5

Fairness for Families
and Communities

INTRODUCTION

5.1 A strong and efficient economy is one which maximises the potential of every individual regardless of gender, disability, age, family circumstance or where they live. Where work is an option, it provides the best route out of poverty and social exclusion. For those who cannot work, the Government is also providing security through tax and benefit reform and high quality public services for all. The Government recognises that the best solutions do not always come from government, but can originate in the community itself. The best policies bring the private sector, voluntary and community action, and government together.

5.2 This chapter describes how the Government is applying these principles to help deliver a fairer society and a better quality of life for all. It describes the Government's approach to, and support for:

• families and children;
• people with disabilities;
• pensioners;
• savings and pensions;
• high quality public services;
• strengthening community life; and
• fairness in taxation.

SUPPORT FOR FAMILIES AND CHILDREN

5.3 The Government's aim is for every child to have the best possible start in life. Families with children have not had an equal share of income growth over the last 20 years. The tax and benefit system must support all children, recognising the extra costs and responsibilities that parents face, and the importance of children to the country's future.

5.4 The Government has set out a range of indicators to help judge the progress being made towards tackling poverty and social exclusion in Opportunity for all.¹ Thirteen of these relate to children. The wide range of indicators reflects the fact that although low incomes are an important part of poverty and social exclusion, poverty is multi-dimensional, and not solely about a lack of money. Other aspects include worklessness, educational failure, and poor health and housing.

5.5 The Treasury paper Supporting Children Through the Tax and Benefit System,² published alongside the Pre-Budget Report, set out the Government's policy strategy for tackling child poverty. It consists of:

• ensuring a decent family income, with work for those who can, and extra support for all families;
• prevention and support for those with additional needs and at key stages in life, particularly where there are very young children;
• harnessing the power and expertise of the voluntary and community sector, providing support for innovation and good practice, and fostering a strategic partnership between the voluntary and community sector and government through a new Children's Fund; and
• a world-class education system for all, ensuring that children from poor backgrounds have the skills and education they need to break the cycle of disadvantage.

5.6 The Treasury paper sets out the achievements of Government policies so far and describes the Government's approach to tax and benefit reform for families with children, which is underpinned by two principles:

• providing financial support for all families with children, through the foundation of universal Child Benefit, recognising the additional costs and responsibilities that all parents face when their children are growing up; and
• providing help in the fairest way, and targeting extra financial support on those who need it most when they need it most, such as mothers with young children, particularly around childbirth, or those on lower or middle incomes through the Children's Tax Credit, the Working Families' Tax Credit, the Disabled Person's Tax Credit and income-related benefits.

5.7 The Government has increased support for all families with children with the largest ever rise in Child Benefit. In addition it has provided greatest help for those most in need. In 2001, financial support for the first child will range from £15.50 to £50 a week. By comparison, it ranged from £11.05 to £27.70 a week in 1997.

Chart 5.1: Financial support for the first child

Financial support for all families with children

Child Benefit

5.8 The Government is committed to the principle of universal Child Benefit, paid to the main carer, as the foundation of its support for children. As announced in Budget 99, Child Benefit will be increased to £15 a week for the first child and £10 a week for subsequent children from April 2000, rising to at least £15.50 and £10.35 from April 2001.

Children's Tax Credit

5.9 Budget 99 announced the introduction of the Children's Tax Credit from April 2001, benefiting around five million families with children. It will replace the married couple's allowance and its related allowances which will be abolished from April 2000. Resources are being targeted at lower and middle-income families, with the credit tapered away from families where there is a higher-rate taxpayer.

5.10 Budget 2000 announces that an additional 50p 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, or £8.50 a week. This is more than twice the value of the married couple's allowance which it replaces.

5.11 These tax and benefit reforms mean that by April 2001 the tax burden on a typical family on average earnings with 2 children will be at its lowest since 1972.

Working Families' Tax Credit and the Disabled Person's Tax Credit

5.12 The Working Families' Tax Credit and the Disabled Person's Tax Credit were launched in October 1999, integrating the tax and benefit system to make work pay for families with children and for disabled people. Details of the Working Families' Tax Credit and the Disabled Person's Tax Credit are set out in Chapter 4. As announced in Budget 99, the under-11 credit in the Working Families' Tax Credit and the Disabled Person's Tax Credit will be increased by a further £1.10 a week over and above indexation from April 2000, to bring it up to the level of the under-16 credit. These increases will also apply to the under-11 rates for income-related benefits.

5.13 Budget 2000 further increases support for children under 16, with a rise in the child credit in the Working Families' Tax Credit and the Disabled Person's Tax Credit by £4.35 a week from June 2000. These increases will be matched in income-related benefits from October 2000.

5.14 A family with two children earning £12,500 will be £2,600 a year better-off as a result of the measures announced in this and previous Budgets. A family with two children on Income Support will be £1,500 a year better off than they were in 1997.

5.15 The Government has increased the amount spent on children for all family types at all income levels. By the end of the Parliament, the Government will be spending £7 billion extra each year on children. Chart 5.2 shows the composition of this spending.

A new integrated child credit

5.16 Although the reforms so far have made progress in tackling child poverty and delivering new resources fairly, the Government is determined to go further in improving the transparency and administration of income-related payments through the tax and benefit system. The Government will therefore introduce an integrated child credit from 2003.

