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New measures to build a Britain of economic
strength and social justice are set out in the
Budget, delivered by the Chancellor, Gordon
Brown, today.
Against a backdrop of global economic uncertainty
and hostilities in Iraq, the Budget sets out
the long-term reforms that will leave Britain
well placed to deal with the impact of global
events, and benefit from the coming global upturn,
to build a Britain of economic strength and
social justice, a Britain that is enterprising,
flexible and fair.
From strong foundations, and having steered
a stable course through the most rapid slowdown
in the world economy for thirty years, Budget
2003:
- forecasts the economy to grow by 2 to 2½
per cent this year as the world economy recovers,
rising to 3 to 3½ per cent in 2004
and 2005;
- shows that the public finances remain sound,
and that the Government is firmly on track
to meet its strict fiscal rules over the economic
cycle, while meeting international and public
spending commitments;
- announces new measures to enhance flexibility
and dynamism in labour, product and capital
markets – measures for flexibility that
will deliver opportunity and prosperity in
every region; and
- takes steps to advance fairness with flexibility,
with further support for some of the most
vulnerable pensioners in the country and a
new Child Trust Fund to help strengthen the
saving habit of future generations.
Key Budget Measures
Key announcements in Budget 2003 include:
- a new Child Trust Fund providing
children born from September 2002 with an
initial endowment at birth of £250,
rising to £500 for the poorest families,
to strengthen the saving habit of future generations;
- an extra £100 on top of the £200
winter fuel payment, to households with a
pensioner aged 80 or over, for the lifetime
of this Parliament;
- an extension, to 52 weeks, of the period
over which all pensioners in hospital receive
their full state pension;
- a package of support for new and growing
businesses, including proposals to improve
access to finance, simplify tax and reduce
regulatory burdens, and measures for the 2,000
Enterprise Areas;
- new measures to increase the supply of
housing, promote flexibility in the housing
market, and streamline and simplify the planning
regime;
- further steps to improve skills in the
workforce, with Enterprise Advisers in
schools, details of additional Employer Training
Pilots and reforms to facilitate migration
as a source of skills in the economy;
- substantial reform of Housing Benefit
to improve gains to work, facilitate labour
mobility, and deliver a more reliable service
to claimants;
- more intensive support to help lone parents
and partners of out-ofwork benefit claimants
find work, with pilots of a new worksearch
premium for lone parents and an enhanced New
Deal for partners;
- a new compliance and enforcement package
to protect direct tax revenues and designed
to save £1.6 billion over the next three
years;
- an increase in tobacco, beer and wine duties
in line with inflation and a freeze in the
duty on spirits, sparkling wine and cider;
and
- a deferred increase in the main road
fuel duties in line with inflation from
1 October, new duty incentives for environmentally-friendly
road fuels, and a new lower rate of vehicle
excise duty for the cleanest cars.
MAINTAINING MACROECONOMIC STABILITY
Economic stability and sound public finances
provide the best foundation for rising national
prosperity and long-term investment in public
services.
Increased global uncertainty in recent months
has led to sharp declines on equity markets
and rising oil prices, restraining global economic
activity. G7 growth this year is now forecast
to be weaker than expected at the time of the
Pre-Budget Report, with prospects for the Euro-area
particularly badly affected. GDP in the G7 economies
is now expected to grow by just 1¾ per
cent in 2003, and that in the Euro-area by just
1 per cent.
International developments continue to influence
prospects for the UK economy and persistent
uncertainty and subdued global growth have affected
business confidence and investment in recent
months. Nonetheless, low inflation and sound
public finances have allowed macroeconomic policy
to support the economy during this period of
global weakness and left the UK better placed
than in previous world slowdowns to maintain
economic stability. Comparisons with major competitors
show the UK, with North America, as the fastest
growing of the G7 industrialised economies in
2001 and 2002.
The Budget 2003 projections show that:
- the economy is forecast to grow by
2 to 2½ per cent in 2003 as uncertainties
diminish and the global recovery strengthens,
and by 3 to 3½ per cent next year and
in 2005 as the economy returns to trend;
- RPIX inflation is forecast to remain
low and close to the Government’s 2½
per cent target throughout the forecast period;
and
- the public finances remain sound.
Based on prudent audited assumptions, and
despite continued uncertainty in the world
economy, the Government is firmly on track
to meet its two strict fiscal rules over the
economic cycle, including in the cautious
case, while meeting its international and
public spending commitments.
PROMOTING PRODUCTIVITY AND FLEXIBILITY
Productivity growth underpins strong economic
performance and sustained increases in living
standards. The Government’s long-term goal
is that Britain will achieve a faster rate of
productivity growth than its main competitors,
closing the productivity gap.
In the modern global economy, faster productivity
growth demands new flexibility in labour, product
and capital markets. Flexibility ensures that
the economy responds to economic change efficiently
and quickly, and in a way that maintains high
employment, low inflation and unemployment,
and growthin real incomes. Were the UK to join
EMU, the need for flexibility would be greater
still, as the ability to adjust interest and
exchange rates would no longer be available.
Dynamic labour, product and capital markets,
and a stable and flexible housing market, would
be vital to avoid putting at risk high and stable
levels of growth and employment.
Building on the reforms to the competition
regime and the support for businesses already
introduced, Budget 2003 sets out the further
steps the Government is taking to support the
drivers of productivity growth.
