1

Overview

1.1  The Government is pursuing a comprehensive and coordinated strategy to fulfil Britain's national economic potential and deliver the objective of high and stable levels of growth and employment - with rising living standards for all.

1.2  Over the past three years, the Government has been building a platform of economic stability, locking in low inflation and bringing the public finances under control. Through measures to promote enterprise and fairness and build a stronger and fairer Britain, Budget 2000 takes further steps towards meeting the Government's long-term goals - with new measures to boost productivity, encourage work, support families and communities, and protect the environment.

1.3  As a result of a commitment to stability and prudence, the Budget ensures that the Government remains on track to meet its fiscal rules and locks in the fiscal tightening over the next two years to an even greater extent than projected in Budget 99, while releasing substantial new resources for education, health, transport, law and order, tackling child poverty and supporting pensioners.

Budget 2000, Prudent for a Purpose: Working for a Stronger and Fairer Britain, comprises the Economic and Fiscal Strategy Report (EFSR) and the Financial Statement and Budget Report (FSBR). The EFSR sets out:
  • a coherent and coordinated framework and strategy to meet the Government's objectives;
  • a progress report on what the Government has achieved so far; and
  • how Budget 2000 measures contribute to each element of the strategy.

The FSBR provides:

  • a summary of each of the main Budget measures; and
  • updated forecasts for the economy and the public finances.

1.4  Full details of the Government's economic strategy are described in the November 1999 Pre-Budget Report. The EFSR follows the same structure as the Pre-Budget Report, focusing on the following key elements:

  • delivering macroeconomic stability;
  • meeting the productivity challenge;
  • increasing employment opportunity for all;
  • ensuring fairness for families and communities; and
  • protecting the environment.

DELIVERING MACROECONOMIC STABILITY

1.5  Chapter 2 describes the Government's framework for macroeconomic policy and prospects for the UK economy and the public finances (full details of which are set out in Chapters B and C of the FSBR).

The new framework

1.6  Since coming into office, the Government has introduced new frameworks for both monetary and fiscal policy, both of which are highly transparent, forward-looking and underpinned by legislation:

  • a new monetary framework to deliver low inflation, giving the Bank of England responsibility for setting interest rates to meet the Government's symmetrical inflation target;
  • a new fiscal framework based on a prudent approach to the public finances and underpinned by two strict fiscal rules - the golden rule and the sustainable investment rule; and
  • a new public spending framework, integrated into the fiscal framework, to deliver greater certainty for long-term planning and remove the previous bias against investment.

1.7  Early indications are that the new frameworks are delivering significant benefits. In contrast to the boom and bust of the past, the UK economy has enjoyed a period of stability and steady growth since the introduction of the frameworks - with employment rising to record levels. Inflation has remained close to target and interest rates have been lower and more stable than in the past. At the same time, the new fiscal framework has restored the public finances to a healthy and sustainable position, while allowing fiscal policy to support monetary policy through the economic cycle.

The economic forecast

1.8  Economic developments over the past year have broadly confirmed the judgements taken in the Budget 99 forecast, with the pause in UK growth at the end of 1998 being short lived and stronger activity spreading to most sectors and regions of the UK economy through last year. Unemployment has fallen to 20-year lows. The Budget 2000 forecast shows that:

  • RPIX inflation is expected to remain below the 21/2 per cent target throughout this year, rising back to target by early 2001;
  • GDP is expected to grow by 23/4 to 31/4 per cent in 2000, up from 2 per cent in 1999 and a little stronger than expected at the time of the Pre-Budget Report. Growth of 21/4 to 23/4 per cent is forecast for both 2001 and 2002; and
  • there are clear upside risks to the outlook for activity and inflation, highlighting the importance of the Government's forward-looking policy framework and the need for responsible wage bargaining and price setting across the economy. But there are also downside risks associated with imbalances in the world economy, particularly in Japan and the US.

Fiscal developments and prospects

1.9  Latest fiscal outturns have been stronger than expected at the time of Budget 99. While some of this improvement in the public finances in 1999-2000 reflects stronger than expected growth, much of it appears to have been structural. The surplus on current budget in 1999-2000 is now estimated to be £17.1 billion, compared with a Budget 99 forecast of £2 billion.