Chart 5.2: Extra £7 billion of financial support for children in April 2001

5.17 The integrated child credit will bring together the different strands of support for children in the Working Families' Tax Credit, the Disabled Person's Tax Credit, Income Support and the Children's Tax Credit, building on the foundation of universal Child Benefit. It will be paid to the main carer in families in and out of work, and as a tax credit it will be administered by the Inland Revenue. The integrated child credit will be complemented by an employment tax credit paid through the wage packet to working households, as described in Chapter 4.

5.18 The integrated child credit will create:

• a more transparent system of support for children to help parents to understand what they can expect to receive, and facilitate public debate about the appropriate level of support;
• a portable and secure income bridge spanning welfare and work to improve work incentives;
• a common framework for assessment and payment to give every family a stake in the system of child payments while allowing extra resources to be directed at those most in need;
• a system where all support for children is paid to the main carer; and
• efficiency gains for Government and reduced hassle for parents.

5.19 Further details of the integrated child credit are set out in the accompanying paper Tackling Poverty and Making Work Pay - Tax Credits for the 21st Century³.

Targeted interventions and additional support

5.20 The Government recognises the challenges and difficulties faced by some families, especially at particular times in their children's lives. The early years of a child's life, in particular, are critical for its future outcome.

Supporting mothers after the birth of a new child

5.21 Around two fifths of children are born into poverty. Low-income mothers face particularly difficult and restricted choices about how they help their children in the early months. In the past, the tax and benefit system has not provided adequate support. Budget 1999 therefore announced that:

• entitlement to Maternity Allowance would be extended to around 16,000 women earning less than the lower earnings limit (£76 per week) but at least £30 a week, as well as 11,000 low-income self-employed women, from April 2000; and
• to help with the initial costs of having a new child, a new Sure Start Maternity Grant will replace the Maternity Payment from April 2000. The payments will be linked to contact with a healthcare professional to ensure expert advice on child development and services.

Sure Start Maternity Grant

5.22 Budget 2000 announces a further package of reforms. From this autumn, the Government will increase the Sure Start Maternity Grant to £300, three times the level in 1997. Over 200,000 mothers in low-income families will be able to claim this on the birth of
a child.

Reforms to WFTC and DPTC

5.23 As well as providing this extra lump sum payment, the Government will make the system more responsive to families' financial needs on the birth of a child:

• at present, and previously under Family Credit and Disability Working Allowance, parents have to wait up to six months before they can claim the extra entitlement for their new child. The Government will reform the Working Families' Tax Credit and the Disabled Person's Tax Credit from May 2001 enabling a family to make a new claim as soon as a child is born. Families will therefore be able to get an extra credit for the new baby immediately. Where a working mother has chosen to stay at home with her baby, the family should get extra support reflecting the fall in earnings. This new award will be available right from the start of the child's life, immediately responding to the family's new circumstances. The award will last six months, providing extra help for mothers at home, including those planning to return to work; and
• from May 2001, any mother who works 16 hours or more prior to the birth of a child, and is in receipt of Statutory Maternity Pay or Maternity Allowance, will meet the work criteria for the Working Families' Tax Credit and Disabled Person's Tax Credit. This change means that low-income working families - including where the mother is the sole earner - should be able to get support in these early weeks from the tax credit system, rather than turn to benefits. It also ensures that families who already receive help with their childcare costs will continue to be eligible for these payments.

5.24 These reforms will help low-income families right at the start of their new child's life. Low-income working families could be up to £30 a week better off in these early weeks, on top of the £300 Sure Start Maternity Grant. In making these reforms, the Government is ensuring that help is directed towards the poorest families, to give these mothers more choice about how they support their family around the birth of a child and whether and how to plan a return to work.

5.25 The Government will also review what improvements can be made in maternity pay and parental leave.

Targeted interventions

5.26 The Government is committed to tackling the causes of poverty and social exclusion, not just the symptoms. This principle underlies, for example, the approach taken by the Social Exclusion Unit and several of the cross-cutting reviews that form part of the 2000 Spending Review. There are also new preventative policies that are aimed specifically at children.

Sure Start

5.27 Sure Start is a new policy that works with parents and children to promote the physical, intellectual and social development of pre-school children - particularly those who are disadvantaged - to equip them to thrive when they start school. £450 million has been dedicated to establish 250 Sure Start programmes by 2001-02. By the summer of this year, over half of these programmes will be under way.

5.28 Sure Start programmes are managed by a partnership bringing together voluntary and non-state sector organisations with statutory services in an effective and integrated way to secure the best outcomes for children. When originally planned, it was estimated that the 250 Sure Start programmes would reach around 5 per cent of children in the 0-3 age range. Improvements in delivery of Sure Start now mean that the programme will reach many more: around 7 per cent of children. Because the programme has been designed especially for disadvantaged areas, this represents nearly 20 per cent of the poorest children.

Additional support

5.29 The Government is also providing targeted interventions to children of all ages to provide help when it is needed most:

• On Track is a new package of policies targeted specifically at reducing the risk factors that link young children and their family circumstances with future criminal behaviour. Part of the Government's drive to be tough on the causes of crime, On Track will provide a range of support including pre-school education, parent support and training, family therapy, home visits, and family/school partnerships. The Government provided an initial £27 million to fund between 20 and 30 pilot projects in 2000-01 and 2001-02; and
• the Connexions strategy, which was announced in February 2000, is a package of measures aimed at increasing participation and attainment through the teenage years. The policies will ensure that more young people have access to the services they need, follow appropriate and high-quality learning opportunities, and make a successful transition from adolescence to adulthood and working life.

