wasted talent, and a welfare system that bears the cost of failure for decades to come: young people with so much to contribute, but whose potential is suffocated early by limited life chances and missed opportunities, struggling to make their way in a society that did not look out for them.

I do not intend to preside over a status quo that punishes children for the circumstances of their birth and demands that we all pay three times over for it. Since last July, we have rolled out free breakfast clubs in schools, and we are expanding free school meals to half a million more kids, lifting 100,000 children out of poverty as we do it. We have passed the Renters’ Rights Act 2025, and we have extended the childcare offer.

I am proud of all that, but it is not enough, because there is one policy that pushes kids into poverty more than any other. It was introduced by the Conservatives. They said it would save money, and that it would bring about “behavioural change”, disincentivising poorer families from having more children. Even on its own terms the policy failed: the welfare bill has continued to rise, and there has been no difference in the size of families. What it has done since it was introduced is push hundreds of thousands of children into poverty. They said they were punishing parents’ choices, but it is the kids who have paid the price.

They have paid the price for the policies of a party that opted for cynical gimmicks over real savings in our welfare system.

I understand that many families are finding times hard, and that many have had to make difficult choices when it comes to having kids. There are many reasons why people choose to have children and then find themselves in difficult times: the death of a partner, separation, ill health, a lost job. I do not believe that children should have to bear the brunt of that.

And neither can I in good conscience leave in place the vile policy known as the rape clause, which requires women to prove their child has been conceived non-consensually, to receive support. I am proud to be Britain’s first female Chancellor of the Exchequer and I take the responsibilities that come with that seriously. I will not tolerate the grotesque indignity to women of the rape clause any longer. It is dehumanising, it is cruel and I will remove it from the statute book.

So because I am tackling fraud and error in our welfare system, cracking down on tax avoidance and reforming gambling taxation, I can announce today, fully costed and fully funded, the removal of the two-child limit in full from April. [Interruption.] It is amazing what people get so angry about. We have seen the Conservatives’ true colours today—the thing they get angry about is lifting children out of poverty—[Interruption.]

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. Our constituents want to hear the Chancellor.

Rachel Reeves
I think our constituents have heard all they need to from Conservative Members today. We on the Labour Benches do not believe that the solution to a broken welfare system is to punish the most vulnerable. We are lifting 450,000 children out of poverty with the end of the two-child limit. Combined with other actions that we are taking, this Labour Government are achieving the biggest reduction in child poverty over a Parliament since records began. That is the difference that this Labour Government are making.

I know how worried families are about the cost of everything. They are worried that their money will not stretch to the end of the month—

Nigel Huddleston
(Droitwich and Evesham) (Con)
Just increase tax.

Rachel Reeves
I think if you have a house that is worth £5 million, then you can probably afford it, but Conservative Members get more exercised about reducing child poverty than they do about the richest paying more.

Under this Government, wages have risen by more since we were elected than in 10 years under the last Government, with lower interest rates already saving families £1,200 a year off a typical new mortgage. Compare that to when Liz Truss was Prime Minister. But I know that people still face pressure on their budgets, day to day and week to week, and where there is more we can do to provide relief, we are doing it: extending the bus fare cap, cracking down on rip-off price hikes, freezing prescription charges and freezing rail fares for the first time in 30 years.

I am increasing the basic and new state pension by 4.8%, an increase of £440 per year for the basic state pension and an increase of £575 per year for the new state pension, in line with our commitment to the triple lock. At the election, we promised a genuine living wage and we are delivering it. At the Budget last year, I increased the national minimum wage and the national living wage, and I am doing the same this year too. I am accepting the recommendations of the Low Pay Commission in full and increasing the minimum wage for 18 to 20-year-olds from £10 to £10.85 per hour, and increasing the living wage from £12.21 to £12.71 per hour.

Under current plans, the temporary 5p cut to fuel duty that was introduced during the pandemic will come to an end in April and fuel duty will be uprated in line with inflation. But I know that the cost of travelling to and from work is still too expensive, so I am extending the 5p cut until September 2026. Because I know that changes in wholesale prices are not always passed on to motorists, I am bringing in new rules to mandate petrol forecourts to share real-time prices through a new fuel finder, empowering drivers to find the cheapest fuel, calling out rip-offs and strengthening competition, saving the average household £40 a year.

One of the greatest drivers of the rising cost of living is energy prices. The cause of high energy bills must be tackled at source, and so we are investing in energy security—in nuclear and renewable energy—and in insulation through the warm homes plan, but that is not enough when people are struggling with energy bills today. The Conservatives’ energy company obligation scheme was presented as a plan to tackle fuel poverty. It costs households £1.7 billion a year on their bills, and for 97% of families in fuel poverty, the scheme—get this—has cost them more than it has saved. It is a failed scheme, and so I am scrapping it, along with taking other legacy costs off bills.

As a result, I can tell the House today that for every family we are keeping our promise to get energy bills and the cost of living down, with £150 cut from the average household bill from April next year—money off bills and in the pockets of working people. That is my choice, not to neglect Britain’s energy security, like the Tories did, and not to leave working families to bear the brunt of high prices, like the Tories did, but to get energy costs down now and in the future. That is the Labour choice.

And, Madam Deputy Speaker, one more thing: because of our action on bills and on prices, as a direct result of this Budget, the Office for Budget Responsibility confirmed today that inflation is coming down faster and will be a full 0.4 percentage points lower next year. That is the benefit of a Labour Government cutting the cost of living.

This Labour Government are changing our country. In the face of challenges on our productivity, I will grow our economy through stability, investment and reform. I have met my fiscal rules and built our economic resilience for the future. I have asked everyone to contribute—yes—for the security of our country and the brightness of its future, but I have kept that contribution as low as possible by reforming our tax system, making it fairer and stronger for the future.

I have protected our NHS, maintaining public investment and driving efficiency in government spending. I have taken action on our broken welfare system, rooting out waste and lifting children out of poverty. And I have cut the cost of living, with money off bills and prices frozen, all while keeping every single one of our manifesto commitments—[Interruption.]

Madam Deputy Speaker
(Ms Nusrat Ghani)
Order. Mr Rankin and Ms Morton, your voices carry right across the Chamber—try to take a breath every so often.

Rachel Reeves
Those are my choices, not austerity and not reckless borrowing, but cutting the debt, cutting waiting lists and cutting the cost of living. Those are Labour choices, promised and delivered by this Budget—promised and delivered by this Labour Government. I commend this statement to the House.

Provisional collection of taxes

Motion made, and Question put forthwith (Standing Order No. 51(2)),

That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—

(a) Stamp duty reserve tax (UK listing relief) (motion no. 60);

(b) Rates of tobacco products duty (motion no. 65).—(Rachel Reeves.)

Question agreed to.

November 26, 2025
Rachel Reeves – 2024 Budget Statement

The 2024 budget statement made by Rachel Reeves, the Chancellor of the Exchequer, in the House of Commons on 30 October 2024.

Madam Deputy Speaker, on 4 July, the country voted for change. This Government were given a mandate: to restore stability to our economy and to begin a decade of national renewal; to fix the foundations and deliver change through responsible leadership in the national interest. That is our task, and I know that we can achieve it.

My belief in Britain burns brighter than ever, and the prize on offer is immense. As my right hon. Friend the Prime Minister said on Monday, change must be felt: more pounds in people’s pockets; an NHS that is there when we need it; and an economy that is growing, creating wealth and opportunity for all, because that is the only way to improve living standards. The only way to drive economic growth is to invest, invest, invest. There are no shortcuts, and, to deliver that investment, we must restore economic stability and turn the page on the last 14 years.

This is not the first time that it has fallen to the Labour party to rebuild Britain. In 1945, it was the Labour party that rebuilt our country out of the rubble of the second world war. In 1964, it was the Labour party that rebuilt Britain with the white heat of technology, and, in 1997, it was the Labour party that rebuilt our schools and our hospitals. Today, it falls to this Labour party—to this Labour Government—to rebuild Britain once again. And while this is the first Budget in more than 14 years to be delivered by a Labour Chancellor, it is the first Budget in our country’s history to be delivered by a woman. I am deeply proud to be Britain’s first ever female Chancellor of the Exchequer. To girls and young women everywhere, I say: let there be no ceiling on your ambition, your hopes and your dreams. Along with the pride that I feel standing here today, there is also a responsibility to pass on a fairer society and a stronger economy to the next generation of women.

Madam Deputy Speaker, the Conservative party failed our country: its austerity broke our national health service; its Brexit deal harmed British businesses; and its mini-Budget left families paying the price with higher mortgages. The British people have inherited the Conservative party’s failure: a black hole in the public finances; public services on their knees; a decade of low growth; and the worst Parliament on record for living standards.

Let me begin with the public finances. In July, I exposed a £22 billion black hole at the heart of the previous Government’s plans—a series of promises that they made, but had no money to deliver—covered up from the British people and covered up from this House. The Treasury’s reserve, set aside for genuine emergencies, was spent three times over just three months into the financial year. Today, on top of the detailed document that I provided to the House in July, the Government are publishing a line-by-line breakdown of the £22 billion black hole that we inherited, which shows hundreds of unfunded pressures on the public finances this year, and into the future too.

The Office for Budget Responsibility has published its own review of the circumstances around the spring Budget forecast. It says that the previous Government

“did not provide the OBR with all the information to them”

and that, had the OBR known about these

“undisclosed spending pressures that have since come to light”,

then its spring Budget forecast for spending would have been “materially different”.

Let me be clear: that means that any comparison between today’s forecast and the OBR’s March forecast is false, because the previous Government hid the reality of their public spending plans. Yet at the very same Budget, they made another £10 billion-worth of cuts to national insurance. It was the height of irresponsibility, and they knew it. They had run out of road, and they called an election to avoid making difficult choices. So let me make this promise to the British people: never again will we allow a Government to play fast and loose with the public finances and never again will we allow a Government to hide the true state of our public finances from our independent forecaster. That is why I can today confirm that we will implement in full the 10 recommendations from the independent Office for Budget Responsibility’s review.

The country has inherited not just broken public finances, but broken public services. The British people can see and feel that in their everyday lives: NHS waiting lists at record levels; children in portacabins as school roofs crumble; trains that do not arrive; rivers filled with polluted waste; prisons overflowing; crimes that are not investigated; and criminals who are not punished. That is the country’s inheritance from the Conservative Government. They had no plan to improve our public services and they had no plan to put our public finances on a sustainable footing—quite the opposite.

Since 2021, there have been no detailed plans for departmental spending set out beyond this year, and the previous Government’s plans relied on a baseline for spending this year, which we now know was wrong because it did not take into account the £22 billion black hole. They also failed to budget for costs that they knew would materialise, including funding for vital compensation schemes for victims of two terrible injustices—[Interruption.]

Madam Deputy Speaker (Ms Nusrat Ghani)

Order. I have just spoken about respecting colleagues. The public are watching, and they want to hear what the Chancellor has to say. Simmer down.

Rachel Reeves

I would politely suggest that hon. Members listen to this, because it includes funding for vital compensation schemes for victims of two terrible injustices: the infected blood scandal and the Post Office Horizon scandal.

The Leader of the Opposition rightly made an unequivocal apology for the injustice of the infected blood scandal on behalf of the British state, but he did not budget for the costs of compensation. Today, for the very first time, we will provide specific funding to compensate those infected and those affected in full, with £11.8 billion in this Budget. I am also today setting aside £1.8 billion to compensate victims of the Post Office Horizon scandal—redress that is long overdue for the pain and injustice that they have suffered.

The leadership campaign for the Conservative party has now been going on for over three months, but in all that time there has been not one single apology for what they did to our country. The Conservative party has not changed—but this is a changed Labour party and we will restore stability to our country once again. The scale and seriousness of the situation that we have inherited cannot be underestimated. Together, the hole in our public finances this year, which recurs every year, the compensation schemes that the previous Government did not fund, and their failure to assess the scale of the challenges facing our public services, means that this Budget raises taxes by £40 billion. Any Chancellor standing here today would have to face this reality, and any responsible Chancellor would take action. That is why today I am restoring stability to our public finances and rebuilding our public services.

As a former economist at the Bank of England, I know what it means to respect our economic institutions. I put on record my thanks to the Governor of the Bank, Andrew Bailey, and the independent Monetary Policy Committee. Today, I can confirm that we will maintain the MPC’s target of 2% inflation, as measured by the 12-month increase in the consumer prices index. I thank James Bowler, the permanent secretary to the Treasury, and my team of officials. I also thank my predecessors as Chancellor of the Exchequer for their wise counsel as I have prepared for this Budget. In particular, I thank the former right hon. Member for Spelthorne for his invaluable advice in this weekend’s papers, where he concluded that his mini-Budget “wasn’t perfect”. For once, he and I are in absolute agreement. Finally, I thank Richard Hughes and his team at the Office for Budget Responsibility for their work in preparing today’s economic and fiscal outlook.

Let me take the House through that forecast. The cost of living crisis under the last Government stretched household finances to their limit, with inflation hitting a peak of above 11%. Today, the OBR says that CPI inflation will average 2.5% this year, 2.6% in 2025, 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.

Moving on to economic growth, today’s Budget marks an end to short-termism, so I am pleased that, for the first time, the OBR has published not only five-year growth forecasts but a detailed assessment of the growth impacts of our policies over the next decade. The new charter for Budget responsibility, which I am publishing today, confirms that this will become a permanent feature of our framework. The OBR forecasts that real GDP growth will be 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029. The OBR is clear: this Budget will permanently increase the supply capacity of the economy, boosting long-term growth. [Interruption.] It may sound shocking to Conservative Members, but this Government are boosting long-term economic growth.

Every Budget that I deliver will be focused on our mission to grow the economy, and underpinning that mission are the seven key pillars of our growth strategy, developed and delivered alongside business, and all driven forward by our excellent Financial Secretary to the Treasury. The first and most important is to restore economic stability. That is my focus today. Secondly, increasing investment and building new infrastructure is vital for productivity, so we are catalysing £70 billion of investment through our national wealth fund, and we are transforming our planning rules to get Britain building again. Thirdly, to ensure that all parts of the UK can realise their potential we are working with the devolved Governments and partnering with our mayors to develop local growth plans. Fourthly, to improve employment prospects and skills we are creating Skills England, delivering our plans to make work pay and tackling economic inactivity.

Fifthly, we are launching our long-term modern industrial strategy and expanding opportunities for our small and medium-sized businesses to grow. Sixthly, to drive innovation, we are protecting record funding for research and development to harness the full potential of the UK’s science base. Finally, to maximise the growth benefits of our clean energy mission, we have confirmed key investments, such as carbon capture and storage, to create jobs in our industrial heartlands. Our approach is already having an impact: just two weeks ago, we delivered an international investment summit that saw businesses commit £63.5 billion of investment into our country, creating nearly 40,000 jobs across the United Kingdom. But we cannot undo 14 years of damage in one go. Economic growth will be our mission for the duration of this Parliament.

In our manifesto, we set out the fiscal rules that would guide this Government. I am confirming those today: our stability rule and our investment rule. The stability rule means that we will bring the current Budget into balance so that we do not borrow to fund day-to-day spending. We will meet that rule in 2029-30, until that becomes the third year of the forecast. From then on, we will balance the current Budget in the third year of every Budget, held annually each autumn. That will provide a tougher constraint on day-to-day spending, so that difficult decisions cannot be constantly delayed or deferred. The OBR says that the current Budget will be in deficit by £26.2 billion in 2025-26 and by £5.2 billion in 2026-27, before moving into surplus of £10.9 billion in 2027-28, £9.3 billion in 2028-29 and £9.9 billion in 2029-30, meeting our stability rule two years early.

Monthly public sector finance data show that Government borrowing in the first six months of this year was already running significantly higher than the OBR’s March forecast, and the OBR confirmed today that borrowing in this financial year is now £127 billion, reflecting the inheritance left by the Conservative party. The increase in the net cash requirement in 2024-25 is lower than the increase in borrowing, at £22.3 billion higher than the spring forecast. Because of the action that we are taking, borrowing falls from 4.5% of GDP this year to 2.1% of GDP by the end of the forecast. Public sector net borrowing will be £105.6 billion in 2025-26, £88.5 billion in 2026-27, £72.2 billion in 2027-28, £71.9 billion in 2028-29 and £70.6 billion in 2029-30.

Before I come to tax, it is vital that we are driving efficiency and reducing wasteful spending. In July, to begin dealing with our inheritance, I made £5.5 billion of savings this year. Today we are setting a 2% productivity, efficiency and savings target for all Departments to meet next year by using technology more effectively and joining up services across Government. As set out in our manifesto, I will shortly be appointing our covid corruption commissioner. They will lead our work to uncover those companies that used a national emergency to line their own pockets, because that money belongs in our public services, and taxpayers want it back. I can confirm today that David Goldstone has been appointed chair of the new office for value for money to help us realise the benefits from every pound of public spending.

Today, I am also taking three steps to ensure that welfare spending is more sustainable. First, we inherited the last Government’s plans to reform the work capability assessment. We will deliver those savings as part of our fundamental reforms to the health and disability benefits system that my right hon. Friend the Work and Pensions Secretary will bring forward.

Secondly, I can today announce a crackdown on fraud in our welfare system—often the work of criminal gangs. We will expand the DWP’s counter-fraud teams, using innovative new methods to prevent illegal activity, and provide new legal powers to crack down on fraudsters, including direct access to bank accounts to recover debt. That package saves £4.3 billion a year by the end of the forecast.

Thirdly, the Government will shortly be publishing the “Get Britain Working” White Paper, tackling the root causes of inactivity with an integrated approach across health, education and welfare, and we will provide £240 million for 16 trailblazer projects, targeted at those who are economically inactive and most at risk of being out of education, employment or training, to get people into work and reduce the benefits bill.

Before a Government can consider any change to a tax rate or threshold, they must ensure that people pay what they already owe. We will invest to modernise His Majesty’s Revenue and Customs systems using the very best technology, and recruit additional HMRC compliance and debt staff. We will clamp down on the umbrella companies that exploit workers, increase the interest rate on unpaid tax debt to ensure that people pay on time, and go after the promoters of tax avoidance schemes. Those measures to reduce the tax gap raise £6.5 billion by the end of the forecast, and I thank the Exchequer Secretary to the Treasury for his outstanding work on that agenda.

I know that for working people up and down our country, family finances are stretched and pay cheques do not go as far as they once did, so today I am taking steps to support people with the cost of living. It was the Labour Government who introduced the national minimum wage in 1999. That had a transformative impact on the lives of working people. As promised in our manifesto, we asked the Low Pay Commission to take account of the cost of living for the first time. I can confirm that we will accept the commission’s recommendation to increase the national living wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker. And, for the first time, we will move towards a single adult rate, phased in over time by initially increasing the national minimum wage for 18 to 20-year-olds by 16.3%, as recommended by the Low Pay Commission, taking it to £10 an hour—a Labour policy to protect working people, being delivered by a Labour Government once again.

Secondly, I have heard representations from colleagues across this House, including my hon. Friends the Members for Shipley (Anna Dixon) and for Scarborough and Whitby (Alison Hume), and the right hon. Member for Kingston and Surbiton (Ed Davey), about the carer’s allowance and the impact of the current policy on carers who are looking to increase the hours that they work. Carer’s allowance currently provides up to £81.90 per week to help those with additional caring responsibilities. Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the national living wage per week—the largest increase in the carer’s allowance since it was introduced in 1976. That means that a carer can now earn over £10,000 a year while receiving carer’s allowance, allowing them to increase their hours where they want to, and keep more of their money. I am also concerned about the cliff edge in the current system and the issue of overpayments. My right hon. Friend the Work and Pensions Secretary has announced an independent review to look at the issue of overpayments, and we will work across the House to develop the right solutions.

Thirdly, we will provide £1 billion from next year to extend the household support fund and discretionary housing payments to help those facing financial hardship with the cost of essentials. Fourthly, having heard representations from the Joseph Rowntree Foundation, the Trussell Trust and others, I will reduce the level of debt repayments that can be taken from a household’s universal credit payment each month from 25% to 15% of their standard allowance. That means that 1.2 million of the poorest households will keep more of their award each month, lifting children out of poverty, and those who benefit will gain an average of £420 a year.

Our plan to make work pay will also protect working people. I know that Conservative Members are deeply interested in our plans. Having seen their colleagues repeatedly dismissed at short notice, I know that they are worried about their future under the right hon. Member for North West Essex (Mrs Badenoch). They should rest easy knowing that our plan will protect working people from unfair dismissal; it will safeguard them from bullying in the workplace; and it will improve their access to paternity and maternity leave. I hope the new shadow Cabinet will soon be grateful for those increased protections at work.

It is right that we protect those who have worked all their lives. In our manifesto, we promised to transfer the investment reserve fund in the mineworkers’ pension scheme to members. I have listened closely to my hon. Friends the Members for Easington (Grahame Morris), for Doncaster Central (Sally Jameson), for Blaenau Gwent and Rhymney (Nick Smith) and for Ayr, Carrick and Cumnock (Elaine Stewart) on this issue. Today, we are keeping our promise, so that working people who powered our country receive the fair pension that they are owed.

Our manifesto committed to the triple lock, meaning that spending on the state pension is forecast to rise by over £31 billion by 2029-30, to ensure our pensioners are protected in their retirement. That commitment means that while working-age benefits will be uprated in line with CPI at 1.7%, the basic and new state pension will be uprated by 4.1% in 2025-26. This means that over 12 million pensioners will gain up to £470 next year, up to £275 more than uprating by inflation. The pension credit standard minimum guarantee will also rise by 4.1%, from around £11,400 per year to around £11,850 a year for a single pensioner.

While I have sought to protect working people with measures to reduce the cost of living, I have had to take some very difficult decisions on tax. I want to set out my approach to fuel duty. Baked into the numbers that I inherited from the previous Government is an assumption that fuel duty will rise in line with the retail prices index next year and that the temporary 5p cut will be reversed. To retain the 5p cut and to freeze fuel duty again would cost over £3 billion next year. At a time when the fiscal position is so difficult, I have to be frank with the House that that is a substantial commitment to make. I have concluded that, in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people. It would mean fuel duty rising by 7p per litre, so I have decided today to freeze fuel duty next year, and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.

The last Government made cuts of £20 billion to employees’ and self-employed national insurance in their final two Budgets. Those tax cuts were not honest, because we now know that they were based on a forecast that the OBR says would have been “materially different” had it known the true extent of the last Government’s cover-up. Since July, I have been urged on multiple occasions to reconsider those cuts—to increase the taxes that working people pay and see in their payslips—but I have made an important choice today: to keep every single commitment that we made on tax in our manifesto. I say to working people, I will not increase your national insurance, I will not increase your VAT, and I will not increase your income tax. Working people will not see higher taxes in their payslips as a result of the choices I am making today. That is a promise made and a promise fulfilled.

Any responsible Chancellor would need to make difficult decisions today to raise the revenues required to fund our public services and restore economic stability. So in today’s Budget, I am announcing an increase in employers’ national insurance contributions. We will increase the rate of employers’ national insurance by 1.2 percentage points to 15% from April 2025, and we will reduce the secondary threshold—the level at which employers start paying national insurance on each employee’s salary—from £9,100 a year to £5,000. This will raise £25 billion per year by the end of the forecast period. I know that this is a difficult choice; I do not take this decision lightly. We are asking businesses to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too, as the OBR has set out today. [Interruption.]

Madam Deputy Speaker (Ms Nusrat Ghani)

Order. Our constituents are watching—they need to be able to hear the Chancellor. Simmer down.

Rachel Reeves

In the circumstances I have inherited, it is the right choice to make. Successful businesses depend on successful schools, healthy businesses depend on a healthy NHS, and a strong economy depends on strong public finances. If the Conservative party chooses to oppose this choice, it is choosing more austerity, more chaos and more instability. That is the choice our country faces, too.

As I make this choice, I know it is particularly important to protect our smallest companies. Having heard representations from the Federation of Small Businesses and others, I am today increasing the employment allowance from £5,000 to £10,500. This means that 865,000 employers will not pay any national insurance at all next year, and over 1 million will pay the same or less than they did previously. This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any national insurance on their wages.

Let me now come to capital gains tax. We need to drive growth, promote entrepreneurship and support wealth creation while raising the revenue required to fund our public services and restore our public finances. Today, we will increase the lower rate of capital gains tax from 10% to 18% and the higher rate from 20% to 24%, while maintaining the rates of capital gains tax on residential property at 18% and 24%. This means that the UK will still have the lowest capital gains tax rate of any European G7 economy.

Alongside these changes to the headline rates of capital gains tax, we are maintaining the lifetime limit for business asset disposal relief at £1 million to encourage entrepreneurs to invest in their businesses. Business asset disposal relief will remain at 10% this year before rising to 14% in April 2025 and to 18% from 2026-27, maintaining a significant gap compared with the higher rate of capital gains tax. Together, the OBR says that these measures will raise £2.5 billion by the end of the forecast.

In a sign of this Government’s commitment to supporting growth and entrepreneurship, we have already extended the enterprise investment and venture capital trust schemes to 2035, and we will continue to work with leading entrepreneurs and venture capital firms to ensure that our policies support a positive environment for entrepreneurship in the UK.

Next, I turn to inheritance tax. Only 6% of estates will pay inheritance tax this year. I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today. First, the previous Government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 2030. That means that the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner.

Secondly, we will close the loophole created by the previous Government, made even bigger when the lifetime allowance was abolished, by bringing inherited pensions into inheritance tax from April 2027. Finally, we will reform agricultural property relief and business property relief. From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with a 50% relief at an effective rate of 20%. This will ensure that we continue to protect small family farms, with three quarters of claims unaffected by these changes.

I can also announce that we will apply a 50% relief in all circumstances on inheritance tax for shares on the alternative investment market and other similar markets, setting the effective rate of tax at 20%. Taken together, these measures raise over £2 billion by the final year of the forecast.

Next, I can confirm that the Government will renew the tobacco duty escalator for the remainder of this Parliament at RPI+2%, increase duty by a further 10% on hand-rolling tobacco this year, and introduce a flat-rate duty on all vaping liquid from October 2026, alongside an additional one-off increase in tobacco duty to maintain the incentive to give up smoking. We will increase the soft drinks industry levy to account for inflation since it was introduced, as well as increasing the duty in line with CPI each year going forward. These measures will raise nearly £1 billion per year by the end of the forecast period.

We want to support the take-up of electric vehicles, so I will maintain the incentives for electric vehicles in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first-year rates of vehicle excise duty from April 2025. These measures will raise around £400 million by the end of the forecast period.

Let me update the House on our plans for air passenger duty—and I can see the Leader of the Opposition’s ears have pricked up. Air passenger duty has not kept up with inflation in recent years, so we are introducing an adjustment, meaning an increase of no more than £2 for an economy class short-haul flight. But I am taking a different approach when it comes to private jets, increasing the rate of air passenger duty by a further 50%. That is equivalent to £450 per passenger for a private jet to, say, California. [Laughter.]

Let us now turn to our high street businesses. I know that, for them, a major source of concern is business rates. From 2026-27, we intend to introduce two permanently lower tax rates for retail, hospitality and leisure properties, which make up the backbone of our high streets across the country, and it is our intention that it is paid for by a higher multiplier for the most valuable properties. The previous Government created a cliff edge next year, as temporary reliefs end, so I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26 up to a cap of £110,000 per business. Alongside this, the small business tax multiplier will be frozen next year.

Next, I can confirm that alcohol duty rates on non-draught products will increase in line with RPI from February next year. However, nearly two thirds of alcoholic drinks sold in pubs are served on draught, so today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7%—[Hon. Members: “Hear, hear!”]—which means a penny off the pint in the pub.

Alongside the changes I am making today, I am publishing a corporate tax road map, providing the business certainty called for by the CBI, the British Chambers of Commerce and the Institute of Directors. This confirms our commitment to cap the rate of corporation tax at 25%—the lowest in the G7—for the duration of this Parliament, while maintaining full expensing and the £1 million annual investment allowance, and keeping the current rates of research and development relief to drive innovation.

In our manifesto, we made a number of commitments to raising funding for our public services. First, I have always said that if you make Britain your home, you should pay your taxes here, too, so today I can confirm that we will abolish the non-dom tax regime, and we will remove the outdated concept of domicile from the tax system from April 2025. We will introduce a new, residence-based scheme, with internationally competitive arrangements for those coming to the UK on a temporary basis, while closing the loopholes in the scheme designed by the Conservative party. To further encourage investment into the UK, we will extend the temporary repatriation relief to three years and expand its scope, bringing billions of pounds of new funds into Britain. The independent Office for Budget Responsibility says that this package of measures will raise £12.7 billion over the next five years.

The fund management industry provides a vital contribution to our economy, but as our manifesto set out, there needs to be a fairer approach to the way that carried interest is taxed, so we will increase the capital gains rates on carried interest to 32% from April 2025, and from April 2026 we will deliver further reform to ensure that the specific rules for carried interest are simpler, fairer and better targeted.

In our manifesto, we committed to reforming stamp duty land tax to raise revenues, while supporting those buying their first home. We are increasing the stamp duty land tax surcharge for second homes, known as the higher rate for additional dwellings, by 2 percentage points to 5%, which will come into effect from tomorrow. This will support over 130,000 additional transactions from people buying their first home or moving home over the next five years.

Next, we are committed to reforming the energy profits levy on oil and gas companies. I can confirm today that we will increase the rate of the levy to 38%. The levy will now expire in March 2030, and we will remove the 29% investment allowance. To ensure that the oil and gas industry can protect jobs and support our energy security, we will maintain the 100% first-year allowances, and the decarbonisation allowances, too.