1.10  Against this background of a significant improvement in the public finances in 1999-2000, which is projected to persist, large surpluses expected on the current budget would imply a fiscal tightening well in excess of that anticipated at the time of Budget 99. It is against this outlook that the Budget 2000 decisions have been taken.

1.11  The Government's Budget judgement ensures that the fiscal rules will continue to be met over the coming years, including under a more cautious case, and that the outcome of the Budget is consistent with the Government's continuing commitment to prudence and responsibility. The Budget locks in the fiscal tightening over the next two years to an even greater extent than projected in Budget 99, while releasing substantial new resources for the Government's key public service priorities.

1.12  In the Budget the Government is:

  • implementing a Budget package to promote enterprise and work and release extra resources to tackle child and pensioner poverty, as set out in Table 1.2;
  • setting firm overall spending limits for the period of the 2000 Spending Review allowing:
    • current spending to increase by 21/2 per cent a year in real terms in the three years to 2003-04, in line with the Government's neutral view of the economy's trend rate of growth;
    • a more than doubling of net investment, rising to 1.8 per cent of GDP by 2003-04. This makes a significant further contribution to tackling the legacy of underfunding of Britain's public infrastructure, while remaining consistent with the sustainable investment rule; and
  • allocating an additional £3 billion of current spending in 2001-01 and an additional £1 billion of capital spending within DEL in 2000-01.

Table 1.1: Fiscal balances comparison with Budget 991
 Outturn2EstimateProjections
 1998-991999-002000-012001-02
Fiscal balances (£ billion)
Surplus on current budget - Budget 99-4.1248
Surplus on current budget - Budget 2000-7.517.11416
Net borrowing - Budget 99-1.0331
Net borrowing - Budget 2000-2.8-11.9-6-5
Cyclically-adjusted budget balances (per cent of GDP)
Surplus on current budget - Budget 99-0.20.61.01.1
Surplus on current budget - Budget 2000-0.61.81.31.3
Net borrowing - Budget 99-0.10.0-0.2-0.1
Net borrowing - Budget 2000-0.1-1.2-0.5-0.3
Debt ratio (per cent of GDP)
Public sector net debt - Budget 9940.639.438.236.8
Public sector net debt - Budget 200039.737.135.133.6

1 Excluding windfall tax receipts and associated spending.

2 The 1998-99 figures were estimates in Budget 99.

Meeting the fiscal rules

1.13  Over the projection period, the surplus on the current budget is projected to fall gradually to 0.7 per cent of GDP by 2004-05. Consistent with the need to maintain a cautious approach, this profile shows that the Government is well on track to meet its golden rule over the projection period, with the average surplus on the current budget from 1999-2000 falling from 1.7 per cent of GDP in 2000-01 to 1.4 per cent of GDP in 2004-05. The cyclically-adjusted current budget also remains comfortably in surplus throughout the projection period.

1.14  Net debt has declined continuously as a proportion of GDP since 1996-97, when it stood at 44 per cent of GDP. By the end of March 2000, it is projected to be 37 per cent of GDP. This is consistent with meeting the sustainable investment rule. The Budget 2000 projections show a decline in net debt over the projection period, stabilising at 321/2 per cent of GDP by 2004-05 reflecting the sustained improvement in the position of the public finances. This is consistent with the projected more than doubling in net investment over the same period.

1.15  As required by the Code for Fiscal Stability, Annex A of the EFSR presents illustrative long-term fiscal projections and examines the long-term sustainability of the public finances. This indicates that the UK has a broadly sustainable fiscal position in the long term.

MEETING THE PRODUCTIVITY CHALLENGE

1.16  Britain's productivity performance lags behind that of other major countries. Chapter 3 describes the action which the Government has taken since coming into office to tackle this productivity gap and the further steps which are being taken in Budget 2000 to help make Britain the most competitive environment for business in the world and promote balanced growth across all the regions of Britain. The Government's long-term ambition for the next decade is that Britain will have a faster rise in productivity than its main competitors, as it closes the productivity gap.