Working with the voluntary and community sector

5.30 The Pre-Budget Report announced plans for a Children's Fund to invest in the work of the children's voluntary and community sector with children in poverty. The Children's Fund will be a key part of the Government's strategy to eradicate child poverty within a generation.

5.31 Initial consultations with the children's voluntary and community sector identified the need for investment at the most local level in order to make the most impact on children's lives. Consequently, the Government will establish a network of Children's Funds to fund local projects providing local solutions to the problem of child poverty.

5.32 The consultation also considered how to make the most impact on children's lives and arrived at the following four themes:

• economic disadvantage - imaginative schemes to enable families to improve their living standards;
• isolation and access - prevention and crisis work with hard-to-reach groups;
• aspirations and experiences - bridging the gap between the childhood experiences of children in poverty and their contemporaries; and
• children's voices - giving children a chance to articulate their own needs.

5.33 A further role for the Children's Fund could be to share good practice that already takes place, building on the diversity and innovation in the sector.

5.34 Over the coming months, the Government will be consulting key groups from the voluntary and community sector to explore how investment in these themes could make a real and measurable difference to the lives of children in poverty and how the local network of children's funds will work in practice.

Importance of a good start in education

5.35 Education is a vital influence on children's life chances. In recognition of the importance the Government places on giving children the opportunity to fulfil their potential, it is making available an additional £1 billion to education across the UK in 2000-01, raising the growth of spending between 1999-2000 and 2000-01 to 8 per cent in real terms.

5.36 This additional funding will be used to reinforce those policies likely to contribute most to every child fulfilling his or her potential. For example:

• schools will receive extra resources next year. An average primary school will receive an extra payment of £6,000, with grants on top for helping the weakest pupils catch up in literacy and numeracy. In return for meeting new requirements, an average secondary school will receive an extra of £40,000; and
• the pilots for Education Maintenance Allowances (EMAs) are already helping to increase participation of young people in education beyond the age of 16. Accordingly, a further £50 million will be made available to Local Education Authorities where staying on rates are relatively low, extending coverage from 7 per cent of those leaving school to nearly 30 per cent.

5.37 The Secretary of State for Education and Employment will be making further detailed announcements in due course.

FAIRNESS FOR PEOPLE WITH DISABILITIES

5.38 The Government is determined to increase opportunities for people with disabilities to live fulfilling and independent lives:

• the New Deal for Disabled People, described in Chapter 4, assists those who want to work, with advice and support specific to their needs;
• the new Disabled Person's Tax Credit, introduced in October 1999, increases the gains to work and removes the administrative complexity of a separate benefit claim and cheque. Chapter 4 provides more details;
• the disabled child credit in the Disabled Person's Tax Credit will be extended to families in receipt of the Working Families' Tax Credit from October 2000;
• from April 2001, severely disabled people under 60 years of age on income-related benefits will receive a guaranteed income of at least £134 a week for single people, and £176 a week for couples; and
• children aged three to four with severe disabilities will receive an additional £37.40 a week from April 2001 through the extension of the Disability Living Allowance. Reforms to Incapacity Benefit will provide up to £26.70 a week more for people who were disabled before the age of 20.

Anti-discrimination measures

5.39 From April 2000 the new independent Disability Rights Commission will promote equalisation of opportunities for disabled people, helping with the enforcement of the Disability Discrimination Act. In December 1999 the Disability Rights Task Force published its report From Exclusion to Inclusion. It contained over 150 recommendations for significant extensions and refinements to the Disability Discrimination Act. The Government has endorsed its recommendations ensuring that disabled people have civil rights in schools, and in further, higher and adult education.

FAIRNESS FOR PENSIONERS

5.40 The Government's strategy to ensure fairness for pensioners has three aims:

• lifting the poorest pensioners out of poverty;
• boosting the living standards of pensioners who are on low incomes but who are just above benefit levels; and
• ensuring continuing security for pensioners who are above benefit levels.

Additional help for the poorest pensioners

5.41 Income Support was the mechanism in place in 1997 to support the poorest pensioners. However, it did not provide adequate financial support. Moreover, many of those who were entitled to Income Support did not receive it and the eligibility rules penalised those who, through hard work and thrift, had managed to put away a small amount of savings.

5.42 In response the Government introduced the Minimum Income Guarantee (MIG) for the poorest pensioners. It has announced that it will increase the MIG by earnings this year and throughout the remainder of the Parliament. From April 2000, a single pensioner on the MIG will have an income of £500 a year more than in 1997. Earnings uprating again in 2001 will bring MIG annual incomes for a younger single pensioner to around £680 more than in 1997, and for a couple to around £1,070 more than in 1997.

Security for all pensioners

5.43 In addition, the Government has introduced measures which reach the poorest and those above income-related benefit levels. These measures will ensure that pensioners who have put a little by for their retirement are not penalised:

• winter fuel payments, now paid to every household with someone over 60,
  8.5 million in total, each December. Budget 2000 increases the winter fuel payment from £100 to £150 a year from the forthcoming winter; and
• from November 2000, concessionary TV licences for households with someone aged 75 or over. Over 3 million households will benefit - almost half of which are in the bottom three income deciles.

5.44 Taken together these measures mean that from April 2001 a 75 year old on the Minimum Income Guarantee will have an annual income of over £950 more than in April 1997. A couple over the age of 75 will receive over £1,350 a year more.