Finally, 94% of children in the UK attend state schools. To provide the highest-quality support and teaching that they deserve, we will introduce VAT on private school fees from January 2025, and we will shortly introduce legislation to remove their business rates relief from April 2025, too.

We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5 billion in the final year of the forecast. I can confirm today that they will in fact raise over £9 billion to support our public services and restore our public finances. That is a promise made and a promise fulfilled.

I have one final decision to announce on tax today. The previous Government froze income tax and national insurance thresholds in 2021, and then did so again after the mini-Budget. Extending their threshold freeze for a further two years raises billions of pounds—money to deal with the black hole in our public finances and repair our public services. Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips. I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions made by the previous Government. From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this Government choose to protect working people every single time.

Those are the choices I have made to restore economic stability and protect working people. My next choice is to begin to repair our public services. In recent months, we conducted the first phase of the spending review to set departmental budgets for 2024-25 and 2025-26. I thank my right hon. Friend the Chief Secretary to the Treasury for his tireless work with colleagues from across Government. Because I have taken difficult decisions on tax today, I am able to provide an injection of immediate funding over the next two years to stabilise and support our public services.

The next phase of the spending review will report in late spring, and I have set out the overall envelope today. Day-to-day spending from 2024-25 onwards will grow by 1.5% in real terms, and today departmental spending, including capital spending, will grow by 1.7% in real terms. At the election, we promised that there would be no return to austerity, and today we deliver on that promise, but given the scale of the challenge that we face in our public services, there will still be difficult choices in the next phase of the spending review. Just as we cannot tax and spend our way to prosperity, neither can we simply spend our way to better public services. We will deliver a new approach to public service reform, using technology to improve public services and taking a zero-based approach, so that taxpayers’ money is spent as effectively as possible, and so that we focus on delivering our key priorities.

In the first phase of the spending review, I have prioritised day-to-day funding to deliver on our manifesto commitments. I want every child to have the very best start in life, and the best possible start to their school day. I know that my right hon. Friend the Secretary of State for Education shares my ambition, so today I am tripling investment in breakfast clubs to fund them in thousands of schools. I am increasing the core schools budget by £2.3 billion next year to support our pledge to hire thousands more teachers in key subjects. So that our young people can develop the skills that they need for the future, I am providing an additional £300 million for further education. Finally, this Government are committed to reforming special educational needs provision, to improve outcomes for our most vulnerable children and ensure that the system is financially sustainable. To support that work, I am today providing a £1 billion uplift in funding—a 6% real-terms increase from this year.

There is no more important job for Government than keeping our country safe, and we are conducting a strategic defence review, to be published next year. As set out in our manifesto, we will set a path to spending 2.5% of GDP on defence at a future fiscal event. Today, I am announcing a total increase in the Ministry of Defence’s budget of £2.9 billion next year, ensuring that the UK comfortably exceeds our NATO commitments, and providing guaranteed military support to Ukraine of £3 billion per year for as long as it takes. Last week, alongside my right hon. Friend the Defence Secretary, I announced, in addition to that, further support for Ukraine, on top of our NATO commitment. That support comes through our £2.26 billion contribution to the G7’s extraordinary revenue acceleration agreement. That will be repaid using profits from immobilised Russian sovereign assets.

As we approach Remembrance Sunday, it is vital that we take time to remember those who have served our country so bravely. I am today announcing funding to commemorate the 80th anniversary of VE and VJ Day next year, to honour those who served at home and abroad. We must also remember those who experienced the atrocities of the Nazi regime at first hand. I would like to pay tribute to Lily Ebert, the Holocaust survivor and educator who passed away aged 100 earlier this month. I am today committing a further £2 million for Holocaust education next year, so that charities such as the Holocaust Educational Trust can continue their work to ensure that those vital testimonies are not lost, and are preserved for the future.

To repair our public services, we need to work alongside our mayors and local leaders. We will deliver a significant, real-terms funding increase for local government next year, including £1.3 billion of additional grant funding to deliver essential services, with at least £600 million in grant funding for social care and £230 million to tackle homelessness and rough sleeping. We are today confirming that Greater Manchester and the West Midlands will be the first mayoral authorities to receive integrated settlements from next year, giving mayors meaningful control of funding for their local areas. To support our high streets, we are taking action to deal with the sharp rise in shoplifting that we have seen in recent years. We will scrap the effective immunity for low-value shoplifting introduced by the Conservative party, and having listened closely to organisations such as the British Retail Consortium and the trade union USDAW, I am providing additional funding to crack down on the organised gangs that target retailers, and to provide more training for our police officers and retailers, in order to stop shoplifting in its tracks.

Finally, I am today providing funding to support public services and drive growth across Scotland, Wales, and Northern Ireland. Having discussed the matter with the First Minister of Wales, Eluned Morgan, my hon. Friend the Under-Secretary of State for Wales (Dame Nia Griffith), and my hon. Friend the Under-Secretary of State for Justice (Alex Davies-Jones), I am today providing £25 million to the Welsh Government next year for the maintenance of coal tips, to ensure that we keep our communities safe. To support growth, including in our rural areas, we will proceed with city and growth deals in Northern Ireland, in Causeway Coast and Glens, and the Mid South West. We will drive growth in Scotland, which is a key priority for Scottish Labour and our leader, Anas Sarwar, including through a city and growth deal in Argyll and Bute.

This Budget provides the devolved Governments with the largest real-terms funding settlement since devolution, delivering an additional £3.4 billion to the Scottish Government through the Barnett formula—funding that must now be used effectively in Scotland to deliver the public services that the people of Scotland deserve. This Budget also provides £1.7 billion to the Welsh Government, and £1.5 billion to the Northern Ireland Executive in 2025-26. I said there would be no return to austerity; that is the choice I have made today.

To rebuild our country, we need to increase investment. The UK lags behind every other G7 country when it comes to business investment as a share of our economy. That matters. It means that the UK has fallen behind in the race for new jobs, new industries, and new technology. By restoring economic stability, and by establishing the national wealth fund to catalyse private funding, we have begun to create the conditions that businesses need to invest, but there is also a significant role for public investment. For too long, we have seen Conservative Chancellors cut investment and raid capital budgets to plug gaps in day-to-day spending. The result is clear for all to see: hospitals without the equipment they need; school buildings not fit for our children; a desperate lack of affordable housing; and economic growth held back at every turn. Under the plans I inherited, public investment was set to fall from 2.5% to 1.7% of GDP, but in Washington last week, the International Monetary Fund was clear: more public investment is badly needed in the UK.

Having listened to the case made by the former Governor of the Bank of England, Mark Carney, the former Treasury Minister, Jim O’Neill and the former Cabinet Secretary, Gus O’Donnell, among others, I am confirming our investment rule. As was set out in our manifesto, we will target debt falling as a share of the economy. Debt will be defined as public sector net financial liabilities—or net financial debt, for short. That metric has been measured by the Office for National Statistics since 2016 and forecast by the Office for Budget Responsibility since that date, too.

Net financial debt recognises that Government investment delivers returns for taxpayers by counting not just the liabilities on a Government’s balance sheet, but the financial assets, too. That means we count the benefits of that investment, not just the costs, and we free up our institutions to invest, just as they do in Germany, France and Japan. Like our stability rule, our investment rule will apply in 2029-30, until that becomes the third year of the forecast. From that point onwards, net financial debt will fall in the third year of every forecast. Today, the OBR says that we are already meeting our target two years early, with net financial debt falling by 2027-28 and £15.7 billion of headroom in the final year.

So that we drive the right incentives in Government investments, we will introduce four key guardrails to ensure capital spending is good value for money and drives growth in our economy. First, our portfolio of new financial investments will be delivered by expert bodies, such as the national wealth fund, and must by default earn a rate of return at least as large as that on gilts. Secondly, we will strengthen the role of institutions to improve infrastructure delivery. Thirdly, we will improve certainty, setting capital budgets for five years and extending them at spending reviews every two years. Finally, we will ensure greater transparency for capital spending, with robust annual reporting of financial investments based on accounts audited by the National Audit Office and made available to the Office for Budget Responsibility at every forecast. Taken together with our stability rule, these fiscal rules will ensure that our public finances are on a firm footing, while enabling us to invest prudently alongside business.

The capital plans I now set out to drive growth across our country and repair the fabric of our nation are possible only because of our investment rule. Let me set out those investment plans. Today, we are confirming our plans to capitalise the national wealth fund to invest in the industries of the future, from gigafactories to ports to green hydrogen. Building on those investments, my right hon. Friend the Business Secretary is driving forward our modern industrial strategy, working with businesses and organisations such as Make UK to set out the sectors with the biggest growth potential. Today, we are confirming multi-year funding commitments for these areas of our economy, including nearly £1 billion for the aerospace sector to fund vital research and development, building on our industry in the east midlands, the south-west and Scotland; more than £2 billion for the automotive sector to support our electric vehicle industry and develop our manufacturing base, building on our strengths in the north-east and the west midlands; and up to £520 million for a new life sciences innovative manufacturing fund.

For our world-leading creative industries, we will legislate to provide additional tax relief for visual effect costs in TV and film, and we are providing £25 million for the North East combined authority, which it plans to use to remediate the Crown Works Studios site in Sunderland, creating 8,000 new jobs.

To unlock these growth industries of the future, we will protect Government investment in research and development, with more than £20 billion-worth of funding. This includes at least £6.1 billion to protect core research funding for areas such as engineering, biotechnology and medical science through Research England, other research councils and the national academies. We will extend the innovation accelerators programme in Glasgow, Manchester and the west midlands. With more than £500 million of funding next year, my right hon. Friend the Secretary of State for Science, Innovation and Technology will continue to drive progress in improving reliable, fast broadband and mobile coverage across our country, including in rural areas.

We committed in our manifesto to build 1.5 million homes over the course of this Parliament, and my right hon. Friend the Deputy Prime Minister is driving that work forward across government. Today, I am providing more than £5 billion of Government investment to deliver our plans on housing next year. We will increase the affordable homes programme to £3.1 billion, delivering thousands of new homes. We will provide £3 billion-worth of support in guarantees to boost the supply of homes and support our small house builders. We will provide investment to renovate sites across our country, including at Liverpool Central Docks, where we will deliver 2,000 new homes, and funding to help Cambridge realise its full growth potential.

Alongside this investment, we will put the right policies in place to increase the supply of affordable housing. Having heard representations from local authorities, social housing providers and Shelter, I can today confirm that the Government will reduce right-to-buy discounts and that local authorities will be able to retain the full receipts from any sales of social housing, so that we can reinvest them back into housing stock and into new supply. By doing that, we will give more people a safe, secure and affordable place to live.

We will provide stability to social housing providers with a social housing rent settlement of CPI plus 1% for the next five years, and we will deliver on our manifesto commitment to hire hundreds of new planning officers to get Britain building again. We will also make progress on our commitment to accelerate the remediation of homes, following the findings of the Grenfell inquiry, with £1 billion of investment to remove dangerous cladding next year.

The last Government made a number of promises on transport, but failed to fund them. Working with my right hon. Friend the Transport Secretary, I am changing that. We are today securing the delivery of the trans-Pennine upgrade to connect York, Leeds, Huddersfield and Manchester, delivering fully electric local and regional services between Manchester and Stalybridge by the end of this year, with a further electrification of services between Church Fenton and York by 2026, to help grow our economy across the north of England with faster and more reliable services.

We will deliver East West Rail to drive growth between Oxford, Milton Keynes and Cambridge, with the first services running between Oxford, Bletchley and Milton Keynes next year, and trains between Oxford and Bedford running from 2030. We are delivering railway schemes that improve journeys for people across our country, including upgrades at Bradford Forster Square station, improving capacity at Manchester Victoria and electrifying the Wigan to Bolton line.

My right hon. Friend the Transport Secretary has also set out a plan for how to get a grip of HS2. Today, we are securing delivery of the project between Old Oak Common and Birmingham, and we are committing the funding required to begin tunnelling work to London Euston station. That will catalyse private investment into the local area, delivering jobs and growth.

I am also funding significant improvements to our road network. For too long, potholes have been an all-too-visible reminder of our failure to invest as a nation. Today that changes, with a £500 million increase in road maintenance budgets next year—more than delivering on our manifesto commitment to fix an additional 1 million potholes each year. We will provide over £650 million of local transport funding to improve connections across our country, in towns such as Crewe and Grimsby and in our villages and rural areas from Cornwall to Cumbria. While the previous Government’s policy was for the bus fare cap to end this December, we understand how important bus services are for our communities, so we will extend the cap for a further year, setting it at £3 until December 2025. Finally, we will deliver £1.3 billion of funding to improve connectivity in our city regions, funding projects such as the Brierley Hill metro extension in the west midlands, the renewal of the Sheffield Supertram, and West Yorkshire mass transit, including in Bradford and Leeds.

To bring new jobs to Britain and drive growth across our country, we are delivering our mission to make Britain a clean energy superpower, led by my right hon. Friend the Energy Secretary. Earlier this month, we announced a significant multi-year investment between Government and business in carbon capture and storage, creating 4,000 jobs across Merseyside and Teesside. Today, I am providing funding for 11 new green hydrogen projects across England, Scotland and Wales—they will be among the first commercial-scale projects anywhere in the world—including in Bridgend, East Renfrewshire and Barrow-in-Furness. We are kick-starting the warm homes plan by confirming an initial £3.4 billion over the next three years to transform 350,000 homes, including a quarter of a million low-income and social homes, and we will establish GB Energy, providing funding next year to set it up at its new home in Aberdeen.

Overall, we will invest an additional £100 billion over the next five years in capital spending—that is possible only because of our investment rule. The OBR says today that this investment will drive growth across our country in the next five years and, in the longer term, increase GDP by up to 1.4%. It will crowd in private investment, meaning more jobs and more opportunities in every corner of the UK. That is the choice that I have made: to invest in our country and to grow our economy.

Today, I am setting out two final areas in which investment is so badly needed to repair the fabric of our nation. My hon. Friend the Member for Lewisham West and East Dulwich (Ellie Reeves) and I joined the Labour party because of the condition of our schools in the 1980s and 1990s under Conservative Governments. When we were at secondary school, my sixth form was a couple of prefab huts in the playground. My school, like so many others, was rebuilt by the last Labour Government, but after 14 years of Tory government, progress has gone backwards: school roofs are crumbling and millions of children are facing the same backdrop as I did. I will be the Chancellor who changes that.

Today, I am providing £6.7 billion of capital investment to the Department for Education next year—a 19% real-terms increase on this year. That includes £1.4 billion to rebuild over 500 schools in the greatest need, including St Helen’s primary school in Hartlepool, Mercia academy in Derby and so many more across our country. We will provide £2.1 billion more to improve school maintenance—£300 million more than this year—ensuring that all our children can learn somewhere safe. That will include dealing with reinforced autoclaved aerated concrete-affected schools in the constituencies of my hon. Friends the Members for Watford (Matt Turmaine), for Stourbridge (Cat Eccles) and for Hyndburn (Sarah Smith) and beyond, alongside investment in new teachers and funding for thousands of new breakfast clubs. This Government are giving our children and young people the opportunities that they deserve.

I come to our most cherished public service of all: our NHS. My right hon. Friend the Health Secretary is beginning to repair the damage of the last 14 years. In our first week in office, he commissioned an independent report into the state of our health service by Lord Darzi. Its conclusions were damning. While our NHS staff do a remarkable job, and we thank them for it, it is clear that in so many areas we are moving in the wrong direction. A hundred thousand infants waited over six hours in A&E last year. Three hundred and fifty thousand people are waiting a year for mental health support. Cancer deaths here are higher than in other countries. It is simply unforgiveable.

In the spring, we will publish a 10-year plan for the NHS to deliver a shift from hospital to community, from analogue to digital and from sickness to prevention. Today, we are announcing a down payment on that plan to enable the NHS to deliver 2% productivity growth next year. These reforms are vital, but we should be honest: the state of the NHS that we inherited after—I quote Lord Darzi—

“the most austere decade since the NHS was founded”

means that reform must come alongside investment. So today, because of the difficult decisions that I have taken on tax, welfare and spending, I can announce that I am providing a £22.6 billion increase in the day-to-day health budget and a £3.1 billion increase in the capital budget over this year and next. This is the largest real-terms growth in day-to-day NHS spending outside of covid since 2010.

Let me set out what this funding is delivering. Many NHS buildings have been left in a state of disrepair, so we will provide £1 billion of health capital investment next year to address the backlog of repairs and upgrades across our NHS. To increase capacity for tens of thousands more procedures next year, we will provide a further £1.5 billion for new beds in hospitals across our country, new capacity for over a million additional diagnostic tests, and new surgical hubs and diagnostic centres so that people waiting for their treatment can get it as quickly as possible.

My right hon. Friend the Health Secretary will be setting out further details of his review into the new hospital programme in the coming weeks and publishing in the new year, but I can tell the House today that work will continue at pace to deliver those seven hospitals affected by the RAAC crisis, including West Suffolk hospital in Bury St Edmunds and Leighton hospital in Crewe. And finally, because of this record injection of funding, the thousands of additional beds that we have secured and the reforms that we are delivering in our NHS, we can now begin to bring waiting lists down more quickly and move towards our target for waiting times to be no longer than 18 weeks by delivering on our manifesto commitment for 40,000 extra hospital appointments a week. That is the difference that this Labour Government are making.

The choices I have made today are the right choices for our country—to restore stability to our public finances, to protect working people, to fix our NHS and to rebuild Britain. That does not mean these choices are easy, but they are responsible. If the Conservatives disagree with the choices that I have made, they must answer: what choices would they make? Would they again choose the path of irresponsibility—the path taken by Liz Truss—and ignore the problems in our public finances all together? If that is their choice, they should say so. But let me be clear: if they disagree with my choices on tax, they would not be able to protect working people. If they disagree with our plans to fund public services, they would have to cut schools and hospitals. If they disagree with our investment rule, they would have to delay or cancel thousands of projects that drive growth across our country.

This is a moment of fundamental choice for Britain. I have made my choices—the responsible choices—to restore stability to our country and to protect working people. More teachers in our schools, more appointments in our NHS, more homes being built, fixing the foundations of our economy, investing in our future, delivering change and rebuilding Britain. We on the Government Benches commend those choices, and I commend this statement to the House.

Provisional Collection of Taxes

Motion made, and Question put forthwith (Standing Order No. 51(2)),

That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—

(a) Value added tax (private school fees) (motion no. 34);

(b) Stamp duty land tax (additional dwellings: purchases before 1 April 2025) (motion no. 35);

(c) Stamp duty land tax (purchases by companies) (motion no. 37);

(d) Rates of tobacco products duty (motion no. 46).—(Rachel Reeves.)

October 31, 2024
Jeremy Hunt – 2024 Budget Speech

The speech made by Jeremy Hunt, the Chancellor of the Exchequer, in the House of Commons on 6 March 2024.

As we mourn the tragic loss of life in Israel and Gaza, the Prime Minister reminded us last week of the need to fight extremism and heal divisions, so I start today by remembering the Muslims who died in two world wars in the service of freedom and democracy. We need a memorial to honour them, so following representations from my right hon. Friend the Member for Bromsgrove (Sir Sajid Javid) and others, I have decided to allocate £1 million towards the cost of building one. Whatever your faith, colour or class, this country will never forget the sacrifices made for our future.

In recent times, the UK—and the UK economy—has dealt with a financial crisis, a pandemic and an energy shock caused by war in Europe, yet despite the most challenging economic headwinds in modern history, under Conservative Governments since 2010 growth has been higher than in every large European economy, unemployment has halved, absolute poverty has gone down, and there are 800 more people in jobs for every single day that we have been in office. [Interruption.] Of course, interest rates remain high as we bring down inflation, but because of the progress we have made, because we are delivering the Prime Minister’s economic priorities, we can now help families not just with temporary cost of living support, but with permanent cuts in taxation. We do that to give much needed help in challenging times, and because Conservatives know that lower tax means higher growth, and higher growth means more opportunity, more prosperity and more funding for our precious public services. [Interruption.]

Madam Deputy Speaker

Order. The Chancellor has hardly said anything—[Interruption.] Order. You cannot get excited yet. Other people want to hear what the Chancellor has to say. It matters, so we will have a bit of good behaviour, please.

Jeremy Hunt

Thank you, Madam Deputy Speaker.

If we want that growth to lead to higher wages and higher living standards for every family in every corner of the country, it cannot come from unlimited migration; it can only come by building a high-wage, high-skill economy—not just higher GDP, but higher GDP per head.

That is the difference. The Labour party’s plans would destroy jobs, reduce opportunities and risk family finances with spending that pushes up taxes. Instead of going back to square one, the policies I announce today mean more investment, more jobs, better public services and lower taxes in a Budget for long-term growth.

I start with the updated forecasts from the Office for Budget Responsibility, for which I thank Richard Hughes and his team. First, inflation. When the Prime Minister and I came into office, it was 11%. The latest figures show—[Interruption.]

Madam Deputy Speaker

Order. This is not amusing any more. We need to hear what the Chancellor has to say. I can tell who is making the noise, and you simply will not get a chance to speak later. That is the end of it.

Jeremy Hunt

When the Prime Minister and I came into office, inflation was 11%, but the latest figures show it is now 4%—more than meeting our pledge last year to halve it. Today’s forecasts from the OBR show it falling below the 2% target in just a few months’ time, nearly a whole year earlier than forecast in the autumn statement.

That did not happen by accident. Whatever the pressures, and whatever the politics, a Conservative Government, working with the Bank of England, will always put sound money first. We also understand that tackling inflation, while necessary, is painful. It means higher interest rates and a period of lower growth, so we have given the average household £3,400 in cost of living support over the past two years. Doing so makes economic as well as moral sense. The OBR predicted real household disposable income per person would fall by 2% in the past year; instead, after that support, it is on track to rise by 0.8%.

Today, I take further steps to help families with cost of living pressures, starting with measures to help the poorest families. We have already abolished higher charges for electricity paid by those on prepayment meters, increased the local housing allowance and raised benefits by double the expected inflation. Today, I focus on those falling into debt. Nearly 1 million households on universal credit take out budgeting advance loans to pay for more expensive emergencies such as boiler repairs or help getting a job. To help make such loans more affordable, I have decided to increase the repayment period for new loans from 12 months to 24 months.

For some people—[Interruption.] I thought Labour Members cared about people on the lowest incomes, but trust them not to want to hear about debt. For some people the best way to resolve debt is through a debt relief order, but getting one costs £90, which can deter the very people who need them most, so, having listened carefully to representations from Citizens Advice, I today relieve pressure on around 40,000 families every year by abolishing that £90 charge completely.

Next, the household support fund. It was set up on a temporary basis and due to conclude at the end of this month. Having listened carefully to representations from the Joseph Rowntree Foundation, the Trussell Trust, the right hon. Member for East Ham (Sir Stephen Timms), my right hon. Friend the Member for Suffolk Coastal (Dr Coffey) and my hon. Friends the Members for Colchester (Will Quince) and for Ruislip, Northwood and Pinner (David Simmonds) among others, I have decided that, with the battle against inflation still not over, now is not the time to stop the targeted help that it offers. We will therefore continue it at current levels for another six months.

Next, I turn to a measure that will help businesses and households more broadly. In the autumn statement I froze alcohol duty until August of this year. Without any action today, it would have been due to rise by 3%. However, I have listened carefully to my right hon. Friends for Altrincham and Sale West (Sir Graham Brady) and for Vale of Glamorgan (Alun Cairns), and to my hon. Friend the Member for Moray (Douglas Ross), who is a formidable champion of the Scottish whisky industry. I also listened to Councillor John Tonks from Ash—a strong supporter of the wonderful Admiral pub—who pointed out the pressures facing the industry. Today, I have decided to extend the alcohol duty freeze until February 2025. That will benefit 38,000 pubs across the UK, on top of the £13,000 saving that a typical pub will get from the 75% business rates discount that I announced in the autumn. We value our hospitality industry. We are backing the great British pub.

Another cost that families and businesses worry about is fuel. The shadow Chancellor complained about the freeze on fuel duty. Labour has opposed it at every opportunity. The Labour Mayor of London wants to punish motorists even more with his ultra low emission zone plans. However, lots of families and sole traders depend on their car. If I did nothing, fuel duty would increase by 13% this month, so instead I have listened to my right hon. Friend the Member for Witham (Priti Patel), my hon. Friends the Members for Stoke-on-Trent North (Jonathan Gullis) and for Dudley North (Marco Longhi) and others, as well as to The Sun newspaper’s “Keep it Down” campaign. I have as a result decided to maintain the 5p cut and freeze fuel duty for another 12 months. That will save the average car driver £50 next year and bring total savings since the 5p cut was introduced to around £250. Taken together with the alcohol duty freeze, that decision also reduces headline inflation by 0.2 percentage points in 2024-25, allowing us to make faster progress towards the Bank of England’s 2% target.

There can be no solid growth without solid finances. An economy based on sound money does not pass its bills to the next generation. When it comes to borrowing, some believe that there is a trade-off between compassion and fiscal responsibility. They are wrong. It is only because we responsibly reduced the deficit by 80% between 2010 and 2019 that we could provide £370 billion to help businesses and families in the pandemic. Labour opposed our plans to reduce the deficit every single step of the way, but, to be fair, they were consistent. In coalition, the Lib Dems supported controlling spending, but now they say that they would prop up a party that will turn on the spending taps. It is the difference between no plan and no principles—and I am delighted that, for once, the right hon. Member for Kingston and Surbiton (Ed Davey) is here to hear that.

Today, we say something different: there is nothing compassionate about running out of money. With the pandemic behind us, we must once again be responsible and build up our resilience to future shocks. That means bringing down borrowing so we can start to reduce our debt, and today’s figures confirm that is happening. Ahead of my first autumn statement in 2022, the OBR forecast that headline debt would rise to above 100% of GDP. Today, it says that it will fall in every year, to just 94% by 2028-29. According to the OBR, underlying debt—which excludes Bank of England debt—will be 91.7% in 2024-25, then 92.8%, 93.2% and 93.2%, before falling to 92.9% in 2028-29, with final year headroom against debt falling of £8.9 billion. Our underlying debt is therefore on track to fall as a share of GDP, meeting our fiscal rule, and we continue to have the second lowest level of Government debt in the G7, lower than that of Japan, France or the United States.

We also meet our second fiscal rule—for public sector borrowing to be below 3% of GDP—three years early. Borrowing falls from 4.2% of GDP in 2023-24 to 3.1%, then 2.7%, 2.3%, 1.6%, and 1.2% in 2028-29. By the end of the forecast, borrowing is at its lowest level of GDP since 2001. None of that, of course, would be possible if Labour implemented its pledge to decarbonise the grid five years early, by 2030; by its own calculations, that costs £28 billion a year to do. Last month, after flip-flopping for months, Labour said that it is not going to spend the £28 billion after all, but will somehow meet its pledge. “Somehow” can only mean one thing: tax rises on working families. Same old Labour!

Today, in contrast, a Conservative Government bring down taxes with borrowing broadly unchanged—in fact, borrowing is slightly lower than in the autumn statement. The fact that we are bringing borrowing down is of particular importance to one very special person: Sir Robert Stheeman is the outgoing chief executive of the Government’s Debt Management Office, and after 20 years of exceptional public service, he is in the Gallery. Thank you, Sir Robert.

I now turn to growth. Just after I became Chancellor, the OBR expected GDP to fall by 1.4% in the following year; in fact it grew, albeit slowly. Now the OBR expects the economy to grow by 0.8% this year and 1.9% next year, which is 0.5% higher than its autumn forecast. After that, growth rises to 2.2%, 1.8%, and 1.7% in 2028. [Interruption.] Opposition Members do not want to hear this, but these are the facts. Since 2010, we have grown faster than Germany, France or Italy—the three largest European economies—and according to the International Monetary Fund, we will continue to grow faster than all three of them in the five years ahead. Surveys by Lloyds and Deloitte show that business confidence is returning. In other words, because we have turned the corner on inflation, we will soon turn the corner on growth.

Today’s OBR forecasts also show that we have made good progress on the Prime Minister’s three economic priorities. Compared to when the three pledges were made, inflation has halved, debt is falling in line with our fiscal rules, and growth is fully 1.5 percentage points higher than predicted. [Interruption.] Labour Members do not have a growth plan, so they might as well listen to ours. As growth returns, our plan is for economic growth, not growth sustained through migration, but growth that raises wages and living standards for families—not just higher GDP, but higher GDP per head. That means sticking to our plan, with a Budget for long-term growth: more investment, more jobs, better public services and lower taxes.

I start with investment. Economists say that stimulating investment is the most effective way to raise productivity, and therefore wages and living standards. Since 2010, we have been doing just that. Business—[Interruption.] Labour Members might want to listen to what I am about to say, because business investment has risen from an average of 9.3% of GDP under Labour to 9.9% under the Conservatives. This year, it will be 10.6% of GDP. That is £30 billion more business investment than if it had continued at Labour levels, and it is still going up.

In the short period since the autumn statement, Nissan has announced that it will build two new electric car models in the UK. Microsoft and Google have announced data centres worth over £3 billion. Thanks to my right hon. Friend the Business Secretary, the global investment summit unlocked £30 billion of investment. In fact, since 2010, greenfield foreign direct investment has been higher here than anywhere else in Europe, and for the last three years the UK has had the third highest levels in the world after the United States and China—and we are not stopping there.

In the autumn statement, I announced that we would introduce permanent full expensing, a £10 billion tax cut for businesses that gives the UK the most attractive investment tax regime of any large European or G7 country. It was welcomed by over 200 business leaders, with the CBI saying it was a game changer and the single most transformational thing we could do to fire up the British economy. Today, I take further steps to boost investment. Having listened to calls from the CBI, Make UK and the British Chambers of Commerce, we will shortly publish draft legislation for full expensing to apply to leased assets, a change I intend to bring in as soon as it is affordable.