Measures already announced

1.17  The Government has already taken significant steps to increase competition, enterprise and innovation, skills, investment and public sector productivity - the five key drivers of productivity performance:

  • competition: the new Competition Act came into force in March 2000, giving tough new powers to the Office of Fair Trading to curb anti-competitive behaviour;
  • enterprise and innovation: measures to improve the science base and the commercialisation of research from universities and Public Sector Research Establishments, the introduction of the new R&D tax credit and the launch of the Small Business Service in April 2000, together with a range of measures to promote enterprise opportunities in deprived areas;
  • skills: in addition to substantial additional resources for education, individual learning accounts and UfI Limited (the company taking forward the University for Industry concept) will from this year increase opportunities for life-long learning. The Government's long-term ambition, as discussed in Chapter 5, is that by the end of the decade 50 per cent of Britain's young people will be going on to higher education;
  • investment: corporation tax rates have been cut to their lowest ever level and the new 10p rate for the smallest companies from April 2000 will benefit 270,000 businesses; and
  • public sector productivity: the Government has set output and efficiency targets for public service delivery through Public Service Agreements. The Public Sector Productivity Panel is working with government departments to identify and tackle key areas for improvement, and the new Office of Government Commerce will streamline government procurement processes and should deliver £1 billion of efficiency savings over the next three years.

Budget measures

1.18  Budget 2000 includes a further package of measures to increase productivity, boost enterprise and support small businesses across all regions of Britain:

  • major reforms to capital gains tax from April 2000 to strengthen the incentives for entrepreneurial investment, including a shortening of the business assets taper from 10 to 4 years and a much wider definition of business assets. All shareholdings in unquoted trading companies will qualify, and in quoted trading companies all employee shareholdings will qualify, as will other shareholdings over 5 per cent;
  • permanent 40 per cent capital allowances for small and medium-sized enterprises (SMEs);
  • further steps to support e-commerce, with new discounts for electronic filing of tax returns, the introduction of 100 per cent first year capital allowances for small firms buying ICT equipment, and a £60 million package to help get more small firms on-line and deliver services to them electronically;
  • an increase from 10 to 15 in the number of employees in small companies eligible for the new Enterprise Management Incentives scheme to be introduced in April 2000, and final details - following consultation - of the new all-employee share ownership plan and corporate venturing tax relief from April 2000;
  • a £1 billion target umbrella fund to finance enterprise growth to be taken forward by the Small Business Service and Regional Development Agencies to provide better access to venture capital for small, growth firms in the regions;
  • following the Banking Review by Don Cruickshank, the Government is bringing forward a package of measures designed to reduce prices and improve services for consumers and SMEs and promote innovation in banking;
  • Paul Myners, Chairman of Gartmore Investment Management, will look at whether there are factors discouraging institutional investors from investing in smaller companies. He will shortly be launching a consultation exercise and will report back with recommendations by the next Budget; and
  • changes to the work permits system to enable UK employers to recruit skilled people from overseas where there are skills shortages and to enhance the UK's image as an attractive location for talented overseas students and entrepreneurs.

1.19  The Secretary of State for Trade and Industry will be making further announcements shortly.

INCREASING EMPLOYMENT OPPORTUNITY FOR ALL

1.20  Chapter 4 describes the Government's aim to deliver employment opportunity for all - the modern definition of full employment. Its long-term economic ambition is that by the end of the decade there will be a higher percentage of people in employment than ever before. The Government is taking steps to help match the large number of vacancies in regions across the country to people in neighbouring unemployment blackspots. It is determined to help into work those who are unemployed and those who are outside the labour market but would like to find work.

Measures already announced

1.21  To deliver employment opportunity for all, the Government has already introduced an ambitious set of reforms built on the evidence of what works: helping people to move from welfare to work, helping to make work pay, and helping people to secure progression once in work:

  • welfare to work: over 750,000 people have already participated in the range of New Deal programmes with almost 260,000 moving into jobs. April 2000 will see the introduction of 15 Employment Zones in areas of particularly high unemployment and enhanced provision to intensify contact between the Employment Service and the long-term unemployed; and
  • making work pay: through tax and benefit reforms including the Working Families' Tax Credit, reform of NICs, the new 10p rate of income tax from April 1999 and the cut in the basic rate to 22p from April 2000 - the lowest rate for 70 years. This is underpinned by the National Minimum Wage, the adult rate of which will be increased to £3.70 an hour from October 2000.