5.45 These changes will ensure that people who have managed to save something for their retirement benefit from additional support. Budget 2000 sets out the Government's intention to do more:

• the Government wants to reward pensioners who have managed to save something for their retirement. Currently the capital rules attached to the MIG allow £3,000 of saving without any reduction in benefit. Savings over that level reduce benefit entitlement. With over £8,000 of savings, MIG entitlement is removed altogether. The Government has announced that from April 2001 it will double the lower limit to £6,000 and increase the upper limit from £8,000 to £12,000 to reward savers; and
• the Government wants to use the MIG to reward low income pensioners who have made some pension provision for themselves and those who are currently just above MIG levels. With this in mind, the Government will examine for the longer term whether through an income taper or other measures the MIG can provide extra help to people who have provided for themselves. In the light of further work by the Department of Social Security and the Treasury, the Secretary of State for Social Security will publish proposals with a view to implementation during the next Parliament.

Combatting fuel poverty

5.46 The Government is also introducing a series of measures, building on the winter fuel payment, to combat fuel poverty among the elderly:

• increased grants under the new Home Energy Efficiency Scheme to reduce the costs of keeping warm for poorer pensioners and other vulnerable groups;
• capital allowances to underpin the Government's Affordable Warmth Programme aimed at combatting fuel poverty to be introduced later this year. The programme will support the installation of efficient central heating systems in up to one million low income homes through a Public Private Partnership with commercial lessors. About two-thirds of those helped are likely to be households aged 60 or above. They will benefit from warmer homes and more efficient heating will also mean lower fuel bills and reduced emissions of greenhouse gases; and
• extending the reduced VAT rate of 5 per cent to grant-funded installation
  of heating systems and home security goods from April 2000.

Fairness for tax paying pensioners

5.47 For pensioners who have higher incomes, the Government has made a series of changes to the tax system to ensure that pensioners who have provided for a comfortable retirement continue to enjoy this security:

• an extension of the 10p starting rate of income tax to savings from April 1999, recognising that many pensioners rely on savings as their primary income source. Around 1.5 million pensioners are benefiting;
• increases in the personal tax allowances for people aged 65 or over to: £5,790 for someone aged 65 to 74 and £6,050 for someone aged 75 or more. No one aged 65 or over will pay any income tax until their income reaches at least £111 a week; and
• older people who pay tax can also benefit from the reduction in the basic rate to 22 per cent from April 2000.

5.48 As a result of these measures, six out of ten adults aged 65 and over do not pay any income tax.

SUPPORTING SAVINGS AND PENSIONS

5.49 The Government is committed to creating a stable economy capable of delivering sustained growth with low inflation. Policies including the Working Families' Tax Credit, the National Minimum Wage and cuts in income tax rates increase the financial gains to work. Taken together these measures have increased financial independence. The Government wants to go further and encourage people to make provision for financial security throughout their lives.

5.50 Savings and investments have traditionally been the preserve of the better off. The Government is seeking to create an environment which promotes savings opportunity for all. The Government's savings strategy is therefore based on three principles of:

• fairness;
• flexibility; and
• confidence and transparency.

5.51 In the past, only those who had money to lock away could enjoy the privilege of saving. By ensuring a fair savings strategy, the Government is extending the savings habit to all:

• the Government is working with financial service providers to tackle financial exclusion by, for example, encouraging basic bank accounts which can be easily opened and cannot become overdrawn;
• the new Individual Savings Account (ISA) allows people to save free from tax, while having instant access to their savings. In the first nine months since their launch in April 1999, ISAs attracted over £17 billion in new funds, nearly 40 per cent more than went into Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs) over the same period in 1998. The Government has decided to retain the current £7,000 ISA subscription limit for 2000-01;
• stakeholder pensions, to be introduced in April 2001, recognise the structure of the modern labour market by offering a good value, low cost, tax free means of saving for retirement to groups previously denied it. For example, stakeholder pensions will help those who change jobs regularly and for whom occupational pensions are inappropriate. Similarly stakeholder pensions will, for the first time, allow those on career breaks (such as carers or mature students) to start, or continue to build up, a pension when they are not working; and
• the new all-employee share schemes offers employees the opportunity to invest in their company, tax free. Unlike many past schemes, all employees will have the opportunity to participate.

5.52 Flexibility is the second strand of the Government's savings strategy. The Government recognises that, throughout their lives, people's circumstances and hence their savings needs change. The savings environment must be flexible enough to meet these needs:

• an ISA, allowing easy access to savings, is an ideal way for people to start saving even small amounts. For example, young savers could start with a cash ISA and, as their circumstances become more secure, start to save in an equity ISA;
• ISA savings can be transferred straight into a stakeholder pension. Alternatively they can be used to buy other assets, such as a deposit for a house, or to help start-up a new business; and
• savings built up in a tax-free employee share scheme can be transferred to either an ISA or a stakeholder pension. This allows savers to diversify into other assets, while remaining within a tax-free environment.

5.53 The Government also wants savers to have ready access to transparent products of good quality. Coupled with the Financial Services Authority's new statutory responsibility for educating financial consumers, this should mean that people are able to save with confidence:

• to tackle complexity in savings products, the Government is setting CAT (Charges, Access, Terms) standards for both ISAs and mortgages, and minimum standards for stakeholder pensions. All these products are designed to be straightforward, clear, fair and easy to understand as well as offering decent value to customers;
• pooled pension investments (PPIs) will from 2001 offer pension savers a transparent and straightforward way of building a personalised pension fund which can readily be transferred from one pension scheme to another. They will thus be especially suitable for people who move jobs from time to time; and
• the Financial Services Authority provides a one-stop shop for investor protection, replacing the plethora of different arrangements that existed previously.