We will also help small businesses, which is something close to my heart. As well as the business rates support, and the work on prompt payments that I announced in the autumn, I will provide £200 million of funding to extend the recovery loan scheme as it transitions to the growth guarantee scheme, helping 11,000 small and medium-sized enterprises access the finance they need. Following representations from the Federation of Small Businesses, as well as my hon. Friends the Members for Loughborough (Jane Hunt), for Southend West (Anna Firth), and for Rother Valley (Alexander Stafford), I will reduce the administrative and financial impact of VAT by increasing the VAT registration threshold from £85,000 to £90,000 from 1 April—the first increase in seven years. That will bring tens of thousands of businesses out of paying VAT altogether, and encourage many more to invest and grow.

I now move to measures to address historical under-investment in our nations and regions. Since we started levelling up in 2019, two thirds of all new salaried jobs created have been outside London and the south-east. We have announced 13 investment zones and 12 freeports, which continue to attract investment—including recently, thanks to the efforts of Mayor Ben Houchen, from the Pneuma Group, which is investing £15 million into the Tees Valley investment zone.

Today, working with the Levelling-Up Secretary, I devolve further power to local leaders, who are best placed to promote growth in their areas. I can announce the north-east trailblazer devolution deal, which provides a package of support for the region potentially worth over £100 million. I will devolve powers to Buckinghamshire, Warwickshire and the most beautiful county in England, Surrey. I see the Leader of the Opposition smiling because, like me, he is a Surrey boy. I know he has been taking advice from Lord Mandelson, who yesterday rather uncharitably said he needed to “shed a few pounds”. Ordinary families will shed more than a few pounds if that lot get in. If he wants to join me on my marathon training, he is most welcome.

Today, we continue to spread opportunity throughout the country by allocating £100 million of levelling-up funding to areas including High Peak, Dundee, Conwy, Erewash, Redditch and Coventry to support cultural projects in these communities. That is alongside support for capital projects across the country, including in Bingley. We are expanding the long-term plan for towns to 20 new places, including Darlington—home of the Treasury’s fantastic Darlington economic campus—Coleraine, Peterhead, Runcorn, Harlow, Eastbourne, Arbroath and Rhyl, providing each with £20 million of funding to invest in community regeneration over the next decade. We will provide £15 million in new funding to the West Midlands Combined Authority to support culture, heritage and investment projects, on the recommendation of our go-getting Mayor, Andy Street, and we will allocate £5 million to renovate hundreds of local village halls across England, so that they can remain at the heart of their communities.

Because this is a Conservative and Unionist Government, we will also set aside funding to support the SaxaVord spaceport in Shetland and an agrifood launchpad in mid-Wales, and funding to support Northern Ireland’s businesses in expanding their global trade and investment opportunities. As a result of the decisions we take today, the Scottish Government will receive nearly £300 million in Barnett consequentials; there will be nearly £170 million for the Welsh Government and £100 million for the Northern Ireland Executive. [Interruption.] I do appreciate that a tax-cutting Budget is very uncomfortable for the biggest tax-raisers in the United Kingdom. We also want to level up opportunity across the generations, including by building more houses for young people, and we are on track to deliver over 1 million homes in this Parliament.

Last week, the Levelling-Up Secretary allocated £188 million to supporting projects in Sheffield, Blackpool and Liverpool. Today I go further, allocating £242 million of investment to Barking Riverside and Canary Wharf, which together will build nearly 8,000 houses; Canary Wharf will also be transformed into a new hub for life science companies. We are launching a new £20 million community-led housing scheme that will support local communities in delivering the developments that they want and need. I am pleased to announce the next steps for Cambridge to reach its potential as the world’s leading scientific powerhouse. I confirm that there will be a long-term funding settlement for the future development corporation in Cambridge at the next spending review; there will be over £10 million invested in the coming year to unlock delivery of crucial local transport and health infrastructure.

The final levelling-up measures I announce today support north Wales, of which I have many happy childhood memories. In Mold, following representations from my hon. Friend the Member for Vale of Clwyd (Dr Davies), we will help fund the renovation of Theatr Clywd. I can announce that this week, the Government have reached agreement on a £160 million deal with Hitachi to purchase the Wylfa site in Ynys Môn and the Oldbury site in south Gloucestershire. Ynys Môn has a vital role in delivering our nuclear ambitions, and no one should take more credit for today’s announcement than my tireless, tenacious and turbocharged hon. Friend the Member for Ynys Môn (Virginia Crosbie). More investment by large businesses, more support for small businesses, promoting investment in our nations and regions—all part of a Budget for long-term growth that sticks to our plan to deliver more jobs, better public services and lower taxes.

I turn to one of the most powerful ways to attract investment: supporting our most innovative industries. Outside the US, we have the most respected universities, the biggest financial services sector and the largest tech ecosystem in Europe. We have double the artificial intelligence start-ups of anywhere else in Europe, double the venture capital investment, and a tech economy now double the size of Germany’s and three times the size of France’s. We are on track to become the world’s next silicon valley.

In today’s Budget for long-term growth, I take further steps to attract investment to our technology-related industries. I want our brilliant tech entrepreneurs to not just start here, but stay here, including when the time comes for a stock market listing, so we will build on the Edinburgh and Mansion House reforms to unlock more pension fund capital. We will give new powers to the Pensions Regulator and the Financial Conduct Authority to ensure better value from defined contribution schemes by judging performance on overall returns, not cost.

We will make sure that there are vehicles to make it easier for pension funds to invest in UK growth opportunities, so I am today publishing the names of the winners of the LIFTS—long-term investment for technology and science—competition. But I remain concerned that other markets, such as Australia, generate better returns for pension savers, with more effective investment strategies and more investment in high-quality domestic growth stocks. So I will introduce new requirements for defined-contribution and local government pension funds to disclose publicly their level of international and UK equity investments. I will then consider what further action should be taken if we are not on a positive trajectory towards international best practice.

I also want to create opportunities for a new generation of retail investors to engage with public markets, so we will proceed with a retail sale for part of the Government’s remaining NatWest shares this summer, at the earliest opportunity, subject to supportive market conditions and value for money. We will continue to explore how savers could be allowed to take their pension pots with them when they change job. We will make it easier for people to save for the long term with a new British savings bond, delivered through National Savings and Investments, offering savers a guaranteed rate, fixed for three years.

Today, following calls from over 200 representatives of the City and our high-growth sectors, I will reform the ISA system to encourage more people to invest in UK assets. After a consultation on its implementation, I will introduce a brand-new British ISA, which will allow an additional £5,000 annual investment for investments in UK equity, with all the tax advantages of other ISAs. That will be on top of existing ISA allowances and will ensure that British savers can benefit from the growth of the most promising UK businesses, as well as supporting those businesses with the capital to expand.

I now turn to our other growth industries, starting with clean energy. We want nuclear to provide up to a quarter of our electricity by 2050. As part of that, I want the UK to lead the global race in developing cutting-edge nuclear technologies. I can therefore announce that Great British Nuclear will begin the next phase of the small modular reactor selection process, with companies now having until June to submit their initial tender responses. Our brilliant Secretary of State for Energy Security and Net Zero will also allocate up to £120 million more to the green industries growth accelerator, to build supply chains for new technology, ranging from offshore wind to carbon capture and storage. By January next year, as promised in the autumn statement, we will have a new, faster connections process to the grid up and running. In advanced manufacturing we have announced a further £270 million of investment into innovative new automotive and aerospace research and development projects, building the UK’s capabilities in zero-emission vehicle and clean aviation technologies.

I now turn to our creative industries. We have become Europe’s largest film and TV production centre, with Idris Elba, Keira Knightley and Orlando Bloom all filming their latest productions here. Studio space in the UK has doubled over the last three years and, at the current rate of expansion, next year we will be second only to Hollywood globally. In the autumn statement I committed to providing more tax relief for visual effects in film and high-end TV. I can today confirm that we will increase the rate of tax credit by 5%, and remove the 80% cap for visual effects costs in the audio-visual expenditure credit. Having worked closely with the Secretary of State for Culture, Media and Sport, and listened carefully to representations from companies such as Pinewood, Warner Bros. and Sky Studios, we will provide eligible film studios in England with a 40% relief on their gross business rates until 2034. Having heard representations from the British film industry, Pact, and indeed the Prime Minister, we will introduce a new tax credit for UK independent films with a budget of less than £15 million. For our creative industries more broadly, we will provide £26 million of funding to our pre-eminent theatre, the National Theatre, to upgrade its stages.

I particularly want to recognise the contribution of our creative industries and the tourism that comes from orchestras, museums, galleries and theatres. In the pandemic, we introduced higher 45% and 50% levels of tax relief, which were due to end in March 2025. They have been a lifeline for performing arts across the country. Today, in recognition of their vital importance to our national life, I can announce that I am making those tax reliefs permanent at 45% for touring and orchestral productions, and 40% for non-touring productions. Lord Lloyd Webber says that this will be a once-in-a-generation transformational change that will ensure Britain remains the global capital of creativity.

I suspect that the new theatre reliefs may be of particular interest to the shadow Chancellor, who seems to fancy her thespian skills when it comes to acting like a Tory. The trouble is that we all know how her show ends: higher taxes, like every Labour Government in history—[Interruption.] I am delighted that Labour Members are cheering the fact that Labour Governments always put up taxes. They are right!

I want to mention our life sciences sector, where we will support research by medical charities into diseases such as cancer, dementia and epilepsy with an additional £45 million, including £3 million for Cancer Research UK. But I have long believed that we should be manufacturing medicines as well as developing them, so I can today also announce a brand-new investment by one of our greatest life science companies, AstraZeneca, led by mon ami the irrepressible Sir Pascal Soriot. AstraZeneca made its covid vaccine available to developing countries at cost, as a result saving over 6 million lives. Today, because of the Government’s support for the life sciences sector, it has announced plans to invest £650 million in the UK to expand its footprint on the Cambridge biomedical campus, and fund the building of a vaccine manufacturing hub in Speke in Liverpool. That is more investment and better jobs in every corner of the country in a long-term Budget for growth from a Conservative Government.

One of the biggest barriers to investment is businesses not being able to hire the staff they need. The economy today has around 900,000 vacancies. It would be easy to fill them with higher migration, but with over 10 million adults of working age who are not in work, that would be economically and morally wrong. Those who can work should work, and I have tackled that issue in every Budget and autumn statement I have delivered. A year ago, I abolished the pensions lifetime allowance, which had pushed doctors and others to take early retirement. Ask any doctor what they think about Labour’s plans to bring it back and they will say, “Don’t go back to square one.” In the autumn, with the help of our superb Secretary of State for Work and Pensions, we announced the back to work plan, which will support 1 million adults with medical conditions and reduce the number of people assessed as not needing to work by two thirds.

A year ago, I also announced the biggest ever expansion of childcare—[Interruption.] Just listen. Extending the 30-hour free childcare offer to all children of working parents from nine months. [Interruption.] We have not had a childcare plan from Labour, so Opposition Members might want to listen to ours. Our plan will mean an extra 60,000 parents enter the workforce in the next four years—a tremendous achievement for the Education Secretary, who I think is doing an effing good job. Today, following representations from many people, including the CBI, I announce measures to support the childcare sector to make the new investments it now needs to make. I am guaranteeing the rates that will be paid to childcare providers to deliver our landmark offer for children over nine months old for the next two years. That is more people in work and more jobs, sticking to our plan in a long-term Budget for growth.

I now turn to public services. [Interruption.] I thought they were supposed to be interested in public services—[Interruption.] I can wait.

Madam Deputy Speaker (Dame Eleanor Laing)

Order. A little bit of murmuring is normal, but I should not be able to hear what Members are saying over there. That is clearly out of order. Let us have some courtesy.

Jeremy Hunt

Thank you, Madam Deputy Speaker.

Good public services need a strong economy to pay for them, but a strong economy also needs good public services. In 2010, schools in the UK were behind Germany, France and Sweden in the OECD’s PISA—programme for international student assessment—education rankings for reading and maths. Now, after Conservative reforms, we are ahead of them. Burglaries and violent crime have halved in the last 14 years after we invested in 20,000 more police officers. Our armed forces remain the most professional and best-funded in Europe, with defence spending already more than 2% of GDP. We are providing more military support to Ukraine than nearly any other country, and our spending will rise to 2.5% as soon as economic conditions allow. The NHS is still recovering from the pandemic but has 42,000 more doctors and 71,000 more nurses than it did under Labour—that is 250 more doctors and 400 more nurses for every single month that we have been in office.

Resources matter, of course, which is why, despite all the economic shocks we have faced, overall spending on public services has gone up since 2010—in the case of the NHS, by more than a third in real terms. Although spending has continued to rise every year, public sector productivity still remains below pre-pandemic levels by nearly 6%. This demonstrates that the way to improve public services is not always more money or more people; we also need to run them more efficiently. We need a more productive state, not a bigger state.

In autumn 2022, I set day-to-day spending to increase by 1% a year in real terms over the next Parliament. Some say that is not enough and we should raise spending by more, and others say it is too much and we should cut it to improve efficiency—neither are right. It is not fair to ask taxpayers to pay for more when public service productivity has fallen; nor would it be wise to reduce that funding, given the pressures that public services face. So I am keeping the planned growth in day-to-day spending at 1% in real terms, but we are going to spend it better. [Interruption.] The Opposition do not have a plan for public services, as with everything else, so why not listen to ours?

Today I am announcing a landmark public sector productivity plan that restarts public service reform and changes the Treasury’s traditional approach to public spending. I start with our biggest and most important public service: the NHS. One of my greatest privileges was to be Health Secretary. Thanks to the NHS, I have three gorgeous children, the oldest of whom has been patiently listening in the Gallery. The NHS is, rightly, the biggest reason most of us are proud to be British, but the systems that support its staff are often antiquated. Doctors, nurses and ward staff spend hours every day filling out forms when they could be looking after patients. [Interruption.]

Madam Deputy Speaker (Dame Eleanor Laing)

Order. I do not like to interrupt the Chancellor, but Mr Streeting, you are too close to me to be shouting that loudly. If you want to shout that loudly, you should go away and sit up there. I apologise for interrupting the Chancellor.

Jeremy Hunt

When patients do not show up or one member of a team is ill, operating theatres are left empty despite long waiting lists. When we published the NHS long-term workforce plan, I asked the NHS to put together a plan to transform its efficiency and productivity. I wanted better care for patients, more job satisfaction for staff and better value for taxpayers. Making changes on the scale we need is not cheap. The investment needed to modernise NHS IT systems so they are as good as the best in the world costs £3.4 billion, but it helps unlock £35 billion of savings—ten times that amount—so in today’s Budget for long-term growth, I have decided to fund the NHS productivity plan in full.

With that new investment, we will slash the 13 million hours lost by doctors and nurses every year to outdated IT systems. We will cut down and potentially halve form filling by doctors by using artificial intelligence. We will digitise operating theatre processes, allowing the same number of consultants to do an extra 200,000 operations a year. We will fund improvements to help doctors read MRI and CT scans more accurately and quickly, speeding up results for 130,000 patients every year and saving thousands of lives, something that I know would have delighted my brother Charlie, who I recently lost to cancer.

We will improve the NHS app so that it can be used to confirm and modify all appointments, reducing up to half a million missed appointments annually and improving patient choice. We will set up a new NHS staff app to make it easier to roster electronically and end the use of expensive off-framework agencies. As a result of this funding, all hospitals will use electronic patient records, making the NHS the largest digitally integrated healthcare system in the world. Today’s announcement doubles the amount the NHS is investing on digital transformation over three years.

On top of this longer-term transformation, we will also help the NHS meet pressures in the coming year with an additional £2.5 billion. That will allow the NHS to continue its focus on reducing waiting times and brings the total increase in NHS funding since the start of the Parliament to 13% in real terms. The NHS was there for us in the pandemic, and today with nearly £6 billion of additional funding, a Conservative Government are there for the NHS.

The head of the NHS, Amanda Pritchard today said that this investment shows that

“the government continues to back the NHS”.

She said that, as a result of the investment, the NHS can commit to delivering 1.9% annual productivity growth over the next Parliament, more than double the average productivity growth in public services between 2010 and 2019.

But today is not just about the NHS. I want this groundbreaking agreement with the NHS to be a model for all our public services. Across education, the police, the courts and local government, I want to see more efficient, better-value and higher-quality public services, so today I can announce that in the next spending review, the Treasury will do things differently. We will prioritise proposals that deliver annual savings within five years equivalent to the total cost of the investment required, and today we make a start with some excellent proposals.

Violence reduction units and hotspot policing have prevented an estimated 136,000 knife crimes and other violent offences, as well as over 3,000 hospital admissions. Every crime costs money, so we will provide £75 million to roll that model out in England and Wales. Police officers waste around eight hours a week on unnecessary admin. With higher productivity, we could free the equivalent of 20,000 police officers over a year. We will spend £230 million rolling out time-saving and money-saving technology that speeds up police response times by allowing people to report crimes by video call and, where appropriate, use drones as first responders.

Too many legal cases, particularly in family law, should never go to court, and it would cost us less if they did not, so we will spend £170 million to fund non-court resolution, reduce reoffending and digitise the court process. Too many children in care end up being looked after by unregistered providers that are much more expensive, so we will invest £165 million over the next four years to reduce that cost by increasing the capacity of the children’s homes estate.

Special educational need provision can be excellent when outsourced to independent sector schools, but also expensive, so we will invest £105 million over the next four years to build 15 new special free schools to create additional high-quality places and increase choice for parents. We will also put in place a plan to realise the tens of billions of savings recommended in an excellent speech by the head of the National Audit Office.

The OBR says that a 5% increase in public sector productivity would be the equivalent of about £20 billion in extra funding. With these plans, we can deliver that and more. If we ensure that they are cash-releasing savings, as we are committed to doing, it will be possible to live with more constrained spending growth without cutting services valued by the public. So with the energy and drive of my talented Chief Secretary to the Treasury, we launch our public sector productivity plan in today’s Budget for long-term growth: more investment, more jobs, better public services and—one more thing—lower taxes.

Keeping taxes down matters to Conservatives in a way that it never can for Labour. We believe that in a free society the money people earn does not belong to the Government; it belongs to them, and if we want to encourage hard work, we should let people keep as much of their own money as possible. Conservatives look around the world at economies in North America and Asia and notice that countries with lower taxes generally have higher growth. Economists argue about cause and correlation, but we know that lower-taxed economies have more energy, more dynamism and more innovation. We know that is Britain’s future, too.

Before I explain how we will bring down taxes, I will start with some measures to make our system simpler and fairer. To discourage non-smokers from taking up vaping, we are today confirming the introduction of an excise duty on vaping products from October 2026 and publishing a consultation on its design. Because vapes can also play a positive role in helping people quit smoking, we will introduce a one-off increase in tobacco duty at the same time to maintain the financial incentive to choose vaping over smoking. I will make a one-off adjustment to rates of air passenger duty on non-economy flights only to account for high inflation in recent years, and I will provide HMRC with the resources it needs to ensure that everyone pays the tax they owe, leading to an increase in revenue collected of over £4.5 billion across the forecast period.

Next, I turn to property taxation. In recent months, following tenacious representation from my hon. Friends the Members for St Austell and Newquay (Steve Double), for North Devon (Selaine Saxby), for Cities of London and Westminster (Nickie Aiken), for Torbay (Kevin Foster) and for Truro and Falmouth (Cherilyn Mackrory), I have been looking closely at our furnished holiday lettings tax regime. I am concerned that that regime is creating a distortion meaning that not enough properties are available for long-term rental by local people. So to make the tax system work better for local communities, I am going to abolish the furnished holiday lettings regime.

I have also been looking at the stamp duty relief for people who purchase more than one dwelling in a single transaction, known as multiple dwellings relief. I see the deputy leader of the Labour party, the right hon. Member for Ashton-under-Lyne (Angela Rayner), paying close attention, given her multiple dwellings—[Interruption.] She—[Interruption.]

Madam Deputy Speaker

Order. Too much excitement. We have not actually heard—because we cannot hear—what the Chancellor is trying to say. [Interruption.] Okay, I can hear who is shouting, and they will not get to speak later.

Jeremy Hunt

I am sorry to disappoint the right hon. Member, but multiple dwellings relief was not actually designed for her; it was intended—[Interruption.]. It was intended to support investment in the private rented sector, but an external evaluation found no strong evidence that it had done so, and that it was being regularly abused, so I am going to abolish it.

Finally, as part of our look at property taxation in this Budget, both the Treasury and the OBR have looked at the costs associated with our current levels of capital gains tax on property and concluded that if we reduced the higher 28% rate that exists for residential property, we would in fact increase revenues because there would be more transactions. For the first time in history, both the Treasury and the OBR have discovered their inner Laffer curve. So today I will reduce the higher rate of property capital gains tax from 28% to 24%—that really is for you, Angela. [Laughter.] I now—[Interruption.]

Madam Deputy Speaker

Order. I have had enough from Opposition Members and I am definitely not having it from Government Members.

Jeremy Hunt

I now turn to oil and gas. Unlike the Labour party, we want to encourage investment in the North sea, so we will retain generous investment allowances for the sector. Following representations from my hon. Friend the Member for Banff and Buchan (David Duguid), we will also legislate in the Finance Bill to abolish the energy profits levy should market prices fall to their historical norm for a sustained period of time. But because the increase in energy prices caused by the Ukraine war is expected to last longer, so too will the sector’s windfall profits, so I will extend the sunset on the energy profits levy for an additional year to 2029, raising £1.5 billion.

Next, I turn to the taxes paid by those who are resident in the UK but not domiciled here for tax purposes. [Hon. Members: “Ah!”] This is a category of people known as non-doms. Nigel Lawson wanted to end the non-dom regime in his great tax reforming Budget of 1988, which is where I suspect the Labour party got the idea from. I, too, have always believed that provided we protect the UK’s attractiveness to international investors, those with the broadest shoulders should pay their fair share. After looking at the issue over many months, I have concluded that we can indeed introduce a system that both is fairer and remains competitive with other countries, so the Government will abolish the current tax system for non-doms, get rid of the outdated concept of domicile—[Interruption.] I aim to please all parts of the House in all my Budgets. We will replace—[Interruption.]

Madam Deputy Speaker

Order. This is impossible. [Interruption.] Order. Could you please shout more quietly? [Laughter.]

Jeremy Hunt

We will replace the non-dom regime with a modern, simpler and fairer residency-based system. From April 2025, new arrivals to the UK will not be required to pay any tax on foreign income and gains for their first four years of UK residency: a more generous regime than at present, and one of the most attractive offers in Europe. But, after four years, those who continue to live in the UK will pay the same tax as other UK residents.

Recognising the contribution of many of these individuals to our economy, we will put in place transitional arrangements for those benefiting from the current regime. That will include a two-year period in which individuals will be encouraged to bring wealth earned overseas to the UK, so it can be spent and invested here—a measure that will attract onshore an additional £15 billion of foreign income and generate more than £1 billion of extra tax.

Overall, abolishing non-dom status will raise £2.7 billion a year by the end of the forecast period. The Opposition planned to use that money for spending increases, but today a Conservative Government make a different choice. We use that revenue to help cut taxes on working families. Many of those families depend on child benefit, but the way that we treat child benefit in the tax system is confusing and unfair. It is a lifeline for many parents because it helps with the additional costs associated with having children. When it works, it is good for children, good for parents, and good for the economy because it helps people into work.

We currently withdraw child benefit when one parent earns over £50,000 a year. That means that two parents earning £49,000 a year receive the benefit in full, but a household earning a lot less than that does not if just one parent earns over £50,000. Today I set out plans to end that unfairness. Doing so requires significant reform to the tax system, including allowing HMRC to collect household-level information. We will therefore consult on moving the high-income child benefit charge to a household-based system, to be introduced by April 2026. But because that is not a quick fix, I make two changes today to make the current system fairer.

Following representations from my hon. Friends the Members for Penistone and Stocksbridge (Miriam Cates), for Carshalton and Wallington (Elliot Colburn), for Bassetlaw (Brendan Clarke-Smith) and for West Worcestershire (Harriett Baldwin), along with many others, I confirm that from this April, the high-income child benefit charge threshold will be raised from £50,000 to £60,000. We will raise the top of the taper at which it is withdrawn to £80,000. That means that no one earning under £60,000 will pay the charge, taking 170,000 families out of paying it altogether. Because of the higher taper and threshold, nearly half a million families with children will save an average of £1,300 next year. According to the OBR, this change will see an increase in hours among those already working to the equivalent of 10,000 more people entering the workforce. More investment, more jobs, better public services and lower tax.

There is one further set of changes that I want to make today. The way we tax people’s income is particularly unfair. Those who get their income from having a job pay two types of tax: national insurance contributions and income tax. Those who get it from other sources pay only one. This double taxation of work is unfair. The result is a complicated system that penalises work instead of encouraging it. If we are to build a high-wage, high-skill economy not dependent on migration and to encourage people not in work to come back to work, we need a simpler, fairer tax system that makes work pay. That is why I cut national insurance contributions in the autumn. By reducing the penalty on work, the OBR said that that tax cut would lead to the equivalent of 94,000 more people in work. In other words, it would fill more than one in 10 vacancies throughout the economy. Lower taxes, more jobs and higher growth.

Today, because of the progress that we have made in bringing down inflation, because of the additional investment flowing into the economy, because we have a plan for better and more efficient public services, and because we have asked those with the broadest shoulders to pay a bit more—[Interruption.]

Madam Deputy Speaker

Order. Mr Perkins—[Interruption.] I can manage, thank you very much. I have heard you five times. I have let you get away with it, but that is enough. One more strike and you’re out.

Jeremy Hunt

I know how hard it is for the Opposition to listen to arguments for lower taxes. That is the difference.

Because we have asked those with the broadest shoulders to pay a bit more, today I go further. From 6 April, employee national insurance will be cut by another 2p, from 10% to 8%, and self-employed national insurance will be cut from 8% to 6%. That means an additional £450 a year for the average employee, or £350 for someone who is self-employed. When combined with the autumn reductions, it means 27 million employees will get an average tax cut of £900 a year, and 2 million of the self-employed will get a tax cut averaging £650. Those changes will make our system simpler and fairer, and will grow our economy by rewarding work. The OBR says that, when combined with the autumn reduction, our national insurance cuts will mean the equivalent of 200,000 more people in work—filling one in five vacancies, and adding 0.4% to GDP and 0.4% to GDP per head.

This is the second fiscal event in which we have reduced employee and self-employed national insurance. We have cut it by one third in six months without increasing borrowing and without cutting spending on public services. That means that the average earner in the UK now has the lowest effective personal tax rate since 1975. Their effective taxes are now lower than in America, France, Germany or any G7 country. Because Conservatives believe that making work pay is of the most fundamental importance, and because we believe that the double taxation of work is unfair, our long-term ambition is to end this unfairness. When it is responsible, when it can be achieved without increasing borrowing and when it can be delivered without compromising high-quality public services, we will continue to cut national insurance as we have done today, so that we truly make work pay.

We stick to our plan with a Budget for long-term growth. It delivers more investment, more jobs, better public services and lower taxes. However, dynamism in an economy does not come from Ministers in Whitehall but from the grit and determination of people who take risks, work hard and innovate—not Government policies but people power. It is to unleash people power that today we put this country back on a path to lower taxes: a plan to grow the economy versus no plan; a plan for better public services versus no plan; a plan to make work pay versus no plan. Growth up, jobs up and taxes down. I commend this statement to the House.

March 6, 2024
Rishi Sunak – 2021 Budget

The text of the 2021 Budget, published on 3 March 2021.

[in .pdf format]

March 3, 2021
Rishi Sunak – 2020 Budget Speech

Below is the text of the Budget Speech made by Rishi Sunak in the House of Commons on 11 March 2020.

Madam Deputy Speaker,

I want to get straight to the issue most on everyone’s mind– coronavirus COVID19.

I know how worried people are.

Worried about their health, the health of their loved ones, their jobs, their income, their businesses, their financial security.

And I know they get even more worried when they turn on their TVs and hear talk of markets collapsing and recessions coming.

People want to know what’s happening, and what can be done to fix it.

What everyone needs to know is that we are doing everything we can to keep this country, and our people, healthy and financially secure.

We are clear that this is an issue above party.

We will do right by you and your family and I know I will have the support of the whole House as I say that.

This House has always stood ready to come together, put aside party politics, and act in the national interest.

We have done so before and I know we will do so again.

My RHF the PM, alongside officials and scientists, is leading the work on the public health response.

Today, I want to set out our economic response so we bring stability and security.

Let me say this: We will get through this – together.

The British people may be worried, but they are not daunted.

We will protect our country and our people.

We will rise to this challenge.

But let me also say:

Yes, this virus is the key challenge facing our country today. But it is not the only challenge.

We have just had an election where people voted for change.

Change in our economy, change in our public services, change in the cost of living, change in our economic geography.

This Budget delivers on that change.

Yes, as we deal with coronavirus it is a Budget that provides security today.

But it is also a plan for prosperity tomorrow.

It is a Budget that delivers on our promises to the British people.

It is a Budget of a Government that gets things done.

Madam Deputy Speaker,

Before I set out the details of our plan, let me first thank Members who’ve contributed to the discussions on how to respond to the coronavirus.

Members from both sides of this House.

Our economy is robust, our public finances are sound, our public services are well-prepared.

My RHF the Health Secretary is working around the clock to protect the public’s health.

And I will do whatever it takes to support the economy.

First, let me explain the nature of the economic challenge and my overall strategy.

The challenge is this:

There is likely to be a temporary disruption to our economy.