Budget measures

1.22  Budget 2000 builds on these measures, taking further steps to secure employment opportunity for all:

  • from autumn 2000, special Action Teams will help to match unemployed people to suitable vacancies in neighbouring areas in 20 of Britain's communities suffering from the highest unemployment and lowest employment, along with additional support in the 15 Employment Zone areas;
  • as outlined in the Pre-Budget Report, there will be a national rollout of an Intensive Gateway within the New Deal for 18 - 24 year olds from June 2000, and a national extension and intensification of the New Deal for 25 plus from April 2001;  
  • extended choices will be available to lone parents so that, from April 2001, all lone parents on Income Support with children over the age of five will be required to meet with a specialist personal adviser who will guide them through their choices - including help to try work, help to move into part-time or full-time work and the opportunity to undertake education and training;
  • the first stage of work to develop a nationwide service to help disabled people find work and testing the effectiveness of help for people when they become ill in work with job retention and rehabilitation pilots;  
  • a new Job Grant of £100 from spring 2001 to ease the transition from welfare to work, together with a 4-week Income Support for Mortgage Interest (ISMI) run-on and simplified rules for the Housing Benefit Extended Payments Scheme;
  • additional support for working families with an increase in the under-16 child credit in the Working Families' Tax Credit from June 2000 (matched by increases in the Disabled Person's Tax Credit and income-related benefits); and
  • a new employment tax credit from 2003, to be brought in alongside the integrated child credit, to extend the principle of the Working Families' Tax Credit to people without children.

FAIRNESS FOR FAMILIES AND COMMUNITIES

1.23  As discussed in Chapter 5, the Government is committed to building a fairer and more inclusive society in which everyone has the opportunity to benefit from higher living standards. In particular, it is pursuing an extensive programme to tackle the causes of poverty. The Government's long-term economic ambition is to halve child poverty by the end of the next decade, as it moves towards its aim to abolish child poverty within 20 years. The Government is also working hard to ensure that individuals and communities have access to high quality public services, including good schools and a modern health service.

Measures already announced

1.24  The key elements of the Government's strategy to meet these aims, and the measures which it has already introduced to help do so, include:

  •   support for families and children: through further increases in universal Child Benefit from April 2000, targeted support through the Working Families' Tax Credit and Income Support and, from April 2001, the new Children's Tax Credit which replaces the married couple's allowance following its withdrawal in April 2000;
  •   fairness for pensioners: with a minimum income guarantee uprated by earnings for the poorest pensioners, a £100 winter fuel payment for every pensioner household, and the concessionary TV licences for those aged 75 and over; and
  •   delivering high quality public services: significant additional resources for health and education over the three years from April 1999 as part of the 1998 Comprehensive Spending Review.

Budget measures

1.25  Budget 2000 takes further steps to support families and tackle child poverty, help pensioners, promote saving, improve public services and ensure a fair and efficient tax system.

Families and children

To provide further support for families and children:

  •   the under-16 child credit in the Working Families' Tax Credit will be increased by a further £4.35 a week from June 2000. This will be matched in the Disabled Person's Tax Credit, the under-16 child allowance in Income Support and income-related benefits;
  • an additional 50 pence a week will be added to the Children's Tax Credit when it is introduced in April 2001, making it worth up to £442 a year - more than twice the value of the married couple's allowance which it replaces;
  • a package of measures will help low-income mothers support their children in the early months, including an increase of £100 to £300 in the Sure Start Maternity Grant from summer 2000;
  • continued consultation on the new Children's Fund which will be set up as part of the 2000 Spending Review, including a network of Children's Funds; and
  • a new integrated child credit from 2003, which will bring together the different stands of support for children in the Working Families' Tax Credit, Income Support and the Children's Tax Credit into a seamless system of support for children built on the foundation of universal Child Benefit.

The measures introduced so far in this Parliament will lift 1.2 million children out of poverty and mean that by 2001 the tax burden on a typical family on average earnings with two children will be at its lowest since 1972.

Pensioners

To provide further support and security for pensioners, Budget 2000:

  • builds on the five-fold increase in the winter fuel payment announced in Budget 99, with a further increase from £100 to £150 for every 60+household;
  • doubles the lower capital limit attached to the minimum income guarantee to £6,000 and increases the upper limit to £12,000 to reward pensioners who have managed to save something for their retirement; and
  • announces the Government's intention to look at opportunities to develop the minimum income guarantee, whether through an income taper or other measures, to reward pensioners who have made some provision for their retirement.