HIGH QUALITY PUBLIC SERVICES

5.54 The Government is committed to delivering the high quality public services that people need and expect. As a result of prudent management of the public finances, and through the Comprehensive Spending Review (CSR), the Government has been able to increase investment in public services.

5.55 At the same time the Government is driving up performance through a comprehensive programme of modernisation and reform.

5.56 Public Service Agreements (PSAs) tell Parliament and the public what the Government will achieve with the money it is investing. They set out the real changes that people want to see, and the concrete, measurable improvements to services that the Government will deliver.

5.57 These Agreements are an important part of the Government's programme of public service modernisation. Targets reflect the Government's top priorities in a way that is transparent to the public and accountable to Parliament. They cover policy goals such as small business start-ups, and service changes such as school class sizes. There are tough, stretching targets for the efficiency with which departments manage the resources they are given.

5.58 Targets are being closely monitored to ensure that services become more modern, efficient, and responsive to their users' needs, bringing performance in all areas up to the levels of the best. Progress to date against targets will be set out in Departments' Annual Reports to be published shortly.

The 2000 Spending Review

5.59 The next Spending Review will sustain and increase the additional resources for public mservices announced in the CSR:

• growth in current spending of 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 of the economy; and
• a more than doubling of net capital investment to 1.8 per cent of GDP by 2003-04, further tackling the legacy of underfunding of Britain's public infrastructure.

5.60 Alongside new spending plans in the 2000 Spending Review, the Government will be publishing revised Public Service Agreements. These will set out the step changes in service delivery which departments must deliver in return for this investment. Box 2.2 provides details of the aims and objectives of the 2000 Spending Review.

A modern National Health Service

5.62 The Government is committed to ensuring that all members of society have access to world class healthcare from the publicly funded NHS, with access based on need.

5.63 Budget 2000 announces the largest ever sustained increase in NHS resources. The Comprehensive Spending Review set out, in July 1998, three year funding for the NHS for 1999-00 to 2001-02. The Government is now able to provide an additional £2 billion for the second year of these plans, 2000-01, including the proceeds of real increases in tobacco duty.

5.63 The Chancellor has also decided to set new three year plans for NHS spending for the following three years covered by the 2000 Spending Review, 2001-02 to 2003-04. The new allocations for the NHS in the UK are set out below.

Table 5.1: NHS spending in the UK, £ billion in current prices

Note: these figures include additions to the devolved administrations and the Northern Ireland departments.

5.64 These UK allocations provide for:

• 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 NHS⁴ It compares to an average of 3.3 per cent annual real growth since the foundation of the NHS and 2.9 per cent annual real growth between 1978-79 and 1996-97; and
• a 50 per cent cash increase in NHS spending over the five years from the beginning of the first Comprehensive Spending Review - 35 per cent in real terms - equivalent to a rise in NHS cash spending per household from £1,850 in 1998-99 to £2,800 in 2003-4.

5.65 The Government is determined to match new resources with more reform.

5.66 Tomorrow, the Prime Minister will make a statement to Parliament on the work he and the Secretary of State for Health will lead over the next four months to reform and modernise the Health Service.

5.67 The Government's plan, to be published in July alongside the detailed public spending allocations, will address long-standing variations in efficiency, performance and health outcomes, and the right balance between preventative, primary and hospital care - so that a step change in resources can achieve a step change in results.

5.68 Alongside the extra resources must come more reform and modernisation. The Prime Minister, in his statement to Parliament tomorrow, will set out how, with the guarantee of sustained investment, the Government, the professions and the NHS can together rise to the challenge of delivering better healthcare for all.

5.69 The Chancellor is also commissioning a long-term assessment of the technological, demographic and medical trends over the next two decades that will affect the health service to report to him in time for the start of the next spending review in 2002.

Education

5.70 Prudent management of the public finances means that the Government is able to make further targeted additions to key priority programmes.

5.71 Budget 2000 announces an immediate boost for education of £1 billion across the UK. This will include extra payments for all primary and secondary schools and an expansion in Education Maintenance Allowances, that help those aged 16 to stay on in education. The Secretary of State for Education and Employment will be announcing further details in due course. Plans for future years will be announced in the 2000 Spending Review.

Transport

5.72 The Government's goal is a modernised and integrated transport system fit for a new century.

5.73 On top of the investment announced in the CSR, Budget 2000 is making an additional £280 million available across the UK for transport, including new money for both road and public transport schemes. The Deputy Prime Minister will announce further details in due course. Plans for transport spending in future years will be announced in the Spending Review in July.

Tackling crime

5.74 The Government is already putting significant additional resources into tackling crime and the causes of crime.

5.75 Budget 2000 is making 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. This will help the police to attract and retain good officers over the coming years, initially by accelerating recruitment under the Crime Fighting Fund. Effective policing however is not just about the number of officers. It is also about how to deploy them most effectively. This extra funding will therefore also be available to enhance existing modernisation investments in for example radios and DNA technology. This investment will strengthen the services which the police deliver in cutting crime and catching offenders. The Home Secretary will announce further details in due course.

Public infrastructure

5.76 A key aim of the CSR was to modernise and improve the public infrastructure to improve service delivery. The 2000 Spending Review will continue to redress the under-investment in public capital with significant increases over the period. The Review will provide for a more than doubling of net investment as a share of GDP. Allocations will be made in the Spending Review culminating in July.