On the supply side, up to a fifth of the working age population could need to be off work at any one time.

And business supply chains are being disrupted around the globe.

This combination of people being unable to work…

…and businesses being unable to access goods…

…will mean that for a period our productive capacity will shrink.

There will also be an impact on the demand side of the economy, through a reduction in consumer spending.

The combination of those effects will have a significant impact on the UK economy.

But it will be temporary.

People will return to work.

Supply chains will return to normal.

Life will return to normal.

For a period, it’s going to be tough.

But I’m confident that our economic performance will recover.

So given this analysis of the situation, let me set out our strategy to deal with it.

We can’t avoid a fall in demand, because the primary driver of that reduction in consumption…

…the primary reason people are not spending as normal…

…is because they’re following Doctors’ orders to stay at home.

So, the right immediate policy response is to provide security and support for those who get sick or can’t work through funding our public services, and a strengthened safety net.

And on the supply side, the right response is to provide a bridge for businesses, to ensure that what is a temporary impact on our productive capacity does not become permanent.

In other words, our response will be temporary, timely and targeted.

This is the right response – and at the right time.

That response is clearly and closely coordinated with the Bank of England.

The Governor and I have been in constant communication about the evolving situation…

…and our responses have been carefully designed to be complementary and to have maximum impact, consistent with our independent responsibilities.

The Governor set out this morning the actions that the Bank will take to help UK businesses and households bridge across the likely economic disruption:

A 50 basis point reduction to interest rates, to support business and consumer confidence;

The introduction of an SME Term Funding Scheme, to help reinforce the transmission of the reduction in Bank Rate to the real economy;

And they have released the counter-cyclical buffer, to further support the ability of banks to supply credit.

The Government’s response will use fiscal action to support: public services, households and business.

Together, we are taking action that is coordinated, coherent and comprehensive.

Let me now set out our three-point plan.

First, whatever extra resources our NHS needs to cope with coronavirus – it will get.

So, whether its research for a vaccine, recruiting thousands of returning staff, or supporting our brilliant Doctors and Nurses…

…whether its millions of pounds or billions of pounds…

…whatever it needs, whatever it costs, we stand behind our NHS.

Second, during this immediate crisis, if people fall ill or can’t work, we’ll support their finances.

We’ll make sure that our safety net remains strong enough to fall back on.

My RHF the Prime Minister has already announced that Statutory Sick Pay will be paid from day one, rather than day four.

Today, with the assistance of My RHF, the Work and Pensions Secretary, I can go further.

Statutory sick pay will also be available for all those who are advised to self-isolate – even if they haven’t yet presented with symptoms.

And rather than having to go to the Doctors you will soon be able to obtain a sick note by contacting 111.

But of course, not everyone is eligible for Statutory Sick Pay.

There are millions of people working hard, who are self-employed or in the gig economy.

They will need our help too.

So to support them, during this period, we’ll make it quicker and easier to access benefits:

Those on Contributory Employment and Support Allowance will be able to claim from day 1 instead of day 8;

To make sure that time spent off work due to sickness is reflected in your benefits, I’m also temporarily removing the minimum income floor in Universal Credit;

And I’m relaxing the requirement for anyone to physically attend a jobcentre; everything can be done by phone or online.

Taken together, these measures on ESA and Universal Credit, provide a boost of almost £0.5bn to our welfare system.

To further support our people, I am also creating a £500m Hardship Fund, distributed to Local Authorities…

…who will be able to use that fund to directly support vulnerable people in their local area.

So, in total, that’s a £1bn commitment to support the financial security of our people.

But, Madam Deputy Speaker, the best way to support people is to protect their jobs.

And we do that by supporting our businesses – the third part of our plan.

The measures I’ve announced today on Statutory Sick Pay are crucial to support those who need to take time off work – but that cost would be borne by business.

And if we expect 20% of the workforce to be unable to work at any one time, the cumulative cost would hit our small and medium sized businesses hard.

So, in recognition of these exceptional circumstances, today I am taking a significant step.

For businesses with fewer than 250 employees…

…I have decided that the cost of providing Statutory Sick Pay to any employee off work due to coronavirus…

…will, for up to 14 days, be refunded by the Government in full.

That could provide over £2bn for up to 2 million businesses.

This will significantly ease the burden on businesses, but we can do more.

I have asked HMRC to scale up the Time To Pay service, allowing businesses and the self-employed to defer tax payments over an agreed period of time.

Starting today, there will be a dedicated helpline with 2,000 staff standing ready to help.

Although Time to Pay is important, it will still be the case that some good, well-run businesses will face problems with their cash flow.

They may struggle to pay people’s salaries, pay their bills, or buy new stock.

They will need loans to get through this period.

So, today, I am announcing a new, temporary Coronavirus Business Interruption Loan Scheme.

Banks will offer loans of up to £1.2m to support small and medium sized businesses.

The government will offer a generous guarantee on those loans, covering up to 80% of losses, with no fees, so that banks can lend with confidence.

This will unlock up to £1bn of attractive working capital loans to support small businesses, with more as needed.

Taken together, I expect the combination of these measures to protect the vast majority of businesses through the worst of the crisis.

But I have two other measures that will use the tax system to support businesses through this.

Our manifesto promised that for shops, cinemas, restaurants, and music venues…

…with a rateable value of less than £51,000…

…we would increase their business rates Retail Discount to 50%.

Today I can go further, and take the exceptional step, for this coming year, of abolishing their business rates altogether.

But there are tens of thousands of other businesses in the leisure and hospitality sectors, currently not covered by this policy.

Museums, art galleries, and theatres;

Caravan parks and gyms;

Small hotels and B&Bs; sports clubs, night clubs; club houses, guest houses.

They would not benefit from today’s measure – but they could be some of the hardest-hit.

So for this year I have decided to extend the 100% retail discount to them as well.

That means any eligible retail, leisure or hospitality business with a rateable value below £51,000 will, over the next financial year, pay no business rates whatsoever.

That is a tax cut worth over £1bn, saving each business up to £25,000.

And it means, over the next twelve months, nearly half of all business properties in England will not pay a penny of business rates.

I’m also launching today a fundamental review, to be concluded at the Autumn Budget, into the long-term future of business rates.

But even with the temporary extension of the retail discount to the leisure and hospitality sectors…

…many of our smallest businesses already pay no business rates, so would not benefit from this policy.

So to support them to manage their fixed costs, I am going to go a step further.

I am providing, to any business currently eligible for the small business rates relief, a £3,000 cash grant per business.

This is a £2bn cash injection direct to 700,000 of our smallest businesses.

Let me summarise for the House the fiscal impact of our immediate response to coronavirus.

Taken together, the extraordinary measures I have set out today represent £7bn to support the self-employed, businesses and vulnerable people.

To support the NHS and other public services, I am also setting aside a £5bn emergency response fund – and will go further if necessary.

Those measures are on top of plans that I will set out later in this Budget, which provide an additional fiscal loosening of £18bn to support the economy this year.

That means I am announcing today, in total, a £30bn fiscal stimulus to support British people, British jobs and British businesses through this moment.

And, of course, if further action is needed as the situation evolves – I hope the whole House knows, I will not hesitate to act.

I believe this represents one of the most comprehensive economic responses of any government anywhere in the world, to date.

The Governor of the Bank of England and I are in close contact with our counterparts, around the world, in the G7 and the G20.

And to support the global response, I’m also making new funding of £150m available for the IMF’s relief efforts.

Madam Deputy Speaker,

Coronavirus will have a significant impact on our economy – but it will be temporary.

I will do whatever it takes to get our nation through it. I’m acting today with a multi-billion-pound commitment:

More money for our NHS.

More generous Sick Pay.

Faster access to benefits if you’re self-employed.

Extra local support for the most vulnerable.

Tax cuts, loans and grants for businesses to protect people’s jobs.

Comprehensive action, and if more action is needed, I will take it. And I know all Members of the House will want to give this plan their full support.

Madam Deputy Speaker,

Before I turn to the economic forecasts, I hope the House will join me in thanking the Office for Budget Responsibility – and Robert Chote, in particular.

After ten years, this is his last Budget in charge.

He’s led the OBR with dedication and integrity – and established that institution as one that is respected around the world.

Madam Deputy Speaker,

Let me now turn to the growth forecasts.

Since the OBR closed their forecast, it has become clear that the spread of coronavirus will have a significant impact on our economy in the coming quarters.

But given the nature of the shock is temporary, I still want to set out for the House the OBR’s judgement on the economy over the medium term.

Even before coronavirus hit, we were facing a slowing world economy.

There has been, across developed economies, including here in the UK a decade-long slowdown in productivity.

This, combined with the political uncertainty over the last three years…

…which affected business investment in particular…

…has led the OBR to downgrade our productivity over the forecast period…

…and to slightly reduce GDP growth, compared to the March 2019 forecast.

But while the world may slowdown, we will act here with a response that is brave and bold, taking decisions now for our future prosperity.

We are investing in world class infrastructure, and to lead the world in the industries and technologies of the future.

The central judgement I’m making today is to fund an additional £175bn over the next five years for our future prosperity.

The OBR have said that, as a direct result of the plans I’m announcing, growth over the next two years will be 0.5 percentage points higher than it otherwise would have been.

For the benefit of the House, the GDP forecast without fully accounting for the impact of coronavirus would have led to growth of 1.1% in 2020 and 1.8% in 2021, then 1.5%, 1.3%, and 1.4% in the following years.

And today the OBR have made an estimate they’ve never made before.

They have said, in their words, that today’s “large planned increase in public investment should boost potential output too”.

If future Governments have the same determination to continue our approach, the UK’s long-term productivity will increase by 2.5%.

The OBR have confidence in the long-term future of our economy – and so do I.

Madam Deputy Speaker,

More investment and higher growth mean more jobs and higher wages.

We already have more people working in our economy than ever before.

Women’s employment is at a record high.

And since 2010, full time weekly wages have grown faster in every region and nation of the UK than they have in London.

The OBR expect half a million more people will be in work by 2025.

Wages are expected to grow in real terms in every year of the forecast period.

The story of this government has been the story of a national jobs miracle.

And, Madam Deputy Speaker, given the last few weeks I’ve had, I’m all in favour of jobs miracles.

On inflation, the OBR forecast 1.4% this year, increasing to 1.8% next year and then, for the rest of the forecast period, remaining on or around target.

And I’m sure the whole House will join me in taking this opportunity to thank Mark Carney, the Governor of the Bank of England for his 7 years of dedicated public service.

We congratulate him on his new role as Finance Adviser for COP26.

And welcome his successor Andrew Bailey, who takes up his post on Monday.

[FISCAL STRATEGY]

Madam Deputy Speaker,

Let me turn now to the fiscal forecasts.

The economic impacts of coronavirus remind us of the importance of fiscal responsibility.

Our public finances are strong, with the deficit down from 10% in 2010 to less than 2% last year.

Our economy is well-prepared for the future and it is well-prepared because of 10 years of Conservative-led Governments and Conservative Chancellors.

But it’s important that we update our fiscal framework to remain at the leading edge of international best practice.

Our economic security depends on maintaining the following principles:

Low and stable inflation delivering price stability;

Fiscal sustainability;

And independent, effective institutions – like the Bank of England and the OBR.

These features of our framework will always be protected.

But there is a live global debate about what our low interest rate environment means for fiscal strategy…

…about the case for fiscal policy to play a more active role in stabilising the economy …

…and about the best ways to measure productivity-enhancing investment in the economy, such as human capital, or measuring value on the public balance sheet.

So I want to take time to consider these questions over the coming months…

…so that our fiscal framework allows us to make the right long-term decisions for our economic security and prosperity.

I will review the fiscal framework, consulting widely with a range of experts.

And will report back in the autumn, if I conclude that any changes are necessary,.

But at the same time, credibility comes as much from what we do as what we say.

We were elected on a manifesto that promised to meet a specific set of fiscal rules.

Today’s Budget is about delivering our promises.

That’s why, despite the speculation, today’s Budget…

…is delivered not just within the fiscal rules in our manifesto, but with room to spare.

And I’m setting the amount that government will spend for the rest of this Parliament within those rules as well.

Today the OBR report a current budget surplus in every one of the next five years.

And in the target year of 2022-23, we have fiscal space of nearly £12bn.

The OBR forecast that borrowing will increase slightly from 2.1% of GDP in 2019-20 to 2.4% in 2020-21 and 2.8% in 2021-22.

It falls to 2.5%, 2.4% and 2.2% in the following years.

And the OBR forecast that headline debt will be lower at the end of the Parliament than it is today, falling from 79.5% this year to 75.2% in 2024-25.

I’m sure the House will understand that given how urgently we’ve developed our economic response to the coronavirus…

…that package of measures have not yet been captured in the fiscal forecasts, and nor have the fiscal impacts of the Bank’s actions.

But the House will also note that the target year for our current budget fiscal rule is not until 2022-23.

So even within our current framework, I have the flexibility to act as required over the next two years.

Madam Deputy Speaker,

As we enter a period of challenge, we start from a position of strength.

The economy growing.

More jobs.

Higher wages.

Stable inflation.

Sound public finances.

We promised to manage our economy responsibly – we’re getting it done.

Madam Deputy Speaker,

This Budget responds, at scale, to the immediate threat of Coronavirus.

And it reports on an economy whose foundations are strong.

It is a Budget that provides for security today.

But let me now outline our Plan for Prosperity tomorrow.

This is the first Budget of a new decade.

The first in almost fifty years outside the European Union.

And the first of this new government.

At the election, we said we needed to be one nation.

While talent is evenly spread, opportunity is not – we need to fix that.

This is a Budget that will deliver on our promises to the British people.

And it is the Budget of a Government that gets things done.

We promised to get Brexit done, and we got it done.

We promised to let hard working families keep more of what they earn.

This Budget gets it done.

We promised to back our businesses to innovate, invest and trade.

This Budget gets it done.

We promised to invest in science and research.

This Budget gets it done.

We promised to deliver green growth and protect our environment.

This Budget gets it done.

We promised to level up, with new roads, railways, broadband and homes.

This Budget gets it done.

And, yes, we promised record funding for our NHS and public services.

This Budget gets it done.

This Government delivers on its promises and gets things done.

Madam Deputy Speaker,

Our plan for prosperity starts immediately by putting more money in people’s pockets.

It was a Conservative Government that in 2016 introduced the National Living Wage, giving Britain’s lowest paid workers the biggest pay rise in 20 years.

And in just three weeks’ time, around 2 million workers will see their wage rise again by 6.2% – for a full-time worker, that’s a pay rise of almost £1,000.

That is the biggest cash increase ever.

But we’ve promised to go further.

Today we’re publishing a new Remit for the independent Low Pay Commission.

They now have a formal target that, as long as economic conditions allow, by 2024 the National Living Wage will reach two-thirds of median earnings.

On current forecasts, that means a living wage of over £10.50 an hour.

We promised to end low pay – we’re getting it done.

And as people earn more – we’ll also cut taxes on their wages.

I am increasing, in just four weeks’ time, the National Insurance threshold from £8,632 to £9,500.

That’s a tax cut for 31 million people, saving a typical employee over £100.

And taken together, our changes to the National Living Wage, income tax, and now National Insurance…

…mean that someone working full time on the minimum wage will be more than £5,200 better off than in 2010.

The Conservatives are the real workers’ party.

I can also confirm, now we’ve left the EU, that I will abolish the tampon tax.

From January next year, there will be no VAT whatsoever on women’s sanitary products.

And I congratulate all the Members and RH Members who campaigned for this, including the former Member for Dewsbury, who led the charge.

Let me turn now to duties.

Scotch whisky is a crucial industry – and our largest food and drink export.

My Scottish Conservative colleagues, including My HF the Member for Moray, have highlighted to me the impact that the recent US tariffs are having.

We will continue to lobby the US government to remove this harmful tariff.

In the meantime, I’m announcing today £1m of support for promoting Scottish food and drink overseas and £10m of new R&D funding to help distilleries go green.

And to further support the industry I can also announce that this year the planned increase in spirits duty will be cancelled.

Madam Deputy Speaker,

Pubs are at the centre of community life.

But too many have closed over the last decade.

We’re already promised to introduce a business rates ‘pub discount’, of £1,000, for small pubs.

But I’ve heard calls from many Honourable and Right Honourable Members, including My HF the Member for Dudley South, that we need to do more…

…especially given the possible impact of coronavirus on pubs.

So today I can announce that, exceptionally, for this year, the business rates discount for pubs will not be £1,000 – it will be £5,000.

And I’m also pleased to announce that the planned rise in beer duty will also be cancelled.

And because of decisions I’ve taken elsewhere in the Budget, I am also freezing duties for cider and wine drinkers as well.

For only the second time in almost twenty years, that’s every single one of our alcohol duties frozen.

Madam Deputy Speaker,

I have heard representations that after nine years of being frozen, at a cost of £110bn to the taxpayer, we can no longer afford to freeze fuel duty.

I’m certainly mindful of the fiscal cost and the environmental impacts.

But I’m taking considerable steps in this Budget to incentivise cleaner forms of transport.

And many people still rely on their cars.

So I’m pleased to announce today that for another year fuel duty will remain frozen.

Compared to pre-2010 plans, that’s a saving of £1,200.

Madam Deputy Speaker,

Wages – up.

National insurance – cut.

The tampon tax – abolished.

Spirits duty – frozen.

Beer duty – frozen.

Wine and cider duty – frozen.

Fuel duty – frozen.

We promised to cut taxes and the cost of living – and we got it done.

[BUSINESS]

Madam Deputy Speaker,

As Conservatives, we know that to put more money in people’s pockets, we need a thriving private sector.

That is what drives growth, that is what creates jobs, that is what lifts living standards.

So the second part of our plan for prosperity is to unleash the power of business.

Businesses need support to start up, grow and export.

So today, I provide:

£130m of new funding to extend Start-up Loans;

£200m for the British Business Bank to invest in scale-ups;

Another £200m for life sciences;

More money for Growth Hubs;

21 cities with British Library business support;

£5bn of new export loans for businesses;

And dedicated trade envoys representing the North, the Midlands, Wales and the West of England in embassies around the world.

Madam Deputy Speaker, businesses also need a fair tax system.

We were elected on a manifesto that promised to review and reform Entrepreneurs’ Relief.

I’ve now completed that review – and here’s what we’re going to do.

Entrepreneurs’ relief is:

Expensive – at a cost of over £2bn a year.

Ineffective – with less than 1 in 10 claimants saying the relief has been an incentive to set up a business.

And unfair – with nearly three quarters of the cost going to just 5,000 individuals.

Just because it is called Entrepreneurs’ Relief doesn’t mean that it’s entrepreneurs who mainly benefit.

For all these reasons, I have heard representations that I should completely abolish it.

The Institute for Fiscal Studies have criticised it.

The Resolution Foundation called it “the UK’s worst tax break”.

I’m sympathetic to that argument.

But at the same time, we shouldn’t discourage those genuine entrepreneurs who do rely on the relief.

We need more risk-taking and creativity in this country, not less.

So I have decided not to fully abolish Entrepreneurs’ Relief today.

Instead, I will do what the Federation of Small Businesses called “a sensible reform” and reduce the lifetime limit from £10m to £1m.

80% of small business owners are unaffected by today’s changes.

Those reforms save £6bn over the next five years – and I’m giving most of that money straight back to business through three additional measures.

The Research and Development Expenditure credit will be increased from 12 to 13% – a tax cut worth £2,400 on a typical R&D claim.

The Structures and Buildings Allowance will be increased from 2 to 3%, giving an extra £100,000 of relief if you’re investing in a building worth £10m.

And, to cut taxes on employment, I will deliver our promise to increase the Employment Allowance by a third to £4,000.

That’s a tax cut this April for nearly half a million small businesses.

Another step towards the dynamic, low tax economy we want to see.

Madam Deputy Speaker – we promised to cut taxes on business – we’re getting it done.

Madam Deputy Speaker, to help our businesses lead the next generation of high productivity industries…

…we also need to invest now in the technologies of the future.

We are the country of Newton, Hodgkin and Turing – ours is a history filled with ideas, invention and discovery.

And it is truly a national history.

The first steam railway ran between Stockton and Darlington.

The first television was invented by a Scot.

A Welshman invented the first hydrogen fuel cell.

And Jocelyn Bell Burnell, born in Northern Ireland, discovered the first radio pulsars.

To compete and succeed over the next decade and beyond, we need to recapture that spirit.

So, the third part of our Plan for Prosperity is to invest in ideas.

Madam Deputy Speaker, in our manifesto we made a promise to double investment in research and development to £18bn.

I will not be doing this today.

Instead, I will increase investment in R&D to £22bn a year.

That is the fastest and the largest increase in R&D spend ever.

As a percentage of GDP, it will be the highest in nearly forty years – higher than the US, China, France and Japan.

And a major step towards our target of increasing public and private investment in R&D to 2.4% of GDP.

We won’t wait to get started – next year, funding will grow by 15%, the fastest year-on-year growth on record.

Detailed allocations of our new investment in ideas will be set out at the Spending Review.

But I can make some announcements today.

I’m investing £1.4bn in our world-leading science institute at Weybridge, where, as we speak, they’re working to analyse samples of Coronavirus.

To secure our leadership in the technologies of the future, I’m investing over £900m in nuclear fusion, space and electric vehicles.

And as we invest in ideas, we’re also changing the way we fund science in this country.

I can confirm that we will invest at least £800m in a new blues-skies funding agency here in the UK…

…modelled on the extraordinary ‘ARPA’ in the US.

And as we invest in ideas, we’re also changing where we fund science in this country.

Today, 50% of R&D funding goes to London, the East and the South East of England.

We’re investing £400m incremental funding into high quality research, with much of that funding going to brilliant universities around the country.

We promised to make this country one of the scientific and research centres of the world – we’re getting it done.

Madam Deputy Speaker,

There can be no lasting prosperity for our people, if we do not protect our planet.

So the fourth part of our Plan for Prosperity, is:

To create the high skill, high wage, low carbon jobs of the future.

To level up, with completely new industries in our regions and nations.

To raise our productivity and lift our quality of life even as we cut our emissions.

The Treasury’s Net Zero Review will set out the Government’s strategic choices ahead of COP26 later this year.

Today’s Budget takes the first steps.

First, we will increase taxes on pollution.

Electricity is now a cleaner energy form than gas – but our Climate Change Levy, paid by companies, taxes electricity at a higher rate.

So as another step towards equalising the rates and encouraging energy efficiency, from April 2022 I’m freezing the levy on electricity and raising it on gas.

I will support the most energy-intensive industries to transition to Net Zero, by extending the Climate Change Agreements scheme for a further two years.

To tackle the scourge of plastic waste, we will deliver our manifesto promise to introduce a new Plastics Packaging Tax.

From April 2022, we will charge manufacturers and importers £200 / tonne on packaging made of less than 30% recycled plastic.

That will increase the use of recycled plastic in packaging by 40% – equal to carbon savings of nearly 200,000 tonnes.

Let me now turn to Red Diesel.

The Red Diesel scheme allows selected users to pay duty of just over 11p per litre for diesel, compared to almost 58p per litre for everyone else.

But the sectors using red diesel are some of the biggest contributors to our air quality problem – emitting nearly 10% of the most noxious gases polluting the air of cities like London.

This is a tax relief on nearly 14 million tonnes of Carbon Dioxide every year…

…the same as the entire population of London and Greater Manchester taking a return flight to New York.

It’s been a £2.4bn tax break for pollution that’s also hindered the development of cleaner alternatives.

So I will abolish the tax relief for most sectors.

That’s the right thing to do – but I recognise it will be a big change for some industries.

So firstly, this change will not take effect for two years – giving businesses time to prepare.

Secondly, I have heard the concerns about agriculture, particularly from the NFU, and [rural colleagues] including My RHF the Member for Sherwood…

…so I have decided that agriculture will retain the relief.

I’ll also keep the relief for rail, for domestic heating, and there will be no impact on fishing.

We’ll consult over the summer with other sectors.

And thirdly, to help develop cleaner alternatives to red diesel and other fossil fuels, we will more than double R&D investment in the energy innovation programme to £1bn.

As well as taxing pollution – we will invest and cut taxes on clean transport.

We’re introducing a comprehensive package of tax and spend reforms to make it cheaper to buy zero or low emissions cars, vans, motorbikes and taxis;

We’re investing £300m in tackling nitrogen dioxide emissions in towns and cities across England;

And we’re investing £500m to support the rollout of new rapid charging hubs, so that drivers are never more than 30 miles away from being able to charge up their car.

Taken together, this Budget invests £1bn in green transport solutions.

Madam Deputy Speaker,

Many Members around this House will have seen the devastating impact of the recent floods on homes and businesses in their own constituencies…

…and particularly the HM for Barnsley East, my HFs the Members for Calder Valley, and Telford, and My RHF the Member for Ludlow.

I can announce today that I’m making £120m available immediately to repair defences damaged in the winter floods.

To support those areas that have been repeatedly flooded, I’m providing £200m of funding directly to local communities to build flood resilience.

And to protect people and over 300,000 properties, I’m doubling our investment in flood defences over the next six years to £5.2bn.

Madam Deputy Speaker,

We’re also supporting natural habitats like woodlands and peat bogs.

I can confirm today that to protect, restore and expand these wonderful habitats – and capture carbon – we will provide £640m for a new Nature for Climate Fund.

Over the next five years, we will plant around 30,000 hectares of trees – that’s a forest larger than Birmingham – and restore 35,000 hectares of peatland.

This Government intends to be the first in history to leave our natural environment in a better state than we found it.

Madam Deputy Speaker,

I can make one further announcement on green growth.

Carbon Capture and Storage is precisely the kind of exciting technology where Britain can lead the world over the next decade.

I can announce today that we will invest at least £800m to establish two or more new Carbon Capture and Storage clusters by 2030.

Once up and running, these clusters will store millions of tons of carbon dioxide that would otherwise be released into the atmosphere.

The new clusters will create up to 6,000 high skill, high wage, low carbon jobs in areas like Teesside, Humberside, Merseyside or St Fergus in Scotland.

It’s levelling up in action.

Madam Deputy Speaker – green jobs; better flood defences; cheaper electric vehicles; innovative new technologies.

We promised to protect our environment – we’re getting it done.

Madam Deputy Speaker,

We as a party know that talent is evenly spread in this country, but opportunity is not. We have to put that right.
We need to build the infrastructure that will lay the foundations for a new century of prosperity. We need to grab the opportunity to upgrade, to improve, to enhance, to level up.

That starts today with the next part of our plan – as we get Britain building.

Madam Deputy Speaker,

Over the next five years, we will invest more than £600bn pounds in our future prosperity.

Public net investment will, in real terms, be the highest it has been since 1955.

Take the average amount we’ve invested over the last forty years in real terms – we’re tripling it.

Capital budgets in 2024-25 alone will reach over £110bn.

I will set out the detailed capital allocations at the Spending Review – but I’m taking three major steps today.

First, we’re going to change the whole mindset of Government.

To make sure economic decision-making reflects the economic geography of the country…

…we’re reviewing the Treasury’s Green Book…

…we’ll have Treasury offices in Scotland, Wales and Northern Ireland…

…and I can announce today that we’re also opening a new economic campus in the North…

…with over 750 staff from the Treasury, and the departments for business, local government and trade.

And we won’t stop there – our ultimate ambition is to move 22,000 civil servants outside central London.

Second, because of this changed mindset, we’ll invest more in our nations, cities and towns.

Today’s Budget provides an extra £640m for the Scottish Government, £360m for the Welsh Government, and £210m for the Northern Ireland Executive.

I’m announcing £242m of funding for new City and Growth Deals, taking our investment in these deals to more than £2.7bn.

We’ve agreed today a new devolution deal in West Yorkshire, with a directly-elected Mayor for the region.

And to make sure that it isn’t just Londoners who benefit from the kind of long-term transport deal that helped TfL…

…I’m announcing today that the new West Yorkshire Mayor will, along with seven other Metro Mayors…

…get new, London-style funding settlements, worth £4.2bn.

These settlements are in addition to the Transforming Cities Fund, which will invest over a billion pounds in local transport in 12 further cities, including Stoke, Preston, Derby and Nottingham, and Southampton.

Third, we’re going to build broadband, railway, roads – if the country needs it, we will build it.

Today’s Budget provides £5bn to get gigabit-capable broadband into the hardest to reach places.

And £510m of new investment into the shared rural mobile phone network…

…which means that in the next five years 4G coverage will reach 95% of the country.

And let me thank My RHF the Culture Secretary, who will get this done.

We’re also going to build better railways:

With spades going in the ground on HS2…

…our commitment to fund the Manchester-Leeds leg of the Northern Powerhouse Rail…

… funding today for a new station at Cambridge South and the Midlands Rail Hub…

…Darlington station moving to the next stage of development and approval…

…and funding to make a dozen train stations more accessible.

And there’s more money for our roads too.

Today, I’m announcing the biggest ever investment in strategic roads and motorway – over £27bn of tarmac.

That will pay for work on over 20 connections to ports and airports, over 100 junctions, 4,000 miles of road.

I’m announcing new investment in local roads, alongside a new £2.5bn pothole fund – that’s £500m every single year; enough to fill, by the end of the Parliament, 50 million potholes.

The details of all the road schemes I’m funding will be published later today – and I thank my RHF the Transport Secretary for his efforts.

Our ambition is truly national.

The A417 in the South West.

The A428 in the East.

The A46 in the Midlands.

Unclogging Manchester’s arteries.

Freeing the traffic north of Newcastle.

And, something my North and Mid Wales colleagues will be particularly pleased to hear…

…we’re protecting beautiful villages in the Welsh Borders, as we finally build the Pant-Llanymynech bypass.