As a result of measures announced in this and previous Budgets, over the course of the current Parliament the Government will be spending an additional £6.5 billion on pensioners.

Savings

To help promote savings opportunity for all, the Budget announces that:

  • the Government has decided to retain the current £7,000 Individual Savings Account (ISA) contribution limit for 2000-01, rather than reduce it to £5,000 as previously planned.

Modernising public services

As a result of prudent management of the public finances, Budget 2000 sustains and increases for the next four years the investment the Government has already made in Britain's key public services. Within the firm overall spending limits set by this Budget, spending will be focused on the public's priorities. The Budget announces:

Health:

  • an immediate additional £2 billion for the NHS in 2000-01 including extra resources from a rise in tobacco duties;
  • 6.1 per cent average annual real terms growth over the next four years - the longest period of sustained high growth in the history of the NHS; and
  • NHS reforms to tackle variations in efficiency, performance and health outcomes to ensure that a step change in resources can achieve a step change in results.

Education:

  • an immediate boost for education of £1 billion across the UK providing more money for schools and for helping young people to stay on at school.

Transport:

  • an additional £280 million, available across the UK for transport, including new money for both road and public transport schemes.

Tackling crime:

  • an extra £285 million available for the fight against crime. Capital modernisation projects totalling £185 million have been approved for criminal justice agencies. Another £100 million will be available for modernising policing across the UK.

In addition, Budget 2000 is putting an immediate extra £200 million into the Government's Captial Modernisation Fund to support innovative capital projects which will improve service delivery. Further allocations from the £2.7 billion Capital Modernisation Fund will be announced in the coming weeks.

A fair and efficient tax system

The Government is committed to addressing unfairness in the taxation system. Measures in Budget 2000 to help promote a fair and efficient tax system include:

  • Budget 2000 increases the rate of tobacco duties by 5 per cent in real terms with immediate effect. This will release extra resources which will be included in the additional £2 billion for the NHS in 2000-01. Further details of the Government's strategy to tackle tobacco smuggling will be announced on 22 March;
  • from April 2001, air passenger duty on economy flights within the European Economic Area (EEA) will be reduced from £10 to £5 and flights from the Scottish Highlands and Islands will be removed from duty. The rate for club and first class fares for destinations outside the EEA will rise from £20 to £40, with other rates unchanged. Part of the cost of these changes will be met by removing the exemption from duty of return flights within the UK, a modification necessary to comply with European law;
  • an increase in the rates of stamp duty for property transactions above £250,000. 95 per cent of residential property transactions will be unaffected; and;
  • the Budget also demonstrates the Government's continuing commitment to protect the revenue base by tackling tax abuse across the entire system, with a range of measures designed to ensure that both individuals and businesses pay their fair share of taxes.

PROTECTING THE ENVIRONMENT

1.26  Economic growth needs to take place in a way which ensures the effective protection of the environment and the prudent use of natural resources. Chapter 6 describes the Government's strategy for protecting the environment, for both current and future generations. Budget 99 included the largest package of environmental tax reforms ever announced in the UK. Budget 2000 implements and delivers the key reforms, putting in place policies to tackle climate change, improve air quality, regenerate Britain's cities and protect the countryside.

Measures already announced

1.27  The Government has already announced a range of measures designed to meet its environmental objectives, including:

  • a climate change levy, to be introduced in April 2001, to encourage energy efficiency in business and help reduce greenhouse gas emissions. All the revenue raised will be fully recycled back to business through a 0.3 percentage point cut in employers' NICs and additional support for energy efficiency measures;
  • supporting integrated transport with reduced Vehicle Excise Duty (VED) for cars with the smallest engines, improvements to the transport system and tax measures to promote environmentally-friendly commuting; and
  • a five-year programme of annual increases in the standard rate of landfill tax from April 2000, as part of the Government's strategy to promote more sustainable waste management.