5.77 Meanwhile Budget 2000 is putting an immediate extra £200 million into the Government's Capital 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.

STRENGTHENING COMMUNITY LIFE

5.78 The best form of economic advance for the country involves communities advancing together. The Government's aim is to build a working and sustainable economy in every community. Strong community networks are an essential foundation for the future success and prosperity of the nation.

5.79 Particular groups and specific geographical areas have their own individual needs. In addition to improving public services for all, Budget 2000 includes a range of measures to strengthen communities by promoting partnerships between government, business and local communities. Chapter 3 sets out the Government's strategy to promote an enterprise culture and encourage private investment flows in deprived areas. This section outlines measures to tackle disadvantage and social exclusion in communities.

The New Deal for Communities

5.80 The New Deal for Communities puts local people in charge of their own futures. It provides financial resources for communities to work with service providers to develop innovative ways of helping themselves which, if successful, can then be extended to other deprived areas. £800 million has been set aside for the first three years of the programme from April 1999. Ten pathfinder neighbourhoods have now submitted detailed delivery plans. In return, the pathfinder neighbourhoods have made a commitment to deliver quantified improvements against four key outcome goals:

• higher levels of employment;
• better health;
• higher educational attainment; and
• lower crime.

5.81 A further 29 communities have joined the New Deal and are in the process of forming partnerships and drawing up delivery plans.

National Strategy for Neighbourhood Renewal

5.82 Communities suffering from multiple deprivation need special help. A consultation document setting out proposals for a National Strategy for Neighbourhood Renewal will be launched shortly. It will set out the Government's approach to tackling the problems that social exclusion brings in the most deprived communities. The strategy will draw on the reports of the 18 inter-departmental Policy Action Teams.

5.83 Building sustainable communities depends in part on ensuring that economic markets can function properly. Drawing on the results of the consultation and the work of a Cross-Cutting Review of Government Intervention in Deprived Areas, set up as part of the 2000 Spending Review, the National Strategy will set out a comprehensive long-term agenda for bridging the gap later this year. The Government is committed to ensuring that the most disadvantaged neighbourhoods are given the support they need to maximise their economic potential.

Housing

5.84 The Government will set out its housing vision in a Housing Green Paper which will be published shortly. The Green Paper will underline the Government's commitment to tackling poor housing and improving choice for everyone, particularly those on low incomes. It will set out the Government's strategy for helping home owners, private renters and those in the social housing sector.

5.85 A key element of the Green Paper will be the drive to improve performance in the social housing sector. The Government wants councils and registered social landlords to offer a better service to tenants and, through the Housing Inspectorate, will ensure that councils attain Best Value. The Government will also improve the process of housing transfer to ensure that it delivers a better deal for tenants.

5.86 The Government also wants to see social tenants offered more choice, and believes that social rents should be more coherent. The present chaotic pattern of rents can be confusing both for tenants and landlords. Moving towards a regime that better reflects the value tenants put on different properties will make it easier to give them more choice in the allocation process. The Government's underlying aim is to create a dynamic social housing sector that gives tenants choices and a higher standard of service.

Strengthening rural communities

5.87 The Government's objective is to sustain and enhance the distinctive environment, economy and social fabric of the countryside for the benefit of all. Meeting this objective requires a policy approach which takes account of remoteness and sparsity of population, structural change in economic activity, and the protection and enhancement of the natural environment.

5.88 As part of the 2000 Spending Review, the cross-cutting review of rural and countryside programmes is examining issues specific to rural communities. Its conclusions will inform the Rural White Paper to be published later this year. It will set out the Government's approach to meeting its objective for rural areas. The White Paper will take account of the full range of rural issues: from encouraging sustainable growth in the countryside and a new direction for agriculture, to combatting social exclusion. The White Paper will address the issues raised in the recent Performance and Innovation Unit report on Rural Economies, including

• economic instruments;
• innovative approaches to service delivery;
• regulatory changes; and
• organisational arrangements that might be adapted to deliver rural policies more effectively.

The vital role played by the voluntary and community sector

5.89 Volunteering and community activity has a pivotal role to play in the development of a democratic, socially-inclusive society. No-one knows better than local people the needs of their communities. They are ideally placed to be agents of change, pioneering fresh solutions, and delivering personalised services.

Helping communities to help themselves

5.90 The Government is already working with the sector on a series of initiatives aimed at encouraging new volunteers and community-based activities by:

• setting up an internet-based database - the site - providing individuals with free and direct on-line access to volunteering opportunities throughout Britain, 24 hours a day, 365 days a year;
• supporting the campaign of the charity one20 and the BBC celebrating volunteering and inspiring people to give time;
• funding the development of the first ever community-based digital TV channel - the media trust's community channel; and
• running five active community demonstration projects testing further ways of strengthening community activity and creating new volunteering opportunities.

Charity Taxation: Getting Britain Giving in the 21st Century

5.91 To further promote social responsibility and voluntary giving, Budget 2000 introduces a radical package of measures to improve incentives for giving to charity and to make the tax system work better for charities themselves. These measures implement and extend the Getting Britain Giving package which was announced in the Pre-Budget Report. They arise out of the comprehensive Review of Charity Taxation which the Government concluded last year. The measures take effect in April 2000.