We promised to get Britain moving – and we’re getting it done.

And there’s one more road I want to mention.

It’s one of our most important regional arteries.

It is one of those totemic projects symbolising delay and obstruction.

Governments have been trying to fix it since the 1980s.

Every year, millions of cars crawl along it in traffic.

Ruining the backdrop to one of our most important historic landmarks.

To the many H & RHMs who have campaigned for this moment – I say this:

The A303 – this government’s going to get it done.

Madam Deputy Speaker,

Today we’ve announced the biggest programme of public investment ever.

£27bn for strategic roads this Parliament.

Funding to fill 50m potholes.

New railways and stations.

£5bn for broadband.

A new Mayor for West Yorkshire.

Investment in every region and nation of the United Kingdom.

We promised to get Britain building – this Budget is getting it done.

Madam Deputy Speaker,

Only by having a plan for prosperity will we grow the economy.

Only by having a growing economy can we invest in our public services.

And only by investing in our public services, the people’s priority, can we send a clear message to those who rely on them:

You are our priority.

Our public services are the one of the most important tools by which we, the government, can level up and spread opportunity…

…so that no matter who you are or where you were born, you’ll have every chance to succeed in our modern dynamic economy.

That starts with education.

We’ve already provided schools with a three-year settlement worth over £7 billion by 2022.

My RHF the Education Secretary is taking forward our plans to increase per pupil funding next year by an average of over 4%.

Today, I’m providing every region in the country with funding for specialist 16-19 maths schools…

…£25,000 per year, on average, for each secondary school to invest in arts activities…

…and £30m a year to improve PE teaching…

…along with £8m for the Football Foundation’s scheme to build new pitches for around 300,000 people to play on.

And to support families, I’m providing £2.5m to fund research into how best to integrate family services, including family hubs, championed by My HF the Member for Congleton.

Next, I’d like to take the opportunity to pay tribute to my predecessor and friend, the RH Member for Bromsgrove.

One of the issues he is most passionate about is levelling up further education.

At the Spending Round, he increased funding for 16-19 education by £400m.

Today I can secure his legacy, with £1.5bn of new capital over five years to dramatically improve the condition of the FE college estate.

My predecessor wanted to level up FE – Saj, we’re getting it done.

Madam Deputy Speaker, I have one final education announcement.

I’ve talked today about Britain being the country of scientists, inventors and engineers.

But we’re also the country of Shakespeare, Austen and Dahl.

Our greatest export to the world is our language.

Our greatest asset is the free exchange of ideas and debate.

And our greatest responsibility is the education of our people.

A world-class education will help the next generation to thrive.

Nothing could be more fundamental to that than reading.

And yet digital publications are subject to VAT.

That can’t be right.

So today I am abolishing the reading tax.

From 1st Dec, just in time for Christmas, books, newspapers, magazines or academic journals, however they are read, will have no VAT charge whatsoever.

There will be no VAT on historical fiction by Hilary Mantel, manuals and textbooks like “Gray’s Anatomy”, or, indeed, works of fantasy like John McDonnell’s “Economics for the Many”. The irony is, it sold so few, it is literally his own little-read book.

Madam Deputy Speaker,

Our second priority is to make sure people have affordable and safe housing.

Today I can make good our promise to extend the Affordable Homes Programme with a new, multi-year settlement of £12 billion.

This will be the largest cash investment in affordable housing in a decade.

To support Local Authorities to invest in their communities, I’m cutting interest rates on lending for social housing by 1 percentage point…

…making available more than £1bn of discounted loans for local infrastructure…

…and consulting on the future of the Public Works Loan Board.

I’m confirming nearly £1.1bn of allocations from the Housing Infrastructure Fund…

…to build nearly 70,000 new homes in high demand areas across the country…

…a new £400m Fund for ambitious Mayors like Andy Street in the West Midlands, to build on Brownfield sites…

…and tomorrow, my RHF the Housing Secretary will set out for the House comprehensive reforms to bring the planning system into the 21st century.

But the housing challenge is most acutely felt by those with no home at all.

So today I’m confirming nearly £650m of funding to help rough sleepers into permanent accommodation.

That will buy up to 6,000 new places for people to live…

…enable a step change in support services…

…and help us meet our promise to end rough sleeping in this Parliament.

And to fund those rough sleeping measures…

…I’m confirming today that our manifesto promise to introduce a new stamp duty surcharge for non-UK residents…

…will be introduced at a rate of 2% from April 2021.

Madam Deputy Speaker,

I have one further measure to announce on housing.

Two and a half years on, we’re still grappling with the tragic legacy of Grenfell.

Last year, we allocated £600m to remove unsafe Aluminium Composite Material (or ACM) from high rise residential buildings.

Today I go further.

Expert advice is clear that new public funding must concentrate on removing unsafe materials from high rise residential buildings.

So, today, I am creating a new Building Safety Fund worth £1 billion.

That is what the independent experts have called for.

That is what the Select Committee has called for.

That is even what the Opposition have called for.

That new fund will go beyond dealing with Aluminium Composite Material to make sure that all unsafe combustible cladding will be removed…

…from every private and social residential building above 18 metres high.

And My RHF the Housing Secretary will spearhead our efforts to make sure developers and building owners do their fair share as well.

Madam Deputy Speaker,

There is no more cherished public service than our NHS.

Whatever resources the NHS needs to deal with coronavirus – it will get.

We all benefit from a thriving health service – so it is right that we ask everyone to contribute.

Business benefits from our NHS.

So, as promised in our manifesto, the Corporation Tax rate will not be cut this year, but will remain at 19% – still the lowest rate in the G20.

Migrants benefit from our NHS.

And we all want them to do so – but it’s right that what people get out, they also put in.

There is a surcharge already, but it doesn’t properly reflect the benefits people receive.

So, as we promised in our manifesto, we are increasing the Immigration Health Surcharge to £624, with a discounted rate for children.

To raise further funds for the NHS, I’m announcing a package of measures today to clamp down on aggressive tax avoidance, evasion and non-compliance…

…including extra funding for HMRC to secure £4.4bn of additional revenue.

And those extra contributions allow me to take three further steps to support our health services.

First, mental health support can be critical for many people – and particularly for our veterans.

Thanks to the campaigning from My HF the Member for Wolverhampton South West, and My RHF the Member for Harwich and North Essex…

…I will be supporting veterans’ with mental health needs with a £10m donation to the Armed Forces Covenant Fund Trust…

…and I’m also confirming today that, to encourage employers to offer veterans work, we’ll introduce a new National Insurance relief.

Second, I’ve listened to concerns, from all sides of this House, that the pensions tax system is preventing Doctors from taking on more hours.

To significantly reduce the number of people that the tapered annual allowance affects…

…I’m increasing both taper thresholds by £90,000, removing anyone with income below £200,000.

Based on their vital work for the NHS, that will take around 98% of consultants and 96% of GPs out of the taper altogether.

At the same time, I’m reducing the minimum annual allowance to £4,000 – which will only impact those with incomes above £300,000.

This is a £2bn commitment that supports our hardworking Doctors.

Let me turn now to the overall funding settlement for the NHS.

We’ve already provided the NHS with a record funding increase.

£34bn over five years – the biggest cash increase in public services since the Second World War.

Today I can go further.

I can announce over £6bn of new funding in this Parliament to support the NHS.

That new money will deliver:

50,000 more nurses.

50 million more GP surgery appointments.

And work starting on 40 new hospitals.

And you heard that right, 40 new hospitals.

We promised to back our NHS – this Budget gets it done.

I have one last point to make about public services.

We have now left the EU.

We promised to get Brexit done, and we got it done.

We promised to regain control of the money we send to Brussels.

And for the first time ever, today’s OBR forecast shows that the billions of pounds we would have sent to the EU, we can now spend on our priorities.

Today, I’m launching the next Spending Review, to conclude in July, setting out detailed spending plans for the Parliament.

Let me set out for the House our new totals for spending on public services.

The OBR have said that today’s Budget will be the largest sustained fiscal boost for thirty years.

Next year, day-to-day departmental spending will grow at the fastest rate in fifteen years.

Over the spending review period, its set to grow at the fastest rate since 2004.

An average growth rate in real terms of 2.8% – twice as fast as the economy.

That means that by the end of the Parliament, day-to-day spending on public services will be £100 billion higher in cash terms than it is today.

More police – safer streets.

More nurses – better healthcare.

More teachers – better education.

Madam Deputy Speaker, the House now knows what the electorate already knows:

The Conservatives are the party of public services.

Madam Deputy Speaker,

We’re at the beginning of a new era in this country.

We have the freedom and the resources to decide our own future.

A future where we unleash the energy, inventiveness and creativity of all the British people.

And a future where we look outwards and are confident on the world stage.

That starts right now with our world-leading response to the coronavirus.

This is a Budget delivered in challenging times.

We will rise to this moment.

We will get through this together.

This Budget delivers security today.

But it also lays the foundations for prosperity tomorrow.

This is just the start.

Over the next few months we’ll tackle the big issues head on.

From our National Infrastructure Strategy…

…to social care…

…and further devolution.

This is the Budget of a Government that gets things done:

Creating jobs.

Cutting taxes.

Keeping the cost of living low.

Investing in our NHS.

Investing in our public services.

Investing in ideas.

Backing business.

Protecting our environment.

Building roads.

Building railways.

Building colleges.

Building houses.

Building our Union.

A Budget that delivers on our promises.

A People’s Budget from a People’s Government.

And I commend it to the House.

March 11, 2020
Philip Hammond – 2017 Budget Speech

Below is the text of the Budget Speech made by Philip Hammond in the House of Commons on 22 November 2017.

I report today on an economy that continues to grow, continues to create more jobs than ever before, and continues to confound those who seek to talk it down: an economy set on a path to a new relationship with our European neighbours and a new future outside the European Union—a future that will be full of change, full of new challenges, and, above all, full of new opportunities. In this Budget, we express our resolve to look forward, not back; to embrace that change; to meet those challenges head on; and to seize those opportunities for Britain.

The negotiations on our future relationship with the European Union are in a critical phase. My right hon. Friend the Prime Minister has been clear about the fact that we seek a deep and special partnership, based on free and frictionless trade in goods and services, close collaboration on security, and strong mutual respect and friendship; and, as Chancellor, I am clear about the fact that one of the biggest boosts that we can provide for businesses and families—one of the best ways to protect British jobs and prosperity as we build that new future—is to make early progress in delivering my right hon. Friend’s vision, with an implementation agreement that allows businesses to plan and invest with confidence. This Government will make the pursuit of that progress a top priority in the weeks ahead.

While we work to achieve this deep and special partnership, we are determined to ensure that the country is prepared for every possible outcome. We have already invested almost £700 million in Brexit preparations and today I am setting aside over the next two years another £3 billion. I stand ready to allocate further sums if and when needed. No one should doubt our resolve.

But this Budget is about much more than Brexit. The world is on the brink of a technological revolution—one that will change the way we work and live, and transform our living standards for generations to come. We face a choice: either we embrace the future, seize the opportunities which lie within our grasp and build on Britain’s great global success story; or, as the Labour party advocates, we reject change and turn inwards to the failed and irrelevant dogmas of the past.

We have no doubts. We choose the future. We choose to run towards change, not away from it, and to prepare our people to meet the challenges ahead, not to hide from them. And the prize will be enormous because, for the first time in decades, Britain is genuinely at the forefront of this technological revolution—not just in our universities and research institutes, but this time in the commercial development labs of our great companies, and on factory floors and business parks across this land. But we must invest to secure that bright future for Britain, and at this Budget that is what we choose to do.

We are listening and we understand the frustration of families where real incomes are under pressure. So at this Budget, we choose a balanced approach—yes, maintaining fiscal responsibility as we at last see our debt peaking, continuing to invest in the skills and infrastructure that will support the jobs of the future and building the homes that will make good on our promise to the next generation, but crucially also helping families to cope with the cost of living.

As we invest in our country’s future, I have a clear vision of what that global Britain looks like: a prosperous and inclusive economy where everybody has the opportunity to shine, wherever in these islands they live and whatever their background, where talent and hard work are rewarded, and where the dream of home ownership is a reality for all generations; a hub of enterprise and innovation; a beacon of creativity; a civilised and tolerant place that cares for the vulnerable and nurtures the talented; an outward-looking, free-trading nation; and a force for good in the world. That is the Britain that I want to leave to my children—a Britain we can be proud of, and a country fit for the future. I know we will not build it overnight but we will lay the foundations in this Budget today. [Interruption.] Mr Deputy Speaker, I am being tempted with something a little more exotic here, but I will stick to plain water. I did take the precaution of asking the Prime Minister to bring a packet of cough sweets, just in case. [Laughter.]

Mr Deputy Speaker (Mr Lindsay Hoyle)

Order. I think it might be hearing aids that we will all need if this noise continues.

Mr Hammond

I shall first report to the House on the economic forecasts of the independent Office for Budget Responsibility. This is the bit with the “long, economicky words”. Once again, I thank Robert Chote and his team for their hard work over the last few weeks. I believe passionately that the best way to improve the lives of people across the length and breadth of this country is to help them get into work. I am acutely aware that 1.4 million people out of work is 1.4 million too many, so today I welcome the OBR forecast that there will be another 600,000 people in work by 2022. I am immensely proud of this Government’s record in having created over 3 million new jobs since 2010—incidentally, a rather far cry from the 1.2 million job losses that the right hon. Member for Hayes and Harlington (John McDonnell) predicted in 2011—but let nobody be in any doubt that this Government will continue their relentless focus on getting more people into work, giving them the security and peace of mind of a regular wage.

I also want work to be good quality and well paid, and regrettably our productivity performance continues to disappoint. The OBR has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2% a year, but it has remained stubbornly flat. So today it revises down the outlook for productivity growth, business investment and GDP growth across the forecast period. The OBR now expects to see GDP grow 1.5% in 2017, 1.4% in 2018, 1.3% in 2019 and 2020, before picking back up to 1.5% and finally 1.6% in 2022, with inflation peaking at 3% in this quarter before falling back towards target over the next year. I reaffirm the remit for the independent Monetary Policy Committee and its 2% CPI inflation target.

We took over an economy with the highest budget deficit in our peacetime history. Since then, thanks to the hard work of the British people, that deficit has been shrinking and next year will be below 2%. However, our debt is still too high and we need to get it down, not for some ideological reason but because excessive debt undermines our economic security, leaving us vulnerable to shocks; because it passes the burden unfairly to the next generation; and because it cannot be right to spend more on our debt interest than we do on our police and our armed forces combined. So I am pleased to tell the House that the OBR expects debt to peak this year and then gradually fall as a share of GDP—a turning point in our recovery from Labour’s crisis. Apparently not everyone shares the view that falling debt is good news. I have heard representations from Labour Members suggesting increasing the debt by £500 billion, taking us back to square one and wasting an extra £7 billion a year on debt interest. If they carry on like that, there will be plenty of others joining Kezia Dugdale in saying, “I’m Labour, get me out of here.”

I have rejected these representations, and instead I reaffirm our pledge of fiscal responsibility and our commitment to the fiscal rules I set out last autumn, but now I choose to use some of the headroom I established then, so that as well as reducing debt, we can also invest in Britain’s future, support our key public services, keep taxes low and provide a little help to families and businesses under pressure: a balanced approach that will prepare Britain for the future, not seek to hide from it.

Today, the OBR confirms that we are on track to meet our fiscal rules. Borrowing is forecast to be £49.9 billion this year. That is £8.4 billion lower than forecast at the spring Budget. After taking account of all decisions since the spring Budget, the OBR’s GDP revision and the measures I will announce today, borrowing will fall in every year of the forecast, from £39.5 billion next year to £25.6 billion in 2022-23, to reach its lowest level in 20 years. As a percentage of our GDP, it falls from 2.4% this year to 1.9% next year, then 1.6%, 1.5%, 1.3% and, finally, 1.1% in 2022-23. The OBR forecasts the structural deficit to be 1.3% of GDP in 2020-21, giving £14.8 billion of headroom against our 2% target. Debt will peak at 86.5% of GDP this year and then fall to 86.4% next year, then 86.1%, 83.1%, 79.3% and, finally, 79.1% in 2022-23—the first sustained decline in debt in 17 years. Under Conservative-led Governments, the hard work of the British people is steadily clearing up the mess left behind by Labour.

At the heart of a global Britain must be a dynamic and innovative economy. On Monday, the Prime Minister set out the key elements of our modern industrial strategy—a strategy to raise productivity and wages in all parts of our country and to guarantee the brighter future we have promised to the next generation. My right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy will present a White Paper to the House in the next few days. This is not just an economic plan; it is a key part of our vision for a fairer Britain—a Britain where every one of our citizens can contribute to, and share in, the benefits of prosperity. The key to raising the wages of British workers is raising investment, both public and private, and we are investing in Britain’s future: half a trillion pounds since 2010; the biggest rail programme since Victorian times; the largest road building programme since the 1970s; the biggest increase in science and innovation funding in four decades; and the two largest infrastructure projects in Europe—Crossrail and HS2.

When I took this job, I committed to making the battle to raise Britain’s productivity, and thus the nation’s pay, the central mission of the Treasury. Last autumn, I launched the national productivity investment fund to provide an additional £23 billion of investment over five years to upgrade Britain’s economic infrastructure for the 21st century. Today, I can announce that I will extend the fund for a further year and expand it to over £31 billion, meaning that public investment under this Government will, on average, be £25 billion higher per year in real terms than under the last Labour Government. We are allocating a further £2.3 billion for investment in R and D, and we will increase the main R and D tax credit to 12%, taking the first strides towards the ambition of the industrial strategy to drive up R and D investment across the economy to 2.4% of GDP.

Britain is the world’s sixth largest economy. London is the No. 1 international financial services centre. We have some of the world’s best companies, and a commanding position in a raft of tech and digital industries that will form the backbone of the global economy of the future. Those who underestimate Britain do so at their peril, because we will harness that potential and turn it into the high-paid, high-productivity jobs of tomorrow. Others may choose to reject the future; we choose to embrace it. A new tech business is founded in Britain every hour, and I want that to be every half hour, so today we invest over £500 million in a range of initiatives from artificial intelligence to 5G and full-fibre broadband. We support regulatory innovation with a new regulators’ pioneer fund and a new geospatial data commission—[Interruption.] Opposition Members should listen. The new commission will develop a strategy for using the Government’s location data to support economic growth.

To help our tech start-ups reach scale, we asked Sir Damon Buffini to review the availability of patient capital, and I am grateful to him. Today, we are publishing an action plan to unlock over £20 billion of new investment in UK knowledge-intensive, scale-up businesses, including through a new fund in the British Business Bank seeded with £2.5 billion of public money, by facilitating pension fund access to long-term investments, and by doubling enterprise investment scheme limits for knowledge-intensive companies while ensuring that EIS is not used as a shelter for low-risk capital preservation schemes. We stand ready to step in to replace European Investment Fund lending if necessary.

There is perhaps no technology as symbolic of the revolution gathering pace around us as driverless vehicles—[Interruption.] Opposition Members surely do not want me to make that joke about the Labour party again. I know that Jeremy Clarkson does not like driverless vehicles, but there are many other good reasons to pursue the technology, so today we step up our support for it—sorry Jeremy, but this is definitely not the first time that you have been snubbed by Hammond and May. Our future vehicles will be driverless, but they will be electric first, and that is a change that needs to come as soon as possible for our planet. So we will establish a new £400 million charging infrastructure fund and invest an extra £100 million in plug-in car grants and £40 million in charging R and D. I can confirm today that we will clarify the law so that people who charge their electric vehicles at work will not face a benefit-in-kind charge from next year. The tax system can play an important role in protecting our environment.

We owe it to our children that the air they breathe is clean. We published our air quality plan earlier this year, and we said then that we would fund it through taxes on new diesel cars. From April 2018, the first-year vehicle excise duty rate for diesel cars that do not meet the latest standards will go up by one band, and the existing diesel supplement in company car tax will increase by one percentage point. Drivers buying a new car will be able to avoid the charge as soon as manufacturers bring forward the next-generation cleaner diesels that we all want to see, and we will only apply the measures to cars. Before the headline writers start limbering up, let me be quite clear: no white van man or white van woman will be hit by these measures. The levy will fund a new £220 million clean air fund to provide support for the implementation of local air quality plans, improving the quality of the air in cities and towns up and down the UK.

However, air quality is, sadly, not our only environmental challenge. Audiences across the country who have been glued to “Blue Planet II” have been starkly reminded of the problems of plastics pollution. The UK led the world on climate change agreements and is a pioneer in protecting marine environments. I want us now to become a world leader in tackling the scourge of the plastic that is littering our planet and our oceans. With my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs, I will investigate how the tax system and charges on single-use plastic items can reduce waste, because we cannot keep our promise to the next generation to build an economy fit for the future unless we ensure our planet has a future.

Meeting the challenge of change head-on means giving our people the confidence to embrace it and the skills to reap the rewards from it, and we have a plan to do so. We are delivering 3 million apprenticeship starts by 2020 thanks to our apprenticeship levy, and I will keep under review the flexibility that levy payers have to spend that money. We are introducing T-levels, and today I provide a further £20 million to support further education colleges to prepare for them. Knowledge of maths is key to the high-tech, cutting-edge jobs in our digital economy, but it is also useful in less glamorous roles such as frontline politics.

So we will expand the Teaching for Mastery of Maths programme to a further 3,000 schools; we will provide £40 million to train maths teachers across the country; we will introduce a £600 maths premium for schools, for every additional pupil who takes A-level or core maths; and we will invite proposals for new maths schools across England, so that highly talented young mathematicians can release their potential, wherever they live and whatever their background. More maths for everyone—Mr Deputy Speaker, don’t let anyone say I don’t know how to show the nation a good time.

Computer science is also at the heart of this revolution, so we will ensure that every secondary school pupil can study computing by tripling the number of trained computer science teachers to 12,000, and we will work with industry to create a new national centre for computing. But rapid technological change means that we also need to help people retrain during their working lives, ensuring that our workforce are equipped with the skills they will need for the workplace of the future. Today, my right hon. Friend the Education Secretary and I are launching an historic partnership, between the Government, the CBI and the TUC, to set the strategic direction for a national retraining scheme. Its first priority will be to boost digital skills and support expansion of the construction sector. To make a start immediately, we will invest £30 million in the development of digital skills distance learning courses, so that people can learn wherever they are and whenever they want.

I am pleased to be able to accept the representation I have received from the TUC to continue to fund Unionlearn, which I recognise is a valuable part of our support for workplace learning. [Interruption.] Apparently the Opposition do not know what that is, Mr Deputy Speaker. I got an email from Len asking me especially, so I couldn’t say no, could I?

Backing skills is key to unlocking growth nationally, but far too much of our economic strength is concentrated in our capital city. If we are truly to build an economy that is fit for the future, we have to get all parts of the UK firing on all cylinders. That is what our modern industrial strategy is all about. Today we back the northern powerhouse, the midlands engine and elected Mayors across the UK, with a new £1.7 billion Transforming Cities fund: half to be shared by the six areas with elected metro Mayors, to give them the firepower to deliver on local transport priorities, and the remainder to be open to competition by other cities in England.

We are investing £300 million to ensure that HS2 infrastructure can accommodate future northern powerhouse and midlands engine rail improvements. I am also providing £30 million today to trial new solutions to improve mobile and digital connectivity on trains on the TransPennine route. We are developing a local industrial strategy with Manchester, and I am pleased to announce a second devolution deal with Andy Street in the west midlands. We have agreed a new devolution deal with North of the Tyne, and we will fund the replacement of the 40-year-old rolling stock on the Tyne and Wear metro, at a total investment of £337 million.

We will invest £123 million in the Redcar steelworks site to support the ambitious plans of our new Tees Valley Mayor, Ben Houchen, and my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), who are leading the fight for prosperity in their area. We are piloting 100% business rates retention in London next year and continuing to work with Transport for London on the funding and financing of Crossrail 2. We will also make over £1 billion of discounted lending available to local authorities across the country to support high-value infrastructure projects—a Conservative Government giving power back to the people of Britain, and driving prosperity and greater fairness across our United Kingdom.

The decisions taken in this Budget also mean £2 billion more for the Scottish Government, £1.2 billion more for the Welsh Government and over £650 million more for a Northern Ireland Executive. I can confirm today that progress is being made on city deals for Tay Cities and Stirling, and on a growth deal for Borderlands. I am getting used to the experience of having my ear bent by 13 Scottish Conservative colleagues, most recently on the issue of Scottish police and fire VAT. The Scottish National party knew the rules and knew the consequences of introducing these bodies, and ploughed ahead anyway. My Scottish Conservative colleagues have persuaded me that the Scottish people should not lose out just because of the obstinacy of the SNP Government, so we will legislate to allow VAT refunds from April 2018.

In response to yet more representations from my hon. Friends from Scotland, aided and abetted by my hon. Friend the Member for Waveney (Peter Aldous), from November 2018 we will introduce transferable tax history for transfers of oil and gas fields in the North sea, an innovative tax policy that will encourage new entrants to bring fresh investment to a basin that still holds up to 20 billion barrels of oil.

We will begin negotiations towards growth deals for north Wales and mid-Wales, and we will abolish tolls on the Severn bridge, as promised, by the end of next year. We will deliver on our commitment to review the effect of VAT and air passenger duty on tourism in Northern Ireland, reporting at next year’s Budget, and we will open negotiations for a Belfast city deal as part of our commitment to a comprehensive and ambitious set of city deals across Northern Ireland—a Conservative Government delivering for all parts of our United Kingdom.

It is only by supporting our regions and nations, dealing with our debts and investing in skills and infrastructure for the long term that we can we build an economy fit for the future. But I recognise that many people are feeling pressure on their budgets now, and because we are all in politics to make people’s lives better, in the short term as well as the long term, we will take further measures in this Budget to help families and businesses where we can.

The switch to universal credit is a long-overdue and necessary reform, replacing Labour’s broken system that discouraged people from working more than 16 hours a week and trapped 1.4 million on out-of-work benefits for nearly a decade. Universal credit delivers a modern welfare system where work always pays and people are supported to earn, but I recognise the genuine concerns on both sides of the House about the operational delivery of this benefit, and today we will act on those concerns.

First, we will remove the seven-day waiting period applied at the beginning of a benefit claim so that entitlement to universal credit will start on the day of the claim. To provide greater support during the waiting period, we will change the advances system to ensure that any household that needs it can access a full month’s payment within five days of applying; we will make it possible to apply for an advance online, and we will extend the repayment period for advances from six months to 12 months; and any new universal credit claimant in receipt of housing benefit at the time of the claim will continue to receive that housing benefit for a further two weeks, making it easier for them to pay their rent. This is a £1½ billion package to address concerns about the delivery of the benefit. My right hon. Friend the Secretary of State for Work and Pensions will give further details in a statement to the House tomorrow.

We also want to help low-income households in areas where rents have been rising fastest. In the long run, of course, the answer lies in increasing the amount of housing available, a theme I shall return to. In the meantime, the best way to help them is by increasing the rate of support in those areas where rents are least affordable. So we will increase targeted affordability funding by £125 million over the next two years, benefiting 140,000 people. We will always listen to genuine concerns and act where we can to help.

Making work pay is core to the philosophy of this Government. That is why we introduced the national living wage in 2016. From April, it will rise by 4.4%, from £7.50 an hour to £7.83, handing full-time workers a further £600 pay increase and taking their total pay rise since its introduction to over £2,000 a year. We also accept the Low Pay Commission’s recommendations on national minimum wage rates, supporting our young people with the largest increase in youth rates in 10 years and delivering a pay rise for over 2 million minimum wage workers of all ages across the country.

The facts are these: income inequality today is at its lowest level in 30 years; the top 1% are paying a larger share of income tax than at any time under the last Labour Government; the poorest 10% in Britain have seen their real incomes grow faster since 2010 than the richest 10%; and the proportion of full-time jobs that are low paid is at its lowest level for 20 years—a Conservative Government delivering a fairer Britain.

As well as making work pay, we want families to keep more of the money they earn. When we came into office, the personal allowance stood at £6,475 a year. From April, I will increase the personal allowance to £11,850 and the higher rate threshold to £46,350, making progress towards our manifesto commitments, which I reiterate today. The typical basic-rate taxpayer will be £1,075 a year better off compared with 2010, and a full-time worker on the national living wage will take home more than £3,800 extra—this Conservative Government, delivering for Britain’s workers.

I turn now to duties. The tobacco duty escalator will continue at inflation plus 2%, with an additional 1% duty on hand-rolling tobacco this year, and minimum excise duty on cigarettes will also rise. Excessive alcohol consumption by the most vulnerable people is all too often done through cheap, high-strength, low-quality products, especially so-called white ciders. I pay tribute to the campaign led by my hon. Friend the Member for Congleton (Fiona Bruce) on this issue. Following our recent consultation, we will legislate to increase duty on these products from 2019. But, recognising the pressure on household budgets, and backing our great British pubs, duties on other ciders, wines, spirits and beer will be frozen. This will mean that a bottle of whisky will be £1.15 less in 2018 than if we had continued with Labour’s plans, and a pint of beer 12p less. So, merry Christmas, Mr Deputy Speaker.

The cost of travel is an important factor for families and businesses. From April 2019, I will again freeze short-haul air passenger duty rates, and I will also freeze long-haul economy rates, paid for by an increase on premium-class tickets and on private jets—sorry, Lewis. For those who do not stretch to a private jet, I can announce a new railcard for those aged 26 to 30, giving 4.5 million more young people a third off their rail fares. I will, once again, cancel the fuel duty rise for both petrol and diesel that is scheduled for April. Since 2010, we will have saved the average car driver £850 and the average van driver over £2,100, compared with Labour’s escalator plans. Fuel duty has now been frozen for the longest period in 40 years, at a total cost to the Exchequer of £46 billion since 2010.