Budget measures

1.28  Budget 2000 includes further measures to tackle climate change, improve air quality, regenerate Britain's cities and protect the countryside:

  • reforms to VED to encourage the use of more environmentally-friendly vehicles, including an extension of the reduced rate of VED for existing cars to cars with engines up to 1,200cc and a new graduated VED system for new cars based on their carbon dioxide (CO2) emissions - both from March 2001;
  • a revenue-neutral reform of company car taxation from April 2002 to encourage the take-up of vehicles which have lower CO2 emissions and use environmentally-friendly fuels;
  • reforms to lorry VED, including allowing 44-tonne lorries meeting Euro II emissions standards onto UK roads from early 2001, at favourable VED rates;
  • a new fiscal incentive to use ultra-low sulphur petrol and the freezing of the duty rate on road fuel gases;
  • further refinements to the detailed design of the climate change levy to increase its environmental effectiveness while protecting competitiveness;
  • further encouragement for emissions trading;
  • an extension of the reduced rate of VAT for the installation of energy saving materials to all homes, and the introduction of capital allowances to underpin the Government's Affordable Warmth Programme;
  • new relief from stamp duty for some Registered Social Landlords to encourage social housing provision and make better use of the existing housing stock;
  • a possible relief from stamp duty for new developments on brownfield sites, with consultation on how this measure might be best targeted to help meet the Government's objective to encourage better use of brownfield land;
  • a new aggregates levy from April 2002 to tackle the environmental costs associated with quarrying and encourage the use of recycled materials. All of the revenues will be returned to business through a cut in employers' national insurance contributions and a new Sustainability Fund to deliver environmental benefits to the local communities affected by quarrying; and
  • further discussions on a possible voluntary package of measures to reduce the environmental impacts of the use of pesticides.

1.29  Table 6.1 of the EFSR shows how the Government's environmental tax measures fit in to the overall framework of the Governments environmental policy. An environmental assessment of these measures is detailed in Table 6.2 of the EFSR.

IMPACT OF BUDGET MEASURES ON HOUSEHOLDS

1.30  The measures in this and previous Budgets support the Government's objectives of promoting and rewarding work, while giving extra support to pensioners and families with children.

1.31  By April 2001, when personal tax and benefit measures from this and previous Budgets have come into effect:

  • on average, households will be £460 a year better off;
  • on average, families with children will be £850 a year better off; and
  • the tax burden on a single-earner family on average earnings with two children will be the lowest since 1972.

Living standards

  • for a single-earner family with two children on £25,000 a year, real living standards will have risen by 10 per cent over the Parliament; and
  • as a result of the Working Families' Tax Credit, for a single-earner family with two children on £12,500 a year, real living standards will rise by 20 per cent this year, the largest annual rise for 25 years.

Supporting working families

  • a single-earner family with two children on £25,000 a year will be £370 a year better off;
  • a single-earner family with two children on £12,500 will be £2,600 a year better off; and
  • no family with someone in full-time work will get less than £214 a week, over £11,000 a year.

Tackling poverty

  • the poorest two-child family on income support will be £1,500 a year better off;
  • 1.2 million children will be lifted out of poverty; and
  • for a 75-year old pensioner on the minimum income guarantee, annual income in April 2001 will be over £950 higher than in 1997. For a 75-year old couple it will be £1,350 higher.

1.32  Charts 1.2 and 1.3 on page 14 provide an indication of where taxpayers' money will be spent in the year ahead and where taxes come from. These figures take account of the additional increases in spending in 2000-01 announced in Budget 2000.

 