Gift Aid

5.92 The Gift Aid scheme provides tax relief for one-off donations to charity. There is no maximum limit for donations, but there is currently a minimum limit of £250, which must be paid in a single payment. Following the consultation exercise, which showed strong support for a reduction in the minimum limit, the Government is abolishing entirely the £250 minimum limit on donations. In future, any donation whether large or small, one-off or regular, will qualify for tax relief.

Boosting the Payroll Giving scheme

5.93 Under the Payroll Giving scheme, employees authorise their employer to deduct charitable donations from their pay and receive tax relief on the donation at their top rate of tax. There is relatively low take-up of the scheme by employers and employees. The Government is therefore boosting Payroll Giving with a promotional campaign, starting in the summer, backed by a 10 per cent supplement on donations, to be paid to charities for three years from April 2000. In addition, Budget 2000 abolishes the £1,200 annual maximum limit for Payroll Giving donations.

Measures to encourage corporate giving

5.94 The tax rules for charitable donations by companies are being simplified. The requirement for companies to deduct income tax from their Gift Aid donations, and for the recipient charity to then claim back the tax from the Inland Revenue, is to be abolished. Also, companies will no longer have to give Gift Aid certificates to the charity with their donations. These changes will significantly simplify the tax system for companies and charities.

Other measures to increase giving

5.95 Budget 2000 introduces a new income tax relief for gifts to charity of certain shares and securities. This goes further than the proposed measure announced in the Pre-Budget Report and covers not only listed shares and securities but also other shares dealt on a recognised stock exchange such as AIM shares, units in authorised unit trusts, shares in open-ended investment companies and holdings in similar foreign collective investment schemes. In addition, Budget 2000 removes the charge to tax where income of certain trusts is given to charity.

Making life easier for charities themselves

5.96 Budget 2000 introduces new measures to ease the administration and the tax burden of charities themselves. The Government is introducing a de minimis exemption which will allow charities that engage only in small-scale trading activities to do so directly, without the need to set up a subsidiary company. Broadly the exemption will apply where trading turnover is less than £5,000, or where the trading turnover represents less than 25 per cent of the charity's total income, up to a maximum of £50,000. The existing income tax and VAT exemptions for charity fundraising events will be extended and aligned to exempt a wider range of events. These measures were announced in the Pre-Budget Report.

5.97 Measures will also be introduced to make the VAT system more generous for specific transactions, such as advertising. The VAT zero rate will be broadened for the sale or hire of donated goods, a measure which goes beyond the package announced in the Pre-Budget Report.

FAIRNESS IN TAXATION

Stamp duty

5.98 The Government recognises the importance of good quality housing. Many families on low incomes live in low-rent social housing, which is increasingly provided through Registered Social Landlords (RSLs). Only RSLs which are registered charities enjoy Stamp duty relief at present. Budget 2000 announces the Government's decision to encourage social housing provision and help the voluntary transfer programme by extending that relief. The additional reliefs cover:

• purchases by resident-controlled RSLs;
• transfers of housing stock from local authorities to help the voluntary transfer programme; and
• purchases of property by RSLs which are subsidised by Social Housing Grants.

5.99 In the Pre-Budget Report, the Government signalled the high priority it attaches to encouraging an urban renaissance by tackling the neglect and decline faced by many of Britain's urban areas. Achieving an appropriate balance between greenfield development and making more efficient use of brownfield land is an important element of this. The Government is attracted to the idea of offering relief from stamp duty for new developments on brownfield land. The Government will consult with interested parties on how this measure might be best targeted to help meet its objectives and how the measure could work in practice.

5.100 Budget 2000 also announces new rates for Stamp Duty on property with rates of duty of 3 per cent for transactions over £250,000 and 4 per cent over £500,000. Only 5 per cent of residential transactions in the UK pay at rates above 1 per cent (just over 10 per cent for London and the South East). Over one third of transactions remain exempt because they take place below the £60,000 threshold.

Tobacco

5.101 Tobacco use is detrimental to health with significant wider social costs. The Government's White Papers, Smoking Kills and Saving Lives, set out ambitious targets for reducing smoking-related diseases such as cancer and heart disease.

5.102 The Government believes that there is a strong health case for year-on-year real terms increases in the price of cigarettes and tobacco. There are two ways of achieving this: through raising taxes and through reducing the supply of cheap smuggled tobacco.

5.103 The Chancellor will continue to form his Budget judgements on the appropriate level and timing of future increases in tobacco taxes, taking into account a wide range of factors, including the Government's health objectives.

5.104 Duties on cigarettes and other forms of tobacco are being increased by 5 per cent in real terms with effect from 21 March. This will release extra resources which will be included in the extra £2 billion for the National Health Service in 2000-01.

Smuggling

5.105 Tobacco smuggling not only undermines the Government's objective of reducing the levels of smoking in the UK, as cheaper cigarettes become available, but also brings with it widespread and serious criminality. It also cost the Exchequer £2.5 billion in lost revenue in 1999. The Government has demonstrated its determination to tackle this threat. In the
Pre-Budget Report, the Government announced a series of measures including the use of scanners and pack marks. This policy will be further underpinned by significant additional resources for Customs and Excise for tackling tobacco smuggling Full details of the Government's strategy are set out in the paper 'Tackling Tobacco Smuggling' to be published on 22 March 2000.⁵

Forestalling

5.106 The Pre-Budget Report signalled the Government's determination to end tax avoidance through forestalling, whereby manufacturers and importers build up large stocks of cigarettes in the months leading up to a Budget change and pay duty on their accumulated stocks just before the Budget increase takes effect. This has cost the public purse some £300 million a year and leads to greater uncertainty over the timing of revenue flows to the Exchequer.