Our NHS is one of our great institutions: an essential part of what we are as a nation and a source of pride the length and breadth of the country. Its values are the values of the British people, and we will always back it. Dedicated NHS staff are handling the challenges of an ageing population and rapidly advancing technology with skill and commitment, and we salute them. Mr Deputy Speaker, although you would not think so to listen to the Leader of the Opposition as he regularly talks down the achievements of the NHS, the number of patients being treated is at record levels, cancer survival rates are at their highest ever level, 17 million people are now able to access GP appointments in the evenings and at weekends, and public satisfaction among hospital in-patients is at its highest level in more than 20 years.

It is central to this Government’s vision that everyone has access to the NHS, free at the point of need. That is why we endorsed and funded the NHS’s five-year forward view in 2014. But even with this additional funding, we acknowledge that the service remains under pressure, and today we respond. First, we will deliver an additional £10 billion package of capital investment in frontline services over the course of this Parliament to support the sustainability and transformation plans that will make our NHS more resilient—investing for an NHS fit for the future. But we also recognise that the NHS is under pressure right now. I am therefore exceptionally, and outside the spending review process, making an additional commitment of resource funding of £2.8 billion to the NHS in England: £350 million immediately, to allow trusts to plan for this winter, and £1.6 billion in 2018-19, with the balance in 2019-20, taking the extra resource into the NHS next year to £3.75 billion in total, meaning that our NHS will receive a £7.5 billion increase to its resource budget over this year and next.

Our nation’s nurses provide invaluable support to us all in our time of greatest need and deserve our deepest gratitude for their tireless efforts. My right hon. Friend the Health Secretary has already begun discussions with health unions on pay structure modernisation for “Agenda for Change” staff, to improve recruitment and retention. He will submit evidence to the independent pay review body in due course, but I want to assure NHS staff and patients, and Members of this House, that if the Health Secretary’s talks bear fruit, I will protect patient services by providing additional funding for such a settlement.

Just as our public services must be fit for the future, so too must our tax system. It must remain competitive to attract the brightest and the best to establish and grow the businesses of the future. It must raise the revenue we need to fund our public services and it must be robust against abuse so that it is fair to all. We have heard a lot of talk recently from the Opposition about what they would do to crack down on tax avoidance and evasion, but the truth is that they did not. It is this Government who have clamped down on avoidance and evasion; this Government who have seen the tax gap cut by a quarter since 2010, to a record low; and this Government who have raked in an extra £160 billion over seven years for our public services by collecting the taxes that are due. So I am going to take no lectures, but I will take action. This Budget continues the work of the last seven years, with a package of measures that is forecast to raise £4.8 billion by 2022-23—doing the job that Labour failed to do for 13 years in office.

Our long-term phased reduction of corporation tax has generated investment and jobs and raised £20 billion extra for our public services. We are committed to maintaining Britain’s competitive corporation tax rates, but there is a case now for removing the anomaly of the indexation allowance for capital gains, bringing the corporate tax system into line with the personal capital gains tax system.

I will therefore freeze this allowance so that companies receive relief for inflation up to January 2018, but not thereafter.

I am grateful to the Office of Tax Simplification for its recent report on the VAT registration threshold. At £85,000, the UK’s VAT threshold is by far the highest in the OECD. By contrast, in Germany it is just £15,600. I note the OTS conclusion that it distorts competition and disincentivises business growth. I also note the concerns of the Federation of Small Businesses about the cliff edge of the threshold. But such a high threshold also has the benefit of keeping the majority of small businesses out of VAT altogether, so I am not minded to reduce the threshold, but I will consult on whether its design could better incentivise growth, and in the meantime we will maintain it at its current level of £85,000 for the next two years.

We cannot build an economy fit for the future without supporting its backbone: our 5.5 million small businesses, which are responsible between them for nearly half of our private sector jobs. They give our economy its extraordinary vibrancy and resilience, but I recognise that many are feeling under pressure right now. I know what hard work it is to get a business off the ground, to get it to grow, so today I want to do what we can to ease that pressure.

Business rates represent a high fixed cost for small businesses. At Budget 2016 we introduced a package of business rate relief worth almost £9 billion, with a further £435 million in the spring Budget. Today I go further. We have listened to concerns about the potential costs of the annual uprating of business rates in April next year, and today I will accept the representation of the British Chambers of Commerce, CBI and other business organisations and bring forward the planned switch from RPI to CPI by two years, to April 2018—a move worth £2.3 billion to businesses over the next five years.

I have also listened to businesses affected by the so-called staircase tax. We will change the law to ensure that where a business has been impacted by the Supreme Court ruling, it can have its original bill reinstated, if it chooses, and backdated. I hope that I can expect cross-party backing to speed that measure through Parliament.

There are three simple steps to solve the staircase tax—[Interruption.] What do they expect? It’s the tax section. To support the thousands of small pubs that are at the heart of so many of our communities, we will extend the £1,000 discount for pubs with a rateable value of less than £100,000 for one more year, to March 2019.

And I have heard the concerns about the five-yearly revaluation system. Shorter revaluation periods will reduce the size of changes in valuations, so I can announce today that after the next revaluation, future revaluations will take place every three years—this Conservative Government listening to small business.

There is a wider concern across this House and in the business community about the tax system in the digital age. Along with the innovation and growth that it brings, digitalisation poses challenges for the sustainability and fairness of our tax system. But this challenge can only be properly solved on an international basis, and the UK is leading the charge in the OECD and the G20 to find solutions.

Today we publish a position paper on the tax challenge posed by the digital economy, setting out our emerging thinking about potential solutions. But in the meantime, we will take what action we can. Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed, and some of these royalties relate to UK sales. So from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales when those royalties are paid to a low-tax jurisdiction, even if they do not fall to be taxed in the UK under our current rules. That will raise about £200 million a year. It does not solve the problem, but it does send a signal of our determination and we will continue work in the international arena to find a sustainable and fair long-term solution that properly taxes the digital businesses that operate in our cyber-space.

Following representations from a number of my hon. Friends, we are also taking further action to address online VAT fraud, which costs the taxpayer £1.2 billion per year, by making all online marketplaces jointly liable with their sellers for VAT, ensuring that sellers operating through them pay the right amount of VAT, just as we would expect traditional retailers to do.

I want to turn to the challenge of the housing market, but before I do so I want to touch on the aftermath of the appalling events at Grenfell Tower. We have provided financial support for the victims of this terrible tragedy, and today I can announce we will provide Kensington and Chelsea Council with a further £28 million for mental health and counselling services, regeneration support for the surrounding areas and to provide a new community space for local residents.

This tragedy should never have happened, and we must ensure that nothing like it ever happens again. All local authorities and housing associations must carry out any identified necessary safety works as soon as possible. If any local authority cannot access funding to pay for essential fire safety work, they should contact us immediately. I have said before, and I will say it again today: we will not allow financial constraints to get in the way of any essential fire safety work.

I want to address the issue of empty properties. It cannot be right to leave property empty when so many are desperate for a place to live, so we will legislate to give local authorities the power to charge a 100% council tax premium on empty properties. We will also launch a consultation on barriers to longer tenancies in the private rented sector and how we might encourage landlords to offer them to those tenants who want the extra security.

I also want to say something about rough sleeping. It is unacceptable that in 21st-century Britain there are people sleeping on the streets, so we will invest today £28 million in three new Housing First pilots in the west midlands, Manchester and Liverpool, and we will establish a homelessness taskforce as part of our commitment to halving rough sleeping by 2022 and eliminating it by 2027.

I thank the many colleagues who submitted ideas on how to tackle the challenge of the housing market, including my hon. Friends the Members for North East Hampshire (Mr Jayawardena), for Eastleigh (Mims Davies) and for Weston-super-Mare (John Penrose) in particular. By continuing to invest in Britain’s infrastructure, skills and research and development, we will ensure the recovery in productivity growth that is the key to delivering our vision of a stronger, fairer, more balanced economy, and the assurance to the next generation of their economic security.

But however successful we are in that endeavour, there is one area where young people today will, rightly, feel concern about their future prospects, and that is in the housing market. House prices are increasingly out of reach for many. It takes too long to save for a deposit, and rents absorb too high a portion of monthly income, so the number of 25 to 34-year-olds owning their own home has dropped from 59% to just 38% over the last 13 years. Put simply, successive Governments, over decades, have failed to build enough homes to deliver the home-owning dream that this country has always been proud of, or indeed to meet the needs of those who rent.

In Manchester a few weeks ago, my right hon. Friend the Prime Minister made a pledge to Britain’s younger generation that she would dedicate her premiership to fixing this problem, and today we take the next steps to delivering on that pledge. By choosing to build we send a message to the next generation that getting on the housing ladder is not just a dream of your parents’ past, but a reality for your future.

We have made a start with schemes such as Help to Buy, which has helped over 320,000 people buy a home. We have increased the supply of homes by more than 1.1 million since 2010, including nearly 350,000 affordable homes. House building stands at its highest level since the crash, with the latest figures showing that over 217,000 net additional homes were added to the stock last year. That is a remarkable achievement, but we need to do better still if we are to see affordability improve.

This is a complex challenge, and there is no single magic bullet. If we do not increase the supply of land for new homes, more money will simply inflate prices and make matters worse. If we do not do more to support the growth of the SME house building sector that was all but wiped out by Labour’s great recession, we will remain dependent on the major national house builders that dominate the industry. If we do not train the construction workers of tomorrow, we may generate planning permissions but we will not turn them into homes. Solving this challenge will require money, it will require planning reform and it will require intervention. So today we set out an ambitious plan to tackle the housing challenge.

Over the next five years, we will commit a total of at least £44 billion of capital funding, loans and guarantees to support our housing market, to boost the supply of skills, resources and building land, and to create the financial incentives necessary to deliver 300,000 net additional homes a year on average by the mid-2020s—the biggest annual increase in housing supply since 1970; new money for the home builders fund to get SME housebuilders building again; a £630 million small sites fund to unstick the delivery of 40,000 homes; a further £2.7 billion to more than double the housing infrastructure fund; £400 million more for estate regeneration; a £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes; a lifting of HRA caps for councils in high demand areas, to get them building again; and £8 billion of new financial guarantees to support private house building and the purpose-built private rented sector. And because we need a workforce to build these new homes, we are providing an additional £34 million to develop construction skills across the country.

Solving the housing challenge takes more than money—it takes planning reform. We will focus on the urban areas where people want to live and where most jobs are created, making best use of our urban land and continuing the strong protection of our green belt, in particular building high quality, high density homes in city centres and around major transport hubs. And to put the needs of our young people first, we will ensure that councils in high demand areas permit more homes for local first-time buyers and affordable renters.

My right hon. Friend the Communities Secretary will set out more detail in a statement to the House in due course. However, one thing is very clear: there is a significant gap between the number of planning permissions granted and the number of homes built. In London alone, there are 270,000 residential planning permissions unbuilt. We need to understand why. So I am establishing an urgent review to look at the gap between planning permissions and housing starts. It will be chaired by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and will deliver an interim report in time for the spring statement next year. And if that report finds that vitally needed land is being withheld from the market for commercial, rather than technical, reasons, we will intervene to change the incentives to ensure that such land is brought forward for development, using direct intervention compulsory purchase powers as necessary.

Mr Deputy Speaker, my right hon. Friend the Prime Minister has said that we will fix this problem, and no one should doubt the Government’s determination to do so. But the solution will not deliver itself. Local authorities will need help and support. Developers will need encouragement and persuasion. Infrastructure to facilitate higher-density development must be funded and delivered. So the Homes and Communities Agency will expand to become Homes England, bringing together money, expertise and planning and compulsory purchase powers, with a clear remit to facilitate delivery of sufficient new homes, where they are most needed, to deliver a sustained improvement in housing affordability.

But Mr Deputy Speaker, the battle to achieve and sustain affordability will be a long-term one, so we also need to look beyond this Parliament, to long-term measures. We will use new town development corporations to kick-start five new locally agreed garden towns in areas of demand pressure, delivered through public-private partnerships and designed to attract long-term capital investment from around the world.

Last week, the National Infrastructure Commission published their report on the Cambridge-Milton Keynes-Oxford corridor. Today we back their vision and commit to building up to 1 million homes by 2050, completing the road and rail infrastructure to support them. And as a down-payment on this plan, we have agreed an ambitious housing deal with Oxfordshire to deliver 100,000 homes by 2031. We are capitalising on the global reputations of our two most famous universities and Britain’s biggest new town to create a dynamic new growth corridor for the 21st century.

Mr Deputy Speaker, this is our plan to deliver on the pledge we have made to the next generation: that the dream of home ownership will become a reality in this country once again. But I also want to take action today to help young people who are saving to own a home. One of the biggest challenges facing young first-time buyers is the cash required up front. We have put £10 billion more money into Help to Buy: Equity Loan to help those saving for a deposit, but I want to do more still. I have received representations for a temporary stamp duty holiday for first-time buyers, but this would only help those who are ready to purchase now and would offer nothing for the many who will need to save for years. So with effect from today, for all first-time-buyer purchases up to £300,000, I am abolishing stamp duty altogether.

Hon. Members

More!

Mr Deputy Speaker (Mr Lindsay Hoyle)

Order. If you want more, you are going to have to let the Chancellor finish.

Mr Hammond

Mr Deputy Speaker, to ensure that this relief also helps first-time buyers in very high price areas like London, it will also be available on the first £300,000 of the purchase price of properties up to £500,000, meaning an effective reduction of £5,000. That is a stamp duty cut for 95% for all first-time buyers who pay stamp duty and no stamp duty at all for 80% of first-time buyers from today. When we say we will revive the home-owning dream in Britain, we mean it. We do not underestimate the scale of the challenge, but today we have made a substantial down-payment.

Mr Deputy Speaker, one of the things that I love most about this country is its sense of opportunity. I have always felt it, and I want young people growing up today to have that same sense of boundless opportunity. In this Budget, I have set out a vision for Britain’s future and a plan for delivering it: by getting our debt down, by supporting British families and businesses, by investing in the technologies and the skills of the future and by creating the homes and the infrastructure that our country needs.

We are at a turning point in our history, and we resolve to look forwards, not backwards—to build on the strengths of the British economy, to embrace change not hide from it, to seize the opportunities ahead of us and, together, to build a Britain fit for the future. I commend this statement to the House.

November 22, 2017
George Osborne – 2016 Budget Speech

Below is the text of the Budget Speech made by George Osborne, the Chancellor of the Exchequer, in the House of Commons on 16 March 2016.

Mr Deputy Speaker,

Today I report on an economy set to grow faster than any other major advanced economy in the world.

I report on a labour market delivering the highest employment in our history.

And I report on a deficit down by two thirds, falling each year and – I can confirm today – on course for a budget surplus.

The British economy is stronger because we confronted our country’s problems and took the difficult decisions.

The British economy is growing because we didn’t seek short term fixes but pursued a long term economic plan.

The British economy is resilient because whatever the challenge, however strong the headwinds, we have held to the course we set out.

I must tell the House that we face such a challenge now.

Financial markets are turbulent.

Productivity growth across the west is too low.

And the outlook for the global economy is weak.

It makes for a dangerous cocktail of risks.

But one that Britain is well-prepared to handle, if we act now so we don’t pay later.

Mr Deputy Speaker,

Britain has learnt to its cost what happens when you base your economic policy on the assumption you have abolished boom and bust.

Britain is not immune to slowdowns and shocks.

Nor as a nation are we powerless.

We have a choice.

We can choose to add to the risk and uncertainty, or we can be a force for stability.

In this Budget we choose to put stability first.

Britain can choose, as others are, short term fixes and more stimulus.

Or we can lead the world with long term solutions to long term problems.

In this Budget we choose the long term.

We choose to put the next generation first.

Sound public finances to deliver security,

Lower taxes on business and enterprise to create jobs,

Reform to improve schools, investment to build homes and infrastructure – because we know that’s the only way to deliver real opportunity and social mobility.

And we know that the best way we can help working people is to help them to save and let them keep more of the money they earn.

That is the path we followed over the past five years.

And it’s given us one of the strongest economies in the world.

And that is the path we will follow in the years ahead.

In this Budget we redouble our efforts to make Britain fit for the future.

Mr Deputy Speaker, let me turn to the economic forecasts.

I want to thank Robert Chote and his team at the Office for Budget Responsibility.

To make sure they have available to them the best statistics in the world I am today accepting all of the recommendations of Sir Charlie Bean’s excellent report.

I also want to take this moment to thank another great public servant, Sir Nicholas Macpherson.

He has served as Permanent Secretary to the Treasury for ten years, under three very different Chancellors, and throughout he has always demonstrated the great British civil service values of integrity and impartiality.

He’s here today to watch the last of 34 Budgets he’s worked on, and on behalf of the House and the dedicated officials in the Treasury, I thank him for his service.

Mr Deputy Speaker,

The OBR tell us today that in every year of the forecast our economy grows and so too does our productivity.

But they have revised down growth in the world economy and in world trade.

In their words, the outlook is “materially weaker”.

They point to the turbulence in financial markets, slower growth in emerging economies like China, and weak growth across the developed world.

Around the globe, they note that monetary policy – instead of normalising this year as expected – has been further loosened.

We’ve seen the Bank of Japan join Sweden, Denmark, Switzerland and the European Central Bank with unprecedented negative interest rates.

The OBR also note that this reflects concerns across the West about low productivity growth.

The Secretary General of the OECD said last month that “productivity growth… has been decelerating in a vast majority of countries”.

As a result, the most significant change the OBR have made since their November forecast is their decision to revise down potential UK productivity growth.

The OBR had thought that what they describe as the “drag from the financial crisis” on our productivity would have eased by now, but the latest data shows it has not.

The OBR acknowledge today that this revision is, in their words, a “highly uncertain” judgement call.

But I back them 100%.

We saw under the last government what happened when a Chancellor of the Exchequer revised up the trend growth rate, spent money the country didn’t have, and left it to the next generation to pick up the bill.

I’m not going to let that happen on my watch.

These days, thanks to the fact we have established independent forecasts, our country is confronted with the truth as economic challenges emerge, and can act on them before it’s too late.

We fix our plans to fit the figures; we don’t fix the figures to fit the plans.

The IMF have warned us this month that the global economy is “at a delicate juncture” and faces a growing “risk of economic derailment”.

Eight years ago, Britain was the worst prepared of any of the major economies for the crisis we then faced.

Today, Britain is among the best prepared for whatever challenges may lie ahead.

That is what our long term economic plan has been all about.

When I became Chancellor we borrowed £1 in every £4 we spent. Next year it will be £1 in every £14. Our banks have doubled their capital ratios.

And we have doubled our foreign exchange reserves.

And we have a clear, consistent and accountable monetary policy framework, admired around the world.

The hard work of fixing our economy is paying off.

In 2014, we were the fastest growing major advanced economy in the world.

In 2015, we were ahead of everyone but America.

So let me give the OBR’s latest forecasts for our economic growth – in the face of the new assessment of productivity and the slowing global economy.

Last year, GDP grew by 2.2%.

The OBR now forecast it will grow by 2% this year, then 2.2% again in 2017, and then 2.1% in each of the three years after that.

The House will want to know how this compares to other countries.

I can confirm that, in these turbulent times, the latest international forecast expects Britain to grow faster this year than any other major advanced economy in the world.

Mr Deputy Speaker, the OBR are explicit today that their forecasts are predicated on Britain remaining in the European Union.

Over the next few months this country is going to debate the merits of leaving or remaining in the European Union, and I have many colleagues whom I respect greatly on both sides of this argument.

The OBR correctly stay out of the political debate and do not assess the long term costs and benefits of EU membership.

But they do say this, and I quote them directly: “a vote to leave in the forthcoming referendum could usher in an extended period of uncertainty regarding the precise terms of the UK’s future relationship with the EU.

This could have negative implications for activity via business and consumer confidence and might result in greater volatility in financial and other asset markets”.

Citing a number of external reports, the OBR say this:

“There appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty while the precise details of the UK’s new relationship with the EU were negotiated.”

Mr Deputy Speaker, the House knows my view.

Britain will be stronger, safer and better off inside a reformed European Union.

I believe we should not put at risk all the hard work that the British people have done to make our country strong again.

Mr Deputy Speaker,

Let me turn to the OBR forecast for the labour market.

Since the Autumn Statement just four months ago, the businesses in our economy have created over 150,000 more jobs than the OBR expected.

That’s 150,000 extra families with the security of work.

That’s 150,000 reasons to support our long term economic plan.

This morning unemployment fell again, employment reached the highest level ever, and the data confirms that we have the lowest proportion of people claiming out-of-work benefits since November 1974.

Now the OBR are forecasting a million more jobs over this Parliament.

Mr Deputy Speaker, in the last Parliament:

They claimed a million jobs would be lost.

Instead two million were created.

When the jobs started coming we were told they’d be low skilled.

But today we know almost 90% of the new jobs are in skilled occupations.

We were told the jobs would be part time.

But three quarters are full time.

We were told the jobs would all be in London.

But the unemployment rate is falling fastest in the North East.

Youth unemployment is falling fastest in the West Midlands.

Employment is growing fastest in the North West.

And in today’s forecast real wages continue to grow and outstrip inflation in each and every year.

The OBR forecasts lower inflation, at 0.7% this year and 1.6% next year.

I am today confirming in a letter to the Governor of the Bank of England that the remit for the Monetary Policy Committee remains the symmetric CPI inflation target of 2%.

I am also publishing the new remit for the Financial Policy Committee, the body we created to keep an eye on emerging long term risks in our financial system, asking them to be particularly vigilant in the face of current market turbulence.

Because in this Budget we act now so we don’t pay later.

Mr Deputy Speaker, that brings me to our approach to public spending and the OBR forecasts for our public finances.

In every year since 2010, I have been told that now is not the right time to cut government spending.

When the economy is growing, I’m told we can afford to spend more.

When the economy isn’t growing, I’m told we can’t afford not to.

Today, I’m publishing new analysis that shows that if we hadn’t taken the action we did in 2010, then cumulative borrowing would have been £930 billion more by the end of the decade than it is now forecast to be.

If we’d taken the advice, Britain would not have been one of the best prepared economies for the current global uncertainties; we would have been one of the worst prepared.

Now the very same people are saying to us we should spend more again.

I reject that dangerous advice.

The security of families and businesses depends on Britain living within its means.

Last autumn’s Spending Review delivers a reduction in government consumption that is judged by the OBR to be the most sustained undertaken in the last hundred years of British history – barring the periods of demobilisation after the first and second world wars.

My spending plans in the last parliament reduced the share of national income taken by the state from the unsustainable 45% we inherited, to 40% today.

My spending plans in this Parliament will see it fall to 36.9% by the end of this decade.

In other words, the country will be spending no more than the country raises in taxes.

And we are achieving this while at the same time increasing resources for our NHS and schools, building new infrastructure and increasing our security at home and abroad.

The OBR now tells us that the world has become more uncertain.

So we have two options.

We can ignore the latest information, and spend more than the country can afford.

That’s precisely the mistake that was made a decade ago.

Or we can live in the world as it is, and cut our cloth accordingly.

I say we act now, so we don’t pay later.

So I am asking my RHFs the Chief Secretary and the Paymaster General to undertake a further drive for efficiency and value for money.

The aim is to save a further £3.5 billion in the year 2019-20.

At less than half a percent of government spending in four years’ time, that is more than achievable while maintaining the protections we have set out.

At the same time we will continue to deliver sensible reforms to keep Britain living within its means.

On welfare, last week my RHF the Secretary of State for Work and Pensions set out changes that will ensure that within the rising disability budget, support is better targeted at those who need it most.

Let me confirm that this means the disability budget will still rise by more than £1 billion, and we’ll be spending more in real terms supporting disabled people than at any point under the last government.

On international aid, I am proud to be part of the government that was the first to honour Britain’s commitment to spend 0.7% of national income on development.

We won’t spend more than that, so the budget will be readjusted, saving £650 million in 2019-20.

We’re also going to keep public sector pensions sustainable.

We reformed them in the last Parliament which will save over £400 billion in the long term.

To ensure those pensions remain sustainable, we have carried out the regular revaluation of the discount rate and public sector employer contributions will rise as a result.

This will not affect anyone’s pension, and will be affordable within spending plans that are benefitting from the fiscal windfall of lower inflation.

Each of these decisions are a demonstration of our determination that the British economy will stay on course.

We will not burden our children and grandchildren. This is a Budget for the next generation.

Mr Deputy Speaker, let me now give the OBR’s forecasts for the debt and the deficit.

The combination of our action to reduce borrowing this year, along with the revisions to our nominal GDP driven by lower inflation, have produced this paradoxical result.

In cash terms the national debt is lower than it was forecast to be in the autumn, but so too is the nominal size of our economy.

We measure the fiscal target against debt to GDP.

So while debt as a percentage of GDP is above target and set to be higher in 2015-16 than the year before;

Compared to the forecast, the actual level of our national debt in cash is £9 billion lower.

In the future, debt falls to 82.6% next year, then 81.3% in 2017-18, then 79.9% the year after.

In 2019-20, it falls again to 77.2%, then down again the year after to 74.7%.

Let me turn to the forecast for the deficit.

When I became Chancellor, the deficit was forecast to reach 11.1% of national income – the highest level in the peacetime history of Britain.

Thanks to our sustained action, the deficit is forecast to fall next year to just over a quarter of that – at 2.9%. In 2017-18, it falls to 1.9%. Then it falls again to 1.0% in 2018-19.

In cash terms, in 2010, Britain was borrowing a totally unsustainable £150 billion a year.

This year we are expected to borrow less than half that, at £72.2 billion.

Indeed our borrowing this year is actually lower than the OBR forecast at the Autumn Statement.

Borrowing continues to fall – but not by as much as before – to £55.5 billion next year, £38.8 billion the year after that and £21.4 billion in 2018-19.

I know there has been concern that the challenging economic times mean we would lose our surplus the following year.

And that would have been the case if we had not taken further action today to control spending and make savings.

But because we have acted decisively, in 2019-20 Britain is set to have a surplus of £10.4 billion.

The surplus is then set to rise to £11.0 billion the year after. That’s 0.5% of GDP in both years.

We said we would take the action necessary to give Britain’s families economic security.

We said our country would not repeat the mistakes of the past – and instead live within its means.

Today we maintain that commitment to long term stability in challenging times.

Decisive action. To achieve a £10billion surplus.

We act now, so we don’t pay later.

We put the next generation first.

Mr Deputy Speaker,

In every Budget I’ve given, action against tax avoidance and evasion has contributed to the repair of our public finances.

And this Budget is no different.

In the Budget book we set out in detail the action we will take to:

Shut down disguised remuneration schemes;

Ensure that UK tax will be paid on UK property development;

Change the treatment of freeplays for remote gaming providers;

Limit capital gains tax treatment on performance rewards; and

Cap exempt gains in the Employee Shareholder Status.

Public sector organisations will have a new duty to ensure that those working for them pay the correct tax rather than giving a tax advantage to those who choose to contract their work through personal service companies.

Loans to participators will be taxed at 32.5% to prevent tax avoidance.

And we’ll tighten rules around the use of termination payments.

Termination payments over £30,000 are already subject to income tax. From 2018, they will also attract employer national insurance.

Taken altogether, the further steps in this Budget to stop tax evasion, prevent tax avoidance and tackle imbalances in the system will raise £12 billion for our country over this Parliament.

People talked about social justice but left enormous loopholes in our tax system for the very richest to exploit.

While the independent statistics confirm that since 2010:

Child poverty is down;

Pensioner poverty is down;

Inequality is down;

And the gender pay gap has never been smaller.

The distributional analysis published today shows that the proportion of welfare and public services going to the poorest has been protected.

And I can report that the latest figures confirm the richest 1% paid 28% of all income tax revenue. Proof that we are all in this together.

So Mr Deputy Speaker

I can report solid steady growth.

More jobs.

Lower inflation.

An economy on course for a surplus.

And all done in a fair way.

A Britain prepared for whatever the world throws at us.

Because we’ve stuck to our long term economic plan.

Credible fiscal policy and effective monetary policy has only ever been part of our plan.

A crucial ingredient has always been the lasting structural reforms needed to make our economy fit for the future.

And with new risks on the horizon, and with all Western countries looking for ways to increase living standards, now is not the time to go easy on our structural reforms.

It’s time to redouble our efforts.

My Budgets last year delivered key improvements to productivity like the Apprenticeship Levy, lower corporation tax and the National Living Wage.

My Budget this year sets out these further bold steps we need to take.

One. Fundamental reform of the business tax system. Loopholes closed. Reliefs reduced but so too are rates. And the result: a huge boost for small business and enterprise.

Two. A radical devolution of power so more of the responsibility and the rewards of economic growth are in the hands of local communities.

Three. Major new commitments to the national infrastructure projects of the future.

Four. Confronting the obstacles that stand in the way of important improvements to education and our children’s future.

And five. Backing people who work hard and save.

In short this Budget puts the next generation first.

Let me take each step in turn.

Mr Deputy Speaker,

In the last Parliament I cut corporation tax dramatically. But I also introduced the Diverted Profits Tax, to catch those trying to shift profits overseas.

As a result Britain went from one of the least competitive business tax regimes to the most competitive – and we raised much more money for public services.

Today the Financial Secretary and I are publishing a roadmap to make Britain’s business tax system fit for the future.

It will deliver a low tax regime that will attract the multinational businesses we want to see in Britain, but ensure that they pay taxes here too.

And it will level the playing field, which has been tilted against our small firms.

The approach we take is guided by the best practice set out by the OECD, work which Britain called for, Britain paid for and Britain will be among the very first to implement.