Table 1.2: Budget 2000 Measures
  (+ve is an Exchequer yield)£ million
  2000-012001-022002-032000-01
  indexedindexedindexednon-indexed
MEETING THE PRODUCTIVITY CHALLENGE
1New all-employee share plan-120-280-370-120
2Abolition of stamp duty on intellectual property-5-5-5-5
3Corporate venturing scheme-5-25-50-5
4Capital gains tax reform0-225-2750
5Abolition of withholding tax on international bonds and foreign dividends0-300*0
Small business
6Enterprise Management Incentives-30-50-60-30
7EIS/VCTs: reduction in minimum holding period and technical changes-5-15-25-5
8Permanent first year capital allowances for small and medium sized enterprises at 40%*-190-330*
9First year capital allowances for small enterprises for information and communication technology at 100% for three years0-90-900
10Discount for filing of tax returns over the internet and electronic payment-5-300-5
Large business
11Extending group rules for corporation tax losses and company gains-60-100-65-60
12Changes to double taxation relief+40+140+120+40
13Reduction in interest rates on overdue quarterly instalments and de-minimis limit for CT instalments raised to £10,000-5**-5
INCREASING EMPLOYMENT OPPORTUNITY FOR ALL
14Income tax: indexation of allowances and limits000-470
15Reduction in employer national insurance contribution rate by 0.1 percentage points from April 200200-3500
Transition to work package
16£100 Job Grant0-20-200
17Income Support Mortgage Interest run-on for 4 weeks on taking work0-10-100
18Income Support Mortgage Interest 52 week linking rule0-5-50
19Simplification of Housing Benefit Extended Payments Scheme0-15-150
20Increasing £15 earnings disregard in income-related benefits to £200-20-200
FAIRNESS FOR FAMILIES AND COMMUNITIES
Measures for families with children
Tackling child poverty
21Increase Children's Tax Credit by £0.50 from April 20010-100-1300
22Increase Working Families' Tax Credit under 16 child credit and income related benefits by £4.35 from June 2000 and October 2000 respectively-665-1,260-1,295-665
Maternity package
23Extension of Working Families' Tax Credit to those receiving maternity pay0-40-800
24Increase Sure Start Maternity Grant by £100-5-20-20-5
Fairness to pensioners
25Increase minimum income guarantee capital limits for pensioners from April 20010-145-1450
26£150 Winter Allowance from December 2000-430-430-430-430
Securing the tax base
27Capital gains tax: use of trusts and offshore companies0+120+1250
28Stamp duty: transfer of property and company reorganisations+50+100+100+50
29Life assurance company taxation: modification of apportionment rules+50+115+120+50
Table 1.2: Budget 2000 Measures
  (+ve is an Exchequer yield)£ million
  2000-012001-022002-032000-01
  indexedindexedindexednon-indexed
30Insurance companies and Lloyds: reserves0+30+1200
31Rent factoring+20+50+80+20
32Controlled Foreign Companies+40+120+150+40
33Petroleum Revenue Tax: preventing misuse of safeguard relief0+10+300
34VAT: capital asset disposals+5+5+5+5
Duties and other tax changes
35Relaxation for flights from Scottish Highlands and Islands from April 20010-5-50
36Other reforms to Air Passenger Duty-5-75-850
37Stamp duty: 3 per cent rate for transfer of land and property above £250,000 and 4 per cent above £500,000+290+295+365+290
38Stamp duty: Registered Social Landlords-10-20-20-10
39Enhancement to charities tax package0-5-150
40Alcohol: freeze duty on spirits and revalorise all other alcohol duties-25-25-20+140
41VAT: reduced rates on sanitary protection-10-35-35-10
42Inheritance tax: index threshold000-15
43Extending current Individual Savings Account subscription limits for 1 year to April 2001-40-70-75-40
445% real increase to tobacco duty+235+405+415+375
45Reform of amusement machine licence duty-5**-5
46VAT: indexation of registration and deregistration thresholds000-5
47Construction industry scheme: reducing the deduction rate-150-50-50-150
48VAT: exemption+15+15+15+15
49VAT: credit supplies-20-20-20-20
PROTECTING THE ENVIRONMENT
50Revalorisation of hydrocarbon oil duties000+715
51Ultra low sulphur petrol - introducing a 1p differential with unleaded petrol*-15-35*
52VAT: revalorisation of fuel scale charges for business cars000+60
53Extending reduced VAT rate for energy saving materials-35-35-35-35
54Affordable warmth scheme: capital allowances*-10-20*
55Aggregates levy00+3850
Vehicle Excise Duty:
56Reduce VED rates for goods vehicles-45-45-45-45
57Introduction of graduated VED system for new cars from March 20010-80-1400
58Increase threshold for reduced VED rates for private and light goods vehicles tax class to 1,200cc (from 1,100cc) from March 2001-120-120-120-120
59Revalorisation of VED rates for existing Private and Light Goods Vehicles deferred until March 2001-11000-110
TOTAL-1,165-2,580-2,480-570

*negligible.

 

Chart 1.1: Where taxpayers' money is spent

Chart 1.2: Where taxes come from
 

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Prepared 21st March 2000