5.107 In view of the potential compliance costs for wholesalers and retailers of a sell-by-date on the pack mark, the Government has decided instead to impose an anti-forestalling measure involving restricting clearances of tobacco from duty-suspended warehouses in the months immediately preceding a Budget. This will be a less burdensome approach for wholesalers and retailers, and should be more effective in protecting revenue than the proposed sell-by date. The Government will be proceeding with its proposal to introduce a pack mark for anti-smuggling purposes.

Off-shore betting

5.108 The bookmaking and racing industries in the UK need a tax system that allows them to take advantage of the increasing globalisation of the gambling market and the possibilities that e-commerce offers. The tax system also needs to ensure that these industries continue to contribute fairly to government revenues.

5.109 A consultation document issued on 21 March 2000 looks at ways of modernising the basis on which betting is taxed to respond to future threats and opportunities. It focuses on two possibilities:

• changing to a tax based on the place of consumption; and
• a gross profits based tax.

5.110 In determining the most appropriate form of taxation for betting, the Government will also wish to take account of proposals for the future funding of the horseracing industry, and looks to the horseracing and betting industries to come forward with sensible and timely proposals. HM Customs and Excise will be conducting a consultation up to 30 June with a view to taking action in Budget 2001⁶.

5.111 It is also important that the industry should continue to be protected against unfair competition from offshore bookmakers. The Government therefore welcomes the recent Court of Appeal decision which upholds restrictions on advertising targeted at UK customers. In the light of this decision, the Government currently sees no further need to amend the existing provisions.

VAT on women's sanitary products

5.112 To make the tax system fairer for women, VAT on women's sanitary products will be cut from the standard rate of 17.5 per cent to a reduced rate of 5 per cent. In order to give businesses time to adjust pricing and accounting systems, the reduced rate will be implemented from January 2001.

Air passenger duty

5.113 Budget 2000 announces a new, fairer structure for air passenger duty that will come into effect from 1 April 2001.

5.114 Air passenger duty is currently levied at rates of £10 on departures to destinations within the European Economic Area (EEA), and £20 to other destinations. The Government has recognised that the tax can represent a very significant proportion of the cost of some airfares, and a very small proportion of the cost of others. The duty on economy flights within the EEA will be halved from £10 to £5. The duty on economy flights to other destinations will remain at £20. The rate for club and first class fares for destinations in the EEA will remain at £10, but will rise from £20 to £40 for other destinations. On top of this, all flights from the Scottish Highlands and Islands will be exempt from duty, reflecting the importance of air transport to the daily life of this remote region.

5.115 Part of the cost of these changes will be met by removing the exemption from duty of return flights within the UK, a modification which was necessary to comply with European law. Overall, the changes will produce a fairer duty structure, and will ensure that many millions of passengers on economy or tourist class flights within the UK and Europe will pay less duty than at present.

Anti-avoidance

5.116 Tax-driven schemes, devices and structures, if allowed to flourish unchecked, not only cause ordinary taxpayers to have to make good the resultant loss of revenue but can also give one business an unfair competitive advantage over another. They can also undermine the credibility of the tax system generally. Budget 2000 shows the Government's continuing commitment to protect the revenue base by tackling avoidance across the whole tax system. Among the measures in the Budget are:

• a package of measures to tighten up the controlled foreign company rules, including countering 'designer rate' schemes (as announced in the Pre-Budget Report);

• a series of measures to combat the avoidance of capital gains tax by the use of trusts, offshore companies and, as announced in the Pre-Budget Report, by exploiting the reliefs for gifts;
• rules to counter the use of a number of devices which seek to reduce the rate of stamp duty payable and a measure to allow new avoidance schemes to be countered as they arise;
• rules to counter rent factoring schemes, equivalent in substance to bank loans, in which borrowers seek excessive relief for repayments;
• action against the avoidance of VAT by foreign lessors on the disposal of assets leased in the UK; and
• legislation to give effect to the proposals already announced to stop avoidance of tax and NICs through the use of personal service companies by workers who would otherwise be treated as employees of their clients.

¹Opportunity for all: Tackling Poverty and Social Exclusion, The Government's first annual report on poverty and social exclusion (September 1999). Copies can be obtained from 020 7712 2171, or at http://www.dss.gov.uk [back]

²Supporting Children Through the Tax and Benefit System, No. 5 in the Modernisation of Britain's Tax and Benefit System series (November 1999). Copies can be obtained from the Treasury Public Enquiry Unit on 020 7270 4558, or at http://www.hm-treasury.gov.uk [back]

³Tackling Poverty and Making Work Pay - Tax Credits for the 21st Century, No. 6 in the Modernisation of Britain's Tax and Benefit System series (March 2000). Copies can be obtained from the Treasury Public Enquiry Unit on 020 7270 4558, or at http://www.hm-treasury.gov.uk [back]

⁴ This will be the first period in the history of the NHS with four years of over 5 per cent real terms growth in every year. [back]

⁵Tackling Tobacco Smuggling (March 2000). Copies can be obtained from 22 March 2000 from the Treasury Public Enquiry Unit on 020 7270 4558, or at http://www.hm-treasury.gov.uk [back]

⁶The consultation document, Our Stake in the Future, is available at http://www.hmce.gov.uk [back]