First, some multinationals deliberately over-borrow in the UK to fund activities abroad, and then deduct the interest bills against their UK profits.

So from April next year we will restrict interest deductibility for the largest companies at 30% of UK earnings, while making sure firms whose activities justify higher borrowing are protected with a group ratio rule.

Next, we’re setting new hybrid mismatch rules to stop the complex structures that allow some multinationals to avoid paying any tax anywhere, or to deduct the same expenses in more than one country.

Then, we’re going to strengthen our withholding tax on the royalty payments that allow some firms to shift money to tax havens.

And lastly we’re going to modernise the way we treat losses. We’re going to allow firms to use losses more flexibly in a way that will help over 70,000 mostly British companies.

But with these new flexibilities in place, we’ll do what other countries do and restrict the maximum amount of profits that can be offset using past losses to 50%.

This will only apply to the less than 1% of firms making profits over £5m – and the existing rules for historic losses in the banking sector will be tightened to 25%.

We’ll maintain our plans to align tax payment dates for the largest companies more closely to when profits are earned, but we will give firms longer to adjust to these changes which will now come into effect in April 2019.

All of these reforms to corporation tax will help create a modern tax code that better reflects the reality of the global economy.

Together, they raise £9 billion in extra revenue for the Exchequer.

But our policy is not to raise taxes on business.

Our policy is to lower taxes on business.

So everything we collect from the largest firms who are trying to pay no tax will be used to help millions of firms who pay their fair share of tax.

I can confirm today we’re going to reduce the rate of Corporation Tax even further.

That’s the rate Britain’s profit-making companies – large and small – have to pay.

And all the evidence shows it’s one of the most distortive and unproductive taxes there is.

Corporation Tax was 28% at the start of the last Parliament and we reduced it so that it’s 20% at the start of this one.

Last summer I set out a plan to cut it to 18% in coming years.

Today I am going further. By April 2020 it will fall to 17%

Britain is blazing a trail.

Let the rest of the world catch up.

Mr Deputy Speaker,

Cutting corporation tax is only part of our plan for the future.

I also want to address the great unfairness that many small businessmen and women feel when they compete against companies on the internet.

Sites like Ebay and Amazon have provided an incredible platform for many new small British start-ups to reach large numbers of customers.

But there’s been a big rise in overseas suppliers storing goods in Britain and selling them online without paying VAT.

That unfairly undercuts British businesses both on the internet and on the high street, and today I can announce that we are taking action to stop it.

That’s the first thing we do to help our small firms.

Second, we’re going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet.

Our tax system should be helping these people so I’m introducing two new tax-free allowances each worth £1,000 a year, for both trading and property income.

There will be no forms to fill in, no tax to pay – it’s a tax break for the digital age and at least half a million people will benefit.

On top of these two measures comes the biggest tax cut for business in this Budget.

Business rates are the fixed cost that weigh down on many small enterprises.

At present small business rate relief is only permanently available to firms with a rateable value of less than £6,000.

In the past I’ve been able to double it for one year only.

Today I am more than doubling it, and I’m more than doubling it permanently.

The new threshold for small business rate relief will raise from £6,000 to a maximum threshold of £15,000.

I’m also going to raise the threshold for the higher rate from £18,000 to £51,000.

Let me explain to the House what this means.

From April next year, 600,000 small businesses will pay no business rates at all.

That’s an annual saving for them of up to nearly £6,000 – forever.

A further quarter of a million businesses will see their rates cut.

In total, half of all British properties will see their business rates fall or be abolished altogether.

And to support all ratepayers, including larger stores who face tough competition and who employ so many people: we will radically simplify the administration of business rates, and from 2020, switch the uprating from the higher RPI to the lower CPI.

That’s a permanent long term saving for all businesses in Britain.

A typical corner shop in Barnstaple will pay no business rates.

A typical hairdressers in Leeds will pay no business rates.

A typical newsagents in Nuneaton will pay no business rates.

Mr Deputy Speaker,

This is a Budget which gets rid of loopholes for multinationals.

And gets rid of tax for small businesses.

A £7 billion tax cut, for our nation of shopkeepers.

A tax system that says to the world: we’re open for business.

A government that’s on your side.

Mr Deputy Speaker,

Just over a year ago, I reformed residential stamp duty. We moved from a distortive slab system to a much simpler slice system.

And as a result 98% of homebuyers are paying the same or less, and revenues from the expensive properties have risen.

The IMF welcomed the changes and suggest we do the same to commercial property.

So that’s what we’re going to do – and in a way that helps our small firms.

At the moment, a small firm can pay just £1 more for a property and face a tax bill three times as large. That makes no sense.

So from now on, commercial stamp duty will have a zero rate band on purchases up to £150,000; a 2% rate on the next £100,000; and a 5% top rate above £250,000.

There will also be a new 2% rate for those high value leases with a net present value above £5 million.

This new tax regime comes into effect from midnight tonight. There are transitional rules for purchasers who have exchanged, but not completed contracts before midnight.

These reforms raise £500 million a year. And while 9% will pay more; over 90% will see their tax bills cut or stay the same.

So, if you buy a pub in the Midlands worth, say, £270,000, you would today pay over £8,000 in stamp duty.
From tomorrow you will pay just £3,000.

It’s a big tax cut for small firms. All in a Budget that backs small business.

Mr Deputy Speaker,

Businesses also want a simpler tax system.

I’ve asked Angela Knight and John Whiting at the Office of Tax Simplification to look at what more we can do to make the tax system work better for small firms.

And I’m funding a dramatic improvement in the service that HMRC offers.

Many retailers have complained bitterly to me about the complexity of the Carbon Reduction Commitment. It’s not a commitment; it’s a tax.

So I can tell the House: we’re not going to reform it.

Instead I have decided to abolish it altogether.

And to make good the lost revenue – the Climate Change Levy will rise from 2019.

The most energy intensive industries like steel remain completely protected, and I’m extending the climate change agreements that help many others.

The Energy Secretary and I are announcing £730 million in further auctions to back renewable technologies. And we’re now inviting bids to help develop the next generation of small modular reactors.

We’re also going to help one of the most important and valued industries in our United Kingdom that has been severely affected by global events.

The Oil and Gas sector employs hundreds of thousands of people in Scotland and across our country.

In my Budget a year ago, I made major reductions to their taxes.

But the oil price has continued to fall. So we need to act now for the long term.

I am today cutting in half the Supplementary Charge on oil and gas from 20% to 10%.

And I’m effectively abolishing Petroleum Revenue Tax too.

Backing this key Scottish industry and supporting jobs right across Britain.

Both of these major tax cuts will be backdated so they are effective from the 1st of January this year, and my HF the Exchequer Secretary will work with the industry to give them our full support.

Mr Deputy Speaker,

We are only able to provide this kind of support to our oil and gas industry because of the broad shoulders of the United Kingdom.

None of this support would have been remotely affordable if, in just eight days’ time, Scotland had broken away from the rest of the UK, as the nationalists wanted.

Their own audit of Scotland’s public finances confirms they would have struggled from the start with a fiscal crisis under the burden of the highest budget deficit in the western world.

Thankfully, the Scottish people decided that we are better together in one United Kingdom.

Mr Deputy Speaker, believing in our United Kingdom is not the same as believing that every decision should be taken here in London.

That’s the next step in this Budget’s plan to make Britain fit for the future.

Because we know that if you want local communities to take responsibility for local growth, they have to be able to reap the rewards.

The government is delivering the most radical devolution of power in modern British history.

We’re devolving power to our nations.

The Scottish Secretary and I have agreed the new fiscal framework with Scotland.

We’re also opening negotiations on a city deal with Edinburgh; we back the new V&A in Dundee.

And in response to the powerful case made to me by Ruth Davidson we’re providing new community facilities for local people in Helensburgh and the Royal Navy personnel nearby at Faslane, paid for by LIBOR fines.

In Wales, we’re committed to devolving new powers to the Assembly and yesterday my RHF the Welsh Secretary signed a new billion pound deal for the Cardiff region.

We’re opening discussions on a city deal for Swansea and a growth deal for North Wales, so it’s better connected to our Northern Powerhouse.

I’ve listened to the case made by Welsh colleagues and I can announce today that from 2018 we are going to halve the price of the tolls on the Severn Crossings.

My RHF the Northern Ireland Secretary and I are working towards the devolution of corporation tax.

I am also extending enhanced capital allowances to the enterprise zone in Coleraine and we will use over £4 million from LIBOR fines to help establish the first Air Ambulance service for Northern Ireland.

Mr Deputy Speaker, in this Budget we make major further advances in the devolution of power within England too.

It was less than two years ago that I called for the creation of strong elected mayors to help us build a Northern Powerhouse.

Since then, powerful elected mayors have been agreed for Manchester, Liverpool, Tees Valley, the North East and Sheffield.

Over half of the population of the Northern Powerhouse will be able to elect a mayor accountable to them next year.

We will have an elected mayor for the West Midlands too.

These new devolution arrangements evolve and grow stronger.

Today I can tell the House that my RHF the Justice Secretary and I are transferring new powers over the criminal justice system to Greater Manchester.

This is the kind of progressive social policy that this Government is proud to pioneer.

And I can also announce to the House that today, for the first time, we have reached agreement to establish new elected mayors in our English counties and southern cities too.

I want to thank my RHF the Communities Secretary and my Treasury colleague Jim O’Neill for their superhuman efforts.

We’ve agreed a single powerful East Anglia combined authority, headed up by an elected Mayor and almost a billion pounds of new investment.

We’ve also agreed a new West of England mayoral authority – and they too will see almost a billion pounds invested locally.

And the authorities of Greater Lincolnshire will have new powers, new funding and a new mayor.

North, South, East and West – the devolution revolution is taking hold.

Mr Deputy Speaker

When I became Chancellor, 80% of local government funding came in largely ring-fenced grants from central government. It was the illusion of local democracy.

By the end of this Parliament, 100% of local government resources will come from local government – raised locally, spent locally, invested locally.

Our great capital city wants to lead the way.

The Mayor of London, and my HF for Richmond Park passionately argue for the devolution of business rates.

I can confirm today that the Greater London Authority will move towards full retention of its business rates from next April, three years early.

Michael Heseltine has accepted my invitation to lead a Thames Estuary Growth Commission and he will report to me with its ideas next year.

Mr Deputy Speaker,

In every international survey of our country, our failure for a generation to build new housing and new transport has been identified as a major problem.

But we are the builders.

Today we’re setting out measures to speed up our planning system, zone housing development and prepare the country for the arrival of 5G technology.

My RHF the Business Secretary will be bringing forward our innovation proposals.

And because we make savings in day to day spending we can accelerate capital investment and increase it as a share of GDP.

All exactly the things that a country focussed on its long term future should be doing.

Our new stamp duty rates on additional properties will come into effect next month. I’ve listened to colleagues and the rates will apply to large investors too.

We’re going to use receipts to support community housing trusts, including £20 million to help young families onto the housing ladder in the South West of England.

This is a brilliant idea from my HF for Truro and Falmouth, and other colleagues.

And it’s proof that when the South West votes blue, their voice is heard loud in Westminster.

And because under this government we’re not prepared to let people be left behind, I am also announcing a major new package of support worth over £115 million to support those who are homeless and reduce rough sleeping.

Last year, Mr Deputy Speaker, I established a new National Infrastructure Commission to advise us all on the big long-term decisions we need to boost our productivity.

I want to thank Andrew Adonis and his fellow Commissioners for getting off to such a strong start.

They’ve already produced three impressive reports.

They recommend much stronger links across northern England.

So we are giving the green light to High Speed 3 between Manchester and Leeds; finding new money to create a 4-lane M62; and will develop the case for a new tunnelled road from Manchester to Sheffield.

My HFs for Carlisle, Penrith and Hexham have told us not to neglect the North Pennines. So we’ll upgrade the A66 and A69 too.

I said we would build the Northern Powerhouse

We’ve put in place the mayors.

We’re building the roads.

We’re laying the track.

We’re making the Northern Powerhouse a reality and rebalancing our country.

I am also accepting the Infrastructure Commission’s recommendations on energy and on London transport.

The Government that is delivering Crossrail 1 will now commission Crossrail 2.

Mr Deputy Speaker,

Across Britain this Budget invests in infrastructure – from a more resilient train line in the South West, to crossings at Ipswich and Lowestoft in the East – we are making our country stronger.

To respond to the increasing extreme weather events our country is facing I am today proposing a further substantial increase in flood defences.

That would not be affordable within existing budgets.

So I am going to increase the standard rate of Insurance Premium Tax by just half a percentage point – and commit all the extra money we raise to flood defence spending.

That’s a £700 million boost to our resilience and flood defences.

The urgent review already underway by my RHFs the Environment Secretary and the Chancellor of the Duchy of Lancaster will determine how the money is best spent.

But we can get started now. I have had many representations from colleagues across the House.

So we are giving the go ahead to the schemes for York, Leeds, Calder Valley, Carlisle and across Cumbria.

In this Budget we invest in our physical infrastructure and we invest in our cultural infrastructure too.

I am supporting specific projects from the Hall for Cornwall in Truro, to £13 million for Hull to make a success as the City of Culture.

Our Cathedral Repairs Fund has been enormously successful so I am extending it with an extra £20 million.

And in the four hundredth anniversary of the great playwright’s death, I have heard the sonnets from the RHM for Knowsley and we commit to a new Shakespeare North theatre, there on the site of the first indoor theatre outside of our capital.

While my HF for Newark has proposed that we introduce a new tax break for museums that develop exhibitions and take those exhibitions on tour.

It’s a great idea and we add that to our collection today.

Mr Deputy Speaker,

We cut taxes for business.

We devolve power.

We develop our infrastructure.

The next part of our plan to make Britain fit for the future is to improve the quality of our children’s’ education.

Providing great schooling is the single most important thing we can do to help any child from a disadvantaged background succeed.

It’s also the single most important thing we can do to boost the long-term productivity of our economy.

Because our nation’s productivity is no more and no less than the combined talents and efforts of the people of these islands.

That is why education reform has been so central to our mission.

Today we take these further steps.

First, I can announce that we are going to complete the task of setting schools free from local education bureaucracy, and we’re going to do it in this Parliament.

I am today providing extra funding so that by 2020 every primary and secondary school in England will be, or be in the process of becoming, an academy.

Second, we’re going to focus on the performance of schools in the north, where results have not been as strong as we’d like.

London’s school system has been turned around; we can do the same in the Northern Powerhouse and I’ve asked outstanding Bradford head teacher Sir Nick Weller to provide us with a plan.

Third, we are going to look at teaching maths to 18 for all pupils.

And fourth, we are going to introduce a fair National Funding Formula – and I’m today committing half a billion pounds to speed up its introduction.

We will consult, and our objective is to get over 90% of the schools that will benefit onto the new formula by the end of this parliament.

The Government delivering on its promise of fair funding for our schools.

Tomorrow my RHF the Education Secretary will publish a White Paper setting out further improvements we will make to the quality of education.

We will put the next generation first.

Doing the right thing for the next generation is what the government and this Budget is about, no matter how difficult and controversial it is.

Mr Deputy Speaker,

You cannot have a long term plan for the country unless you have a long term plan for our children’s healthcare. Here are the facts we know.

5 year old children are consuming their body weight in sugar every year.

Experts predict that within a generation over half of all boys, and 70% of girls could be overweight or obese.

Here’s another fact that we all know.

Obesity drives disease.

It increases the risk of cancer, diabetes and heart disease – and it costs our economy £27 billion a year; that’s more than half the entire NHS paybill.

And here’s another truth we all know.

One of the biggest contributors to childhood obesity is sugary drinks.

A can of cola typically has nine teaspoons of sugar in it. Some popular drinks have as many as 13.

That can be more than double a child’s recommended added sugar intake.

Let me give credit where credit is due.

Many in the soft drinks industry recognise there’s a problem and have started to reformulate their products.

Robinsons recently removed added sugar from many of their cordials and squashes.

Sainsbury’s, Tesco and the Co-op have all committed to reduce sugar across their ranges.

So industry can act, and with the right incentives I’m sure it will.

Mr Deputy Speaker,

I am not prepared to look back at my time here in this Parliament, doing this job and say to my children’s generation:

I’m sorry. We knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing.

So today I can announce that we will introduce a new sugar levy on the soft drinks industry.

Let me explain how it will work.

It will be levied on the companies.

It will be introduced in two years’ time to give companies plenty of space to change their product mix.

It will be assessed on the volume of the sugar-sweetened drinks they produce or import.

There will be two bands – one for total sugar content above 5 grams per 100 millilitres; a second, higher band for the most sugary drinks with more than 8 grams per 100 millilitres.

Pure fruit juices and milk-based drinks will be excluded, and we’ll ensure the smallest producers are kept out of scope.

We will of course consult on implementation.

We’re introducing the levy on the industry which means they can reduce the sugar content of their products – as many already do.

It means they can promote low-sugar or no sugar brands – as many already are.

They can take these perfectly reasonable steps to help with children’s health.

Of course, some may choose to pass the price onto consumers and that will be their decision, and this would have an impact on consumption too.

We understand that tax affects behaviour. So let’s tax the things we want to reduce, not the things we want to encourage.

The OBR estimate that this levy will raise £520 million.

And this is tied directly to the second thing we’re going to do today to help children’s health and wellbeing.

We’re going to use the money from this new levy to double the amount of funding we dedicate to sport in every primary school.

And for secondary schools we’re going to fund longer school days for those that want to offer their pupils a wider range of activities, including extra sport.

It will be voluntary for schools. Compulsory for the pupils.

There will be enough resources for a quarter of secondary schools to take part – but that’s just a start.

The devolved administrations will receive equivalent funding through the Barnett formula – and I hope they spend it on the next generation too.

I’m also using the LIBOR funds specifically to help with children’s’ hospital services.

Members across the House have asked for resources for children’s’ care in Manchester, Sheffield, Birmingham and Southampton and we provide those funds today.

A determination to improve the health of our children.

A new levy on excessive sugar in soft drinks.

The money used to double sport in our schools.

A Britain fit for the future.

We’re not afraid to put the next generation first.

Mr Deputy Speaker, let me now turn to indirect taxes.

Last autumn I said that I would use all the VAT we collect from sanitary products to support women’s charities.

I want to thank many Members here on all sides, for the impressive proposals they have put forward.

Today we allocate £12 million from the Tampon Tax to these charities across the UK, from Breast Cancer Care to the White Ribbon Campaign.

And we will make substantial donations to the Rosa Fund and to Comic Relief so we reach many more grassroots causes.

Mr Deputy Speaker, I now turn excise duties.

In 2010 plans would have seen fuel duty rise above inflation every year – and cost motorists 18 pence extra a litre.

We wholeheartedly rejected those plans – and instead we took action to help working people.

We froze fuel duty throughout the last Parliament – a tax cut worth nearly £7 billion a year.

In the last twelve months, petrol prices have plummeted. That is why we pencilled in an inflation rise.

But I know that fuel costs still make up a significant part of household budgets and weigh heavily on small firms.

Families paid the cost when oil prices rocketed; they shouldn’t be penalised when oil prices fall.

So I can announce that fuel duty will be frozen for the sixth year in a row.

That’s a saving of £75 a year to the average driver; £270 a year to a small business with a van. It’s the tax boost that keeps Britain on the move.

Mr Deputy Speaker,

Tobacco duty will continue to rise as set out in previous Budgets, by 2% above inflation from 6pm tonight – while hand rolling tobacco will rise by an additional 3%.

And to continue our drive to improve public health we will reform our tobacco regime to introduce an effective floor on the price of cigarettes and consult on increased sanctions for fraud.

Mr Deputy Speaker,

I’ve always been clear that I want to support responsible drinkers and our nation’s pubs.

5 years ago we inherited tax plans that would have ruined that industry.

Instead, the action we took in the last Parliament on beer duty saved hundreds of pubs and thousands of jobs.

Today I back our pubs again. I am freezing beer duty and cider duty too.

Scotch Whisky accounts for a fifth of all of the UK’s food and drink exports.

So we back Scotland and back that vital industry too, with a freeze on whisky and other spirits duty this year.

All other alcohol duties will rise by inflation as planned.

Mr Deputy Speaker,

There are some final measures we need to take to boost enterprise, back the next generation, and help working people keep more of the money they earn.

All these have been the themes of this Budget.

Let me start with Enterprise.

We know that when it comes to growing the economy, alongside good infrastructure and great education we need to light the fires of enterprise.

And our tax system can do more.

To help the self-employed I’m going to fulfil the manifesto commitment we made, and from 2018 abolish Class 2 National Insurance Contributions altogether.

That’s a simpler tax system and a tax cut of over £130 for each of Britain’s 3 million strong army of the self-employed.

Next, we want people to invest in our businesses, and help them create jobs.

The best way to encourage that is to let them keep more of the rewards when that investment is successful.

Our Capital Gains Tax is now one of the highest in the developed world, when we want our taxes to be among the lowest.

The headline rate of Capital Gains Tax currently stands at 28%

Today I am cutting it to 20%.

And I am cutting the Capital Gains Tax paid by basic rate taxpayers from 18% to just 10%.

The rates will come into effect in three weeks’ time. The old rates will be kept in place for gains on residential property and carried interest.

I am also introducing a brand new 10% rate on long term external investment in unlisted companies, up to a separate maximum of £10 million of lifetime gains.

In this Budget we’re putting rocket boosters on the backs of enterprise and productive investment.

Mr Deputy Speaker,

In this Budget I also want to help the next generation build up assets and save.

The fundamental problem is that far too many young people in their 20s and 30s have no pension and few savings.

Ask them and they will tell you why.

It’s because they find pensions too complicated and inflexible, and most young people face an agonising choice of either saving to buy a home or saving for their retirement.

We can help by providing people with more information about the multiple pensions many have; and by providing more tax relief on financial advice and the Economic Secretary and I do both today.

We can also help those on the lowest incomes save, and the Prime Minister announced our Help to Save plan on Monday.

Over the past year we’ve consulted widely on whether we should make compulsory changes to the pension tax system.

But it was clear there is no consensus.

Mr Deputy Speaker,

My pension reforms have always been about giving people more freedom and more choice.

So faced with the truth that young people aren’t saving enough, I am today providing a different answer to the same problem.

We know people like ISAs – because they are simple.

You save out of taxed income; everything you earn on your savings is tax-free; then it’s tax-free when you withdraw it too.

From April next year I am going to increase the ISA limit from just over £15,000 to £20,000 a year for everyone.

And for those under 40, many of whom haven’t had such a good deal from the pension system, I am introducing a completely new flexible way for the next generation to save.

It’s called the Lifetime ISA.

Young people can put money in, get a government bonus, and use it either to buy their first home or save for their retirement.

Here’s how it will work.

From April 2017, anyone under the age of 40 will be able to open a Lifetime ISA and save up to £4,000 each year.

And for every £4 you save, the government will give you £1.

So put in £4,000 and the government will give you £1,000. Every year. Until you’re 50.

You don’t have to choose between saving for your first home, or saving for your retirement.

With the new Lifetime ISA the government is giving you money to do both.

For the basic rate taxpayer, that is the equivalent of tax-free savings into a pension, and unlike a pension you won’t pay tax when you come to take your money out in retirement.

For the self-employed, it’s the kind of support they simply cannot get from the pensions system today.

Unlike a pension you can access your money anytime without the bonus and with a small charge.

And we’re going to consult with the industry on whether, like the American 401K, you can return money to the account to reclaim the bonus – so it is both generous and completely flexible.

Those who have already taken out our enormously popular Help to Buy ISAs will be able to roll it into the new Lifetime ISA – and keep the government match.

Mr Deputy Speaker,

A £20,000 ISA limit for everyone.

A new Lifetime ISA.

A Budget that puts the next generation first.

Mr Deputy Speaker,

I turn now to my final measures.

The government was elected to back working people.

And the best way to help working people is to let them keep more of the money they earn.

When I became Chancellor, the tax-free personal allowance was less than £6,500.

In two weeks’ time it will rise to £11,000.

We committed that it would reach £12,500 by the end of this Parliament.

And today we take a major step towards that goal.

From April next year, I am raising the tax-free personal allowance to £11,500.

That’s a tax cut for 31 million people.

It means a typical basic rate taxpayer will be paying over £1,000 less income tax than five years ago.

And it means another 1.3 million of the lowest paid taken out of tax altogether.

Mr Deputy Speaker,

We made another commitment in our manifesto and that was to increase the threshold at which people pay the higher rate of tax.

That threshold stands at £42,385.

I can tell the House that from April next year I’m going to increase the Higher Rate threshold to £45,000.

That’s a tax cut of over £400 a year.

It is going to lift over half a million people who should never have been paying the higher rate out of that higher tax band altogether.

And it’s the biggest above inflation cash increase since Nigel Lawson introduced the 40p rate almost thirty years ago.

Mr Deputy Speaker,

A personal tax free allowance of £11,500.

No one paying the 40p rate under £45,000.

And we have delivered a budget for working people.

Mr Deputy Speaker,

Five years ago we set out on a long term plan.

Because we wanted to make sure that Britain never again was powerless in the face of global storms.

We said then that we would do the hard work to take control of our destiny and put our own house in order.

5 years later our economy is strong, but the storm clouds are gathering again.

Our response to this new challenge is clear.

We act now so we don’t pay later.

This is our Budget.

One that reaches a surplus so the next generation doesn’t have to pay our debts.

One that reforms our tax system so that the next generation inherits a strong economy.

One that takes the imaginative steps so that the next generation is better educated.

One that takes bold decisions so that our children grow up fit and healthy.

This is a Budget that gets investors investing, savers saving, businesses doing business; so that we build for working people a low tax, enterprise Britain; secure at home, strong in the world.

I commend to the House a Budget that puts the next generation first.

March 16, 2016
Alistair Darling – 2008 Budget

Mr Deputy Speaker, the core purpose of this Budget is stability – now and in the future.

And its core values are fairness and opportunity, founded on stability and strength.

Mr Deputy Speaker, in every country in 2008, every government has one aim – to maintain stability through the world economic slowdown.

Britain with its central role in the world’s financial system is no exception.

With low inflation. Record levels of employment. And unemployment at its lowest level for a generation.

And with the action taken last year to curb inflation, Britain is better placed than other economies to withstand the slowdown in the global economy.

Mr Deputy Speaker, this year’s Budget is a responsible Budget that will secure stability in these times of global economic uncertainty.

And we will do everything in our power to maintain stability – keeping inflation and interest rates low and maintaining our record of growth.

While other countries have suffered recessions, the British economy has now been growing continuously for over a decade – the longest period of sustained growth in our history.

Because of the changes made by this Government to entrench stability and increase the flexibility and resilience of our economy, I am able to report that the British economy will continue to grow through this year and beyond.

Even in today’s difficult and uncertain times, we are determined that we will not be diverted from our long-term aim – to equip our country for the challenges of the future, confront climate change and to end child poverty in this generation.

Mr Deputy Speaker, this Budget is about equipping Britain for the times ahead. Making sure that everyone – no matter what their circumstances – can exploit their potential.

It’s about building a fairer society, offering more opportunity, a fair Britain in which everyone can succeed.

Mr Deputy Speaker, throughout the world economies have benefited from the globalisation of trade and investment, which has delivered strong world growth.

Here in Britain, our openness, our global reach, our history of scientific invention and creative success, make us uniquely placed to succeed in the global economy.

But with the benefits of globalisation we see too how problems in one part of the world can quickly spread to another.

Turbulence in global financial markets – which started in the American mortgage market – has affected all economies from the United States to Asia, as well as Europe.

We have seen significant disruption across many credit markets: with a number of them barely functioning at all.

And since the turn of the year, global stock markets have also been affected. This poses a major risk to the world economy.

And so we welcome yesterday’s commitment by the world is central banks including, the Bank of England to address these concerns.

Here, the action we took last autumn to support Northern Rock and protect depositors and savers mean that – despite seeing the worst period of financial disruption for a generation – we have maintained confidence and stability in the banking system.

Mr Deputy Speaker, between the early 1970s and the mid 1990s the UK was one of the least stable economies in the G7. Today we are the most stable.

In the past our economy suffered from high unemployment and high inflation but today unemployment is lower than in Germany, France and Italy.

Welfare reform makes work pay and encourages people off benefits. The strengthened competition regime has increased the flexibility of product and labour markets, backed by fair employment laws.

So, the reforms we have made since 1997 – independence for the Bank of England and tough fiscal rules – mean that Britain is now more resilient and better prepared to deal with future shocks. And is better equipped to meet the challenges of rapid global change.

We are developing new strengths in the industries of the future – creative industries account for 7 per cent of the economy; pharmaceuticals account for a quarter of the UK’s research and development.

Ours is the only major industrial economy to see an increasing share of trade in global services – from 7 per cent a decade ago to 8 ¼ per cent today.

In knowledge-intensive services, the UK is second only to the United States. High-tech manufacturing has grown by 30 per cent in the last ten years.

Driven by improved productivity, the UK’s GDP per head – the average income for every man, woman and child – has gone from the lowest amongst the group of seven leading industrial economies in the early 1990s to being second only to the United States last year.

Mr Deputy Speaker, right across the world, countries have lowered their forecasts for growth in the coming year.

In Japan, growth is forecast to be 1.4 per cent, in the Euro area and the United States 1.6 per cent, and in Canada, 1.8 per cent.

And even the fastest growing markets: China, India and Brazil, which have enjoyed record growth in recent years, are expected to slow.

Despite the slowdown in the world economy, in 2007 the British economy grew by 3 per cent – the fastest growth of any major economy.

This year my forecast is that – as growth in the world economy slows further – growth in the British economy will be between 1¾ and 2¼ per cent in 2008 – but faster than Japan, the US and the Euro area.

I expect growth to shift towards companies and exports with growth rising to 2 ¼ to 2 ¾ in 2009 and 2 ½ to 3 per cent by 2010.

So Mr Deputy Speaker, my forecast shows the UK economy will continue to grow throughout this period of global uncertainty – a view supported by the Bank of England, the International Monetary Fund and the Organisation for Economic Co-operation and Development.

Mr Deputy Speaker, in the past, inflation has overshadowed many Budgets. From the 1970s until the early 1990s, the British economy suffered through the failure of successive governments to deliver economic stability.

Mr Deputy Speaker, we have seen recent increases in world food, fuel and energy prices.

The reforms we have made since 1997 mean we can be confident about the inflation outlook. There will be no return to the inflation rates of the early 1990s.

As is happening in many countries because of commodity prices, inflation in the UK will rise in the short term as higher oil and food prices feed through into domestic inflation.

But inflation is forecast to return to target in 2009 and remain on target thereafter.

The success of the Monetary Policy Committee and the resilience of the UK economy is clear. Energy prices have tripled since 2002, but over this period inflation has averaged just 2 per cent and growth has averaged 2 ¾ percent.

To provide certainty, and to build on this foundation of stability, I am today writing to the Governor of the Bank of England to re-confirm that the inflation target for the Monetary Policy Committee remains 2 per cent on a CPI basis – entrenching our commitment to low inflation.

And the discipline we have shown on pay in the public sector will support the Bank of England in maintaining low and stable inflation.

The reforms we made, this hard-won stability, means that – whereas in previous decades the UK economy suffered more than other economies in the face of global economic downturns – we enter this period of uncertainty, better placed than any other major economy.

Mr Deputy Speaker, our fiscal policy, like our monetary policy is designed to support stability.

It is founded on tough fiscal rules, underpinned by the Code for Fiscal Stability and forecast on the basis of cautious assumptions audited by the independent National Audit Office.

Our fiscal rules – to keep debt low and stable and to borrow only for investment over the economic cycle – deliver sound public finances in the medium term.

They protect public investment and allow fiscal policy to support monetary policy at the right time to sustain economic stability and growth.

Over the past ten years at all times we have taken the action necessary to meet our fiscal rules.

The disciplines we have imposed mean that borrowing is much lower than it was before 1997 – and so too is debt.

And between 1979 and 1997 borrowing was 3.4 per cent of national income.

Since 1997 it has averaged just 1.2 per cent.

And debt which – at the start of the economic cycle in 1997 – was 43.3 per cent has now fallen to 36.6 per cent of GDP.

It is precisely our commitment to this discipline and stability that gives us the flexibility now to respond to the global economic challenges we face today.

Given the fundamental strength of our public finances, it is right to allow fiscal policy to support monetary policy over the period ahead in helping to maintain stability in the face of the global downturn.

For environmental reasons we will increase fuel duty by ½ pence per litre in real terms from 2010.

Fuel duty is due to rise again in April but because I want to support the economy now and help business and families I will postpone that increase until October.

Mr Deputy Speaker, I can tell the House with our Budget projection for the current budget balance in 2007/08 will come in at £8 billion as forecast.

And our projection for net borrowing at £36 billion is £1.4 billion lower than forecast at the time of the Pre-Budget Report.

Debt too this year is forecast to be lower than the Pre-Budget Report at 37.1 per cent.

As a result of decisions in this and recent Budgets that come into effect this year – including a reduction in the main rate of income tax from 22 to 20 pence – fiscal policy is able to provide real support to the economy this year.

This is a responsible approach – within the disciplines of our fiscal rules – that will help entrench the resilience of the UK’s economy.

So borrowing next year, which peaked at 7.8 per cent of national income by 1993, equivalent to £110 billion today, next year will rise to £43 billion, some 2.9 per cent of national income, less at its peak than the average level of borrowing between 1979 and 1997.

Because of the decisions taken in this Budget it will fall to 2.5 per cent, then 2 per cent, then 1.6 per cent and then 1.3 per cent by 2012/13, supporting stability and resilience in the economy. That is £38 billion and then £32 billion, £27 billion and £23 billion by 2012/13.

Even taking into account the turbulence in financial markets and the support we are providing to the economy now, the current balance this year is in line with my forecast at Pre-Budget Report at minus £8 billion.

Next year it will be minus £10 billion, then minus £4 billion, returning to a surplus in 2010 of £4 billion, then £11 billion and then £18 billion by 2012/3, forecast to meet the Golden Rule over the economic cycle.

And so Mr Deputy Speaker, the Budget shows that we are meeting our first fiscal rule – the Golden Rule – with the current budget in surplus over the economic cycle.

In the previous 2 cycles the then Governments failed to meet the Golden Rule; in the cycle from 1986 to 1997 they failed by a margin of £240 billion and in the cycle from 1977 to 1986 by £140 billion.

In the past, the then Government borrowed to fund the immediate pressures of the day with no long-term return to the taxpayer.

Today our fiscal discipline means that over the cycle we will borrow only to invest.

Vital investment – in transport, schools and hospitals – has been protected and increased.

So whereas in 1996-7 public sector net investment was £5.4 billion, over the forecast period it is set to rise further from £33bn next year to £37bn in 2010 – the highest in three decades.

Borrowing for investment within the fiscal rules, means that we will meet our second fiscal rule – the Sustainable Investment Rule. In each year and over the cycle.

This year debt will be lower than the US, Euro area and Japan.

Debt levels are forecast to be 38.5, 39.4, 39.8, 39.7 and 39.3 per cent of GDP by 2012 /13. Every year lower than in 1997.

Mr Deputy Speaker, in the 18 years between 1979 and 1997 investment increased by only 20 per cent in cash terms and reached a low of just 0.3 per cent as a share of national income.

But by 2011, I can tell the House that investment will have increased by 500 per cent since 1997 and will have trebled as a share of national income.

Mr Deputy Speaker, by 2011 we will have seen the longest sustained expansion of investment in public services since 1945.

It is an achievement to be rightly proud of.

And we remain committed to continued investment in these public services.

And building on the platform of stability provided by the new fiscal rules, successive Spending Reviews delivered sustained increases in spending addressing the backlog of underinvestment in public services.

Mr Deputy Speaker, public spending grew by 3.6 per cent a year in real terms between 1997 and 2007.

Following the Comprehensive Spending Review last October, public spending in the coming three years will grow by 2.2 per cent, building on past increases and underpinned by our stretching value for money reforms.

In 10 years, spending on health has almost doubled; spending on education is up by 58 per cent.

As a result waiting lists are down; school standards are up. Transport spending is now 90 per cent higher. More people are using public transport than ever before.

Aid for the world’s poorest countries has doubled in real terms.

The Defence Budget has seen the longest period of increased spending in a generation.

This year we again expect to spend over £2 billion more supporting our troops on the front line. Including around £900 million on military equipment.

Mr Deputy Speaker, I want to take this opportunity to pay tribute to our service men and women in Iraq and Afghanistan, and their families.

We are deeply proud of the bravery, professionalism, and courage they display in serving our country.

Mr Deputy Speaker, this has been an exceptional commitment to improving public services. By 2010-11 we will have seen the longest sustained expansion of investment in public services in recent history.

In 1997 the annual cost of servicing our national debt was 9 per cent of public spending.

But today it is 5 per cent of total public spending. Freeing up an extra £23 billion each year to invest in public services – around half the entire budget for schools.

In the early 1990s as much as three quarters of all new public spending went on debt and social security costs. The figure is now just a third of that – allowing us to target spending where it is needed.

We have turned welfare into work and borrowing into wealth creation.

And it is essential that we continue to help everyone who can work to do so.

So Mr Deputy Speaker, we will bring forward further proposals to reform housing benefit to ensure that work pays.

From April 2010 all long-term recipients of incapacity benefit will attend work capability assessments.

These reforms will continue to free up resources for investment.

And it is right that like any other organisation, the public sector is as efficient as possible and that it delivers value for money.

Over the last year public sector employment has fallen. At the same time, private sector employment has grown strongly leading to record levels of employment, underlining the resilience of the British economy.

All departments have now published plans which will deliver another £30 billion in savings each year from 2010/11.

All of these savings will be reinvested in services.

And we will examine all major spending areas to identify where further reform could be made to deliver better value for money and maintain the improvement of public services.

Mr Deputy Speaker the Prime Minister has made clear, spending must be matched by reform. Reform remains vital. It’s not optional – it’s essential. It’s common sense.

Since 1997 we have responded to peoples’ expectations for better public services after decades of underinvestment and neglect.

We have driven up standards, developed a greater diversity of providers, tackled failing services, thereby ensuring that maximum benefit was gained from investment.

10 years ago there were 600 schools in which less than a quarter of pupils gained at least five good GCSEs. Today there are fewer than 50.

Compared to 1997, around 10percent fewer people under 75 now die from cancer thanks to faster and better treatment and more specialist doctors.

But the test for public services in the future is not whether they are better than before or simply good enough. It is whether they are as good as they can be.

So, if the focus of the past decade was on repairing the old; the focus of the next will be on developing genuinely world-class services.

After a decade of hugely increased investment, we will continue our spending at a sustainable rate alongside our wider objectives for the economy and public services.

This Budget therefore confirms the spending plans set out in last year’s Comprehensive Spending Review, and makes an assumption for continuing real growth in public spending after 2011 at a rate of 1.9 per cent a year.

That will allow departmental resources to continue to grow at broadly the same rate as in the next three years.

Now, Mr Deputy Speaker, I want to turn to the steps that we need to equip Britain for the future.

There is no greater moral imperative than to make sure that every child has the highest aspiration and ambition.

And the best possible opportunity to go as far as they have to the talent to go. Not some children, but every child.

If we are to build a fairer future for our children then we must eradicate child poverty in Britain.

Between 1979 and 1997 the number of children living in poverty has doubled.

Since then Mr Deputy Speaker, I can report that there are 600,000 fewer children in relative poverty, and we have halved the number of children in absolute poverty.

We have set ourselves an ambitious target to eradicate child poverty by 2020 and to halve it by 2010. And today I want to do more to deliver that ambition.

I will help their families to escape permanently the cycle of deprivation that blights too many lives.

Central to this is helping more parents into work.

We want to demonstrate our commitment to supporting parents, through a contract in which Government undertakes to provide the support that families need to move into work and the other side of this contract we look to families to make a commitment to improve their situations where they can.

From October 2009, we will change the rules for Housing and Council tax benefit so that parents are better off in work than on benefits.

As a result, a working family with one child on the lowest income will gain up to £17 a week. Mr Deputy Speaker this measure will lift 150,000 more children out of poverty.

And I can do more to help all children and hard working families.

In 1997 Child Benefit for the first child was £11 a week. I can tell the House that from April 2009, I will increase Child benefit for the first child to £20 a week – a year earlier than planned.

I will increase by £50 a year above inflation the child element of the Child Tax Credit for families on low and middle income from April next year.

This means that a family with two children, earning up to £28,000 a year, will be over £130 a year better off.

To make further progress we will spend a further £125m over the next three years targeting help to those who need it most and where the challenges are the hardest, developing new approaches that help families for the long-term.

Taken together these measures mean that, even at a time when we need to take difficult decisions, are investing a further £765 million next year and then a further £950 million the following year to take 250,000 more children out of poverty.

Today I am publishing analysis on what further steps we intend to take to eradicate child poverty.

And I believe further action is now needed to help vulnerable groups deal with rising energy prices.

We want to see the 5 million customers on prepayment meters given a fairer deal and energy companies to increase their support to vulnerable customers.

We will work with the companies to take further action on a voluntary and statutory basis – to underpin this as necessary we will legislate.

Energy companies currently spend around £50 million a year on social tariffs. I want to see this rising to at least £150 million a year over the period ahead.

Mr Deputy Speaker, the Government is committed to encouraging more people to save.

There are now over 17 million people with individual savings accounts and, from this April, we are increasing the annual Individual Savings Accounts investment limit to £7,200 with the amount that can be held in cash rising to £3,600.

And parents have now opened over 2.4 million Child Trust Fund accounts saving more for their children’s future.

We must go further.

So I can also announce that the Government will launch the Saving Gateway nationally with the first accounts available to savers from 2010. By contributing to these accounts we will offer incentives to save to up to 8 million people on lower incomes.

Ending child poverty, encouraging saving, raising ambition and providing greater opportunity.

Mr Deputy Speaker, for business, my Budget provides continuing stability and certainty and introduces new opportunities for entrepreneurs – the three critical factors contributing to the strength of the UK’s business environment.

Ensuring that the UK remains one of the best places in the world to do business, we will continue to promote open and competitive markets – including by removing barriers to trade across the world through bilateral and multilateral trade negotiations including the conclusion of the Doha development agenda.

Mr Deputy Speaker, our goal is, and will continue to be, to maintain the most competitive corporation tax rate of any major economy. We have the lowest corporation tax rate in the G7.

A competitive and simplified tax regime is essential.

That is why we cut the main rate of corporation tax in 1997 and again in 1999.

And from next month the main corporation tax rate falls again from 30 per cent to 28 per cent.

Mr Deputy Speaker, the UK is one of the best places in the world to do business. We are committed to consultation with business to maintain a stable business tax system that remains responsive to business’ needs and internationally competitive.

Underlining our commitment to maximising the economic recovery of the UK’s oil and gas reserves, I can also confirm reforms to the North Sea fiscal regime to help incentivise investment and support production.

But today I also want to do more to support Small and Medium Enterprises now and in the longer term.

13 million people work in Small and Medium Enterprises. And there are over 750,000 more firms than in 1997.

The new Capital Gains Tax rate will come in next month including the entrepreneurs’ relief I announced in January.

And that will benefit over 80,000 businesses and investors in the next year alone – 90 per cent will continue to pay Capital Gains Tax at 10 per cent – one of the lowest rates in the world.

This Budget continues a programme of tax simplification. I am today announcing further steps to help small companies simplify their tax calculations.

Mr Deputy Speaker, especially at this time we need to do more to help Small and Medium Enterprises get access to the finance they need.

To help them in current conditions, I can therefore announce that funds available through the Small Firms Loan Guarantee scheme will be increased by £60 million for the coming year.

And I am from next month extending the scheme to small and medium firms.

I am also increasing the amount of investment on which tax relief is available under the Enterprise Investment Scheme from £400,000 to £500,000, and the employee share limit for tax relief under the Enterprise Management Incentive Scheme will increase from £100,000 to £120,000.

The Secretary of State for Business and Enterprise will consult on radical new proposals to impose a limit on the amount of regulation that can be imposed by Whitehall departments.

I will also provide a capital fund of initially £12.5 million to specifically encourage more women entrepreneurs.

There is more I can do to ensure that small and medium firms win more business from the public sector.

So we will take immediate steps to give firms better access to Government contracts, and to help them with their cashflow.

And I am asking Anne Glover, Chief Executive of Amadeus Capital Partners, to look into what other barriers we can remove and the practicality of setting a goal for Small and Medium Enterprises to win 30 per cent of all public sector business in the next five years.

I believe that this could help promote enterprise in one of our most innovative and dynamic areas of the economy.

I believe we can help support them grow their businesses, creating new jobs and opportunities.

Mr Deputy Speaker, we welcome the contribution made by people born outside the UK who choose to come and work here. They are an important and central contributor to our economy’s growth and prosperity.

They pay taxes on their earnings here and also pay tax on money they bring into the country from abroad.

But for those non-domiciled individuals or families who have chosen to make Britain their home, I believe that it is right and fair that they should, after 7 years, pay a reasonable charge to maintain the right to be taxed differently from other UK residents.

Beyond that, as I have said before, we will not seek to charge UK tax on offshore income or capital gains that is not brought into the UK.

This new charge will be implemented from April. There will be no further changes to this regime for the rest of this Parliament or the next.

Last October I said that I would consider a scheme to which claimed to raise an additional £2.8 billion. On closer examination it was clear that the sums that did not add up. Not for the first time given the source. And I have rejected it.

We will continue to be vigilant against tax avoidance and we are publishing today further measures to ensure fairness for all taxpayers.

If we are to compete in the future it is essential to do even more to drive up standards in education and to improve skills. Increased spending on education has benefited children across the UK.

We have cut the number of underperforming schools dramatically in the last decade.

And building on last year’s Spending Review, we will raise standards even further. To create greater opportunity for all children.

And so the Secretary of State for Children, Schools and Families will be investing £200m to bring forward by a year to 2011 the Government’s aim for no schools to have fewer than 30 per cent of its pupils achieving 5 A*-C GCSEs, including English and Maths.

We will extend the successful London Challenge model, enable the best head teachers to turn round low performing schools, create new trusts and federations around successful schools, and in areas of greatest need drive forward a faster expansion of our Academies programme.

And as a result, by 2011, we will ensure that every school is an improving school meeting the standards we have set.

And I can announce today that we will commit £10 million over the next five years – which alongside contributions from the Wellcome Trust and private sector will create a £30 million Enthuse Science fund.

This will give every science teacher in secondary and further education access to high quality professional development helping improve the science offer to today’s children.

And to improve skills, the Comprehensive Spending Review increased resources for adult training. Extra funding will enable nearly 3 million adults to gain new, higher-level skills by 2011.

And today I can announce an extra £60 million over the next three years to provide new opportunities for people to gain the skills needed to enter the labour market, to remain in work, and progress in work.

This includes additional apprenticeships with leading employers to help tackle skills gaps and shortages.

Mr Deputy Speaker, by 2010 we will be spending over £6 billion a year supporting British science and innovation.

And tomorrow also the Secretary of State for Innovation, Universities and Skills will publish the Science and Innovation White paper.

Including proposals for a Further Education Innovation Fund to help them support businesses to develop their innovative potential.

If we are to compete in the future, not only do we need to have the best business environment and higher skills levels, we also need good transport links to make up for decades of underinvestment.

In the last ten years we have doubled the amount we spend on transport. £7 billion on the West Coast Mainline to Glasgow cut journey times. Public transport usage is at a 25 year high.

Mr Deputy Speaker, last November, following the Government’s investment of £6 billion, saw the completion of the Channel Tunnel rail link, with the opening of the St Pancras international station.

This week the new Terminal 5 opens at Heathrow.

Today I can announce new measures at Heathrow and other airports to ensure that a greater use of biometric technology speeds up the time it takes passengers to get through immigration control.

Good for business. Good for Britain.

Government funding for Crossrail is now secure; this will support economic growth not just in London but in the whole of the United Kingdom by adding an estimated £20 billion to national income.

This will help ensure that London retains its position as the world’s pre-eminent international financial centre.

We are spending more on public transport. But we also need to reduce congestion and improve transport links.

If we are to remain competitive over the next 20 to 30 years, we have to take more radical steps to reduce congestion on our roads.

We need more capacity on our roads but we cannot build our way out of all the problems we face.

Last week the Secretary of State for Transport announced further measures to ease congestion. In addition she has made available funding to develop local schemes to tackle congestion in the short-term.

In the longer-term, road pricing could reduce congestion as well as helping to meet our wider environmental obligations.

So I am setting aside new funding to develop the technology that could underpin national road pricing, inviting tenders to test this with the results expected next year.

Just as we need good transport links, we also need to make sure that we have more housing to meet the rising demand for new homes as well as to support our growing economy.

Since 1997, as a result of historically low mortgage rates we have seen one and a half million more home owners.

Already we have helped 95,000 families into new homes through shared ownership and shared equity schemes. And we will spend £8 billion on new, affordable and social housing over the next three years.

This will enable the Housing Corporation to deliver 70,000 new affordable homes each year by 2010/11.

But I want to go further.

From this April, key workers – such as teachers and nurses – and first time buyers will be able to borrow money from new-shared equity schemes.

Until now these were only available to those who could afford three quarters of the price of their new home. I am now extending the scheme to help those able to afford half of the price of their new home.

And I can also announce that from today, stamp duty on shared ownership homes will not be required until buyers own 80 per cent of the equity in their home.

Mr Deputy Speaker, it is precisely at this time that we need to do more to promote longer-term stability for home owners and mortgage holders.

Already the reforms we have introduced have created much greater stability with consistently low mortgage rates for home owners.

However, the uncertainty in the financial markets is having an impact on mortgage lenders here in the UK.

So I want to take measures that will keep mortgage rates low and stable.

In 2006, 30 per cent of mortgages agreed in the UK – £100 billion of lending – were funded through secondary funding markets.

Current conditions in these mortgage funding markets are extremely difficult because of financial turbulence in global markets.

In some countries these markets are closed.

It is, however, imperative that lenders have access to stable and low cost funding so that mortgage rates can come down as soon as possible.

We will to bring together, investors and lenders with the Treasury, the Bank and the Financial Services Authority to find market-led solutions to strengthen these funding markets further.

Mr Deputy Speaker, I also want more people to have the choice of long term fixed rate mortgages. These protect borrowers from risks and still allow them flexibility to move, or get a new mortgage if rates go down.

Today, however, most people in the UK have short-term fixed rate mortgages for two or three years, leaving them exposed to interest rate rises when their mortgage deal ends.

This is not the case in other countries, such as Denmark where the majority of homeowners take out long-term fixed rate mortgages.

I want to see more flexible and affordable long-term fixed rate mortgages for 10, 20 or even 25 years.

And I am today publishing the findings of the review of housing finance in the UK.

The conclusions show that long term fixed rate mortgages can reduce some of the risks of taking out a mortgage, especially for first time buyers and lower income families.

And it will help more people get on – and stay on – the housing ladder.

So, I will seek views on how we can deliver – drawing on international experience – the right framework for the UK to achieve affordable, long term fixed rate mortgages. I will report back at the Pre-Budget Report.

Mr Deputy Speaker, the best way to improve long term affordability and stability is to build more homes. That is why we are committed to 3 million more homes by 2020.

So I can announce that in addition to the 40,000 already under construction, we have through the review of public sector land identified sites for 70,000 more homes.

Mr Deputy Speaker, we are determined to take decisions now for the long-term future of our country.

Helping to improve affordability, supporting long-term stability for homeowners, and meeting the needs of future generations.

And our greatest obligation to future generations must be to tackle climate change.

Britain has been at the forefront of international action. We are one of the few countries meeting our Kyoto target.

We are working with other countries following agreement in Bali last year to agree tougher global goals after 2012.

And the UK will use our £800 million environment fund to work with the United States, Japan and other countries as well as the World Bank to fund clean technologies in developing countries, and adaptation to climate change.

Britain is already the leading financial centre for carbon markets and we are also working with California and other American states to build these markets and strengthen international partnerships.

We need to do more and we need to do it now. Few doubt the science. The need to take action is urgent.

There will be catastrophic economic and social consequences if we fail to act.

Recognising this threat, we are the first Government anywhere in the world to introduce legal targets compelling us to take action to cut carbon emissions.

We have an established target to reduce carbon emissions by at least 60 per cent by 2050.

I believe that we should go further.

That is why we have asked the Climate Change Committee to advise us – whether as part of an international agreement – we should raise our target to 80 per cent.

And if we are serious about reaching demanding targets then every department in Government, every public sector body, every business, every one of us needs to play its part.

And to ensure carbon reduction is a central part of our economic objectives, I can tell the House that the first carbon budgets to 2022 will be announced alongside the Budget next year.

Long-term growth must be sustainable.

There are huge opportunities here too for business, and there could be over a million jobs in our environmental industries within the next two decades.

Meeting these long term challenges will require us to make substantial reductions in emissions across the economy – in energy supply, transport, in our business and in our homes.

But I believe that there are three key steps we can take now.

Firstly, working in Europe we have helped build the Emissions Trading Scheme to curb the amount of carbon produced by generators and large industrial users.

The scheme imposes a cap on the amount of carbon companies can generate. Companies get allocations for credits to help them adapt.

If we want to encourage investment in low carbon technology in energy renewables and in nuclear, for example, and to make industry more carbon efficient we need to go further.

So in the next phase, instead of auctioning 7 per cent, I want to see auctioning of 100 per cent of these allowances for energy generators.

Last year’s Energy White paper committed us to increasing the supply of renewable energy and the Energy Bill will allow the tripling of renewable electricity by 2015.

We will consult on how to meet our share of the European Union target in the summer.

Secondly, we need to do more to reduce the amount of carbon generated at home and at work.

Given the damage that single-use carrier bags inflict on the environment, we want to be able to take action. We will introduce legislation to impose a charge on them if we have not seen sufficient progress on a voluntary basis.

Legislation would come into force in 2009 and based on other countries’ experience, it could lead to a 90 percent reduction, with around 12 billion fewer plastic bags in circulation.

The money raised should go to environmental charities.

And next month we will launch the most ambitious household emissions reduction programme.

Energy companies are obliged through the Carbon Emissions Reduction Target to give their customers better deals for energy efficiency and therefore cut bills.

Cavity wall insulation for nearly three million homes. Loft insulation, more energy efficient appliances and light bulbs.

I can announce £26 million funding next year for a Green Homes Service to help people cut their carbon emissions and their fuel bills.

We will roll out smart meters to medium and large companies over the next five years, providing greater incentives to reduce the amount of energy they consume.

We already have a target to make new homes zero carbon from 2016. I believe that we can go further.

And I can announce today that new non-domestic buildings will become zero-carbon from 2019.

We will consult on achieving that targets with the potential to save 75 million tonnes of carbon dioxide over the next thirty years.

The Climate Change levy, which is the main reason why we have met our Kyoto targets and which is still opposed by some, will increase in line with inflation from April.

The third key area we need to take action now is in relation to transport.

It accounts for nearly a third of our carbon emissions.

We recognise the contribution of aviation to the UK economy. That is why we support the expansion of Stansted and Heathrow.

I have always been clear that aviation must meet its environmental costs, and that is why we want aviation in the European Union Emissions Trading Scheme.

Because emissions from aircraft are forecast to continue to grow, I am also announcing that revenue from plane duty will be increased by 10 per cent in the second year of operation.

But Britain’s 30 million cars, vans and lorries together account for 22 per cent of total carbon emissions.

Over the last 20 years new cars have become 50 per cent more efficient. And new technology will bring further improvement.

Today, I am publishing Professor Julia King’s review of low carbon cars in which she examined new technologies which could help cut carbon emission.

Professor King found that by simply switching to the cleanest cars on offer, motorists could save 25 per cent of their fuel costs.

She also found that manufacturers needed to be encouraged to bring new technology to the market.

And I am asking the European Commission today to set a tighter target which reduces the cap on emissions from cars from 130 grams per kilometre of carbon dioxide to 100 grams per kilometre of carbon dioxide by 2020.

The road tax system should do more to support the use of more carbon-efficient, and therefore less costly cars.

This will help reduce average carbon dioxide levels in new cars.

Firstly, from April 2009, I am proposing a major reform to Vehicle Excise Duty to encourage manufacturers to produce cleaner cars and by introducing new bands, there will be an incentive to encourage drivers to choose the least polluting car.

And as a second stage for new cars, from April 2010 there will be a new first-year rate based on carbon dioxide emissions of the car.

Cars that emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions will pay no car tax at all in the first year.

But a higher first year rate will be introduced on the most polluting cars.

Cutting taxes for those who cut carbon emissions.

But it is right that if people choose to buy a more polluting car that they should pay more in the first year to reflect the environmental cost.

The changes will provide a real incentive to manufacturers and motorists.

We must encourage sustainable biofuels. Therefore the biofuel duty differential will be replaced by the Renewable Transport Fuel Obligation.

I am also reforming capital allowances for business cars to increase the incentive to move to lower emitting cars.

Mr Deputy Speaker, today is no smoking day. From 6pm today the duty on tobacco will rise, adding 11 pence to the price of a packet of 20 cigarettes and 4 pence to the price of five cigars.

And to help people to stop smoking, we are continuing the 5 per cent reduced rate of Value Added Tax on smoking cessation products beyond 30 June this year.

Mr Deputy Speaker, as incomes have risen, alcohol has become more affordable.

In 1997, the average bottle of wine bought in a supermarket was £4.45 in today’s prices. If you go into a supermarket today, the average bottle of wine will cost about £4.

From midnight on Sunday, alcohol duty rates will increase by 6 per cent above the rate of inflation. Beer will rise by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle.

Alcohol duties will increase by 2 per cent above the rate of inflation in each of the next four years.

Mr Deputy Speaker, it is only because I have taken these decisions on alcohol and on closing tax loopholes that I am able to provide additional support for families and lift more children out of poverty.

And it also why I am now able to make two further announcements whilst still meeting our fiscal rules.

As the House will know, the basic rate of income tax will fall by 2 pence in April.

Charities play a vital role. We will therefore implement a transitional rate of 22 per cent, to allow them to continue to claim gift aid at the current rate, delivering £300 million worth of relief and will give charities the certainty they need for the next years.

I said that one of the key features of this Budget is fairness. I also want to do more to help older people especially this year.

Mr Deputy Speaker, we are spending £11 billion more in real terms per year on pensions with over half this extra money going to pensioners on the lowest incomes.

From this April, as a result of changes made last year, a further 600,000 pensioners will be taken out of paying income tax.

The pension Credit now guarantees a minimum income of £124 per week from April.

Before 1997 there was no Winter Fuel Allowance.

For this year I have decided to help pensioners who are facing pressures such as higher energy bills. I will raise the winter fuel payment for over 60s from £200 to £250 and for the over 80s from £300 to £400. 9 million pensioner households will be better off. Conclusion

Mr Deputy Speaker, this is a responsible Budget to secure Britain’s stability in the face of global uncertainty.

I have made my choice.

Responsible decisions not irresponsible, unfunded promises.

Fairness and opportunity for everyone in Britain.

To secure a strong, sustainable future.

And I commend it to the House.

November 25, 2015