Promoting enterprise and innovation
The Government is committed to building an
enterprise society in which people from all
backgrounds and all areas of the country consider
and act upon enterprise opportunities. Budget
2003 announces further action to support small
and growing businesses, including:
- proposals to improve access to finance
for small businesses, with consultation
on Small Business Investment Companies, reforms
to the Enterprise Investment Scheme and Venture
Capital Trust provisions, and tax relief for
the incidental costs incurred by SMEs in issuing
equity. Further details of the Government’s
proposals are set out in a new document, Bridging
the finance gap: a consultation on improving
access to growth capital for small businesses,
published alongside the Budget;
- deregulatory reforms to ease the
regulatory burden on small businesses, including
amendment of the Company Law definition of
small- and medium-sized companies to increase
the turnover thresholds
to the maxima allowed under EU law. Legislation
to establish the new definitions will be introduced
as soon as the new EU maxima come into force
later this year;
- further steps to promote research and
development (R&D) activity by business,
including reforms to improve the operation
of existing R&D tax credits to ensure
that more businesses can claim a wider range
of relief and consultation on improving the
definition of R&D used for the tax credits
to ensure it remains consistent with technological
developments and is competitive internationally;
- further proposals to help businesses
in Enterprise Areas, including a second
community development venture fund and enhanced
capital allowances. From 10 April, all non-residential
transactions in these areas are exempt from
stamp duty, regardless of value;
- £16 million over two years to fund
Enterprise Advisers to work alongside
headteachers in around 1,000 secondary schools
in deprived areas to ensure that pupils gain
better knowledge of business and enterprise.
Budget 2003 also launches a new £1 million
Enterprise Promotion Fund, to support private
and voluntary sector creativity in promoting
enterprise;
- a new package of training support for
SMEs delivered in partnership with high
street banks. The package will use the banks’
existing communication networks to stimulate
demand for advice and training. It will be
managed by a steering group chaired by Sue
Brownson, chief executive of Blue Bell BMW;
- a series of measures to simplify VAT
for businesses, including an increase
in the registration threshold in line with
inflation and extension of the optional flat
rate and annual accounting schemes to businesses
with turnover of up to £150,000;
- further reform of capital gains tax (CGT),
including an extension of business assets
taper relief to improve access to let property
for unincorporated traders and new measures
to simplify the CGT regime;
- a package of measures to simplify employee
share schemes, to enable and encourage
companies to offer them to their employees;
- an extension of 100 per cent first year
capital allowances for small businesses
investing in information and communication
technologies for one further year; and
- the abolition of Petroleum Revenue Tax
from 1 January 2004 on all new third party
tariffing business under contracts completed
on, or after, Budget day relating to the use
of pipelines and other infrastructure in the
UK and on its continental shelf.
Further information on these and other reforms
to help businesses are set out in the separate
press notices, PN 05 and PN 06.
Improving UK skills
Improving skills is central to raising UK productivity
growth. Skilled labour is an important driver
of economic performance and helps to deliver
a more flexible and adaptable labour market,
enabling firms to update working practices and
products at the rate demanded by global markets
and making the economy more flexible and productive
in the long term.
The Government is planning to publish a Skills
Strategy in June 2003, setting out a framework
for action by government, individuals and employers
to tackle deficiencies in the skills base. The
Strategy will propose measures to support employers
facing barriers in raising skills levels, improve
vocational opportunities for young people, engage
more low-skilled adults in training, and make
further education funding and qualification
structures more responsive to the needs of the
economy. Budget 2003 announces further support
to improve levels of skills throughout the UK
workforce, including:
- the launch of six new Employer Training
Pilots in Berkshire, East London, Kent,
Leicester, Shropshire and South Yorkshire
to test new approaches to improving access
to training for those in the workforce. The
new pilots will be backed by £130 million
of funding and will now run in around one
quarter of local Learning and Skills Council
areas. The extension of Employer Training
Pilots will help to strengthen evaluation
of the scheme and provide important evidence
to inform the development of national policy,
complementing work in other areas;
- improvements to the Highly Skilled Migrants
Programme, including a new threshold for
eligibility to encompass a wider range of
highly skilled applicants, a new category
for younger applicants, and taking partners’
achievements into account in assessing individual
applications. The changes will take effect
from August 2003; and
- further steps to facilitate migration
as a source of skills in the UK, including
a new entitlement for foreign students of
science, technology, engineering and maths
to work in the UK for 12 months after graduation
from a UK institution, reform of the Working
Holidaymakers scheme, and action to improve
potential migrants and employers’ access
to information on migration routes.
Improving housing supply and simplifying
planning
A stable and flexible housing market is essential
to a healthy economy and has a significant influence
on macroeconomic stability. Housing market
imbalances can act as a brake on economic development
and lead to social disadvantage. The effect
the housing market has on macroeconomic stability
could be much more significant were the UK to
join EMU.
The Government’s Sustainable communities
strategy includes reforms to increase the supply
of housing, particularly affordable housing.
Budget 2003 announces further significant measures,
including:
- a new requirement that local authority plans
make provision for at least 10 years potential
supply of housing, while continuing to prioritise
brownfield development;
- a new right for the Deputy Prime Minister
to call in for his own decision major housing
developments where local authorities are not
delivering housing numbers and where intervention
will speed up delivery;
- a new review, to be led by Kate Barker,
of issues affecting housing supply in the
UK, including competition, the capacity and
finance of the house-building industry, new
technology, possible fiscal instruments, the
interaction of these factors with the planning
system, and sustainable development objectives;
- consideration of whether, in the medium
term, the Government’s objectives will
require a system of binding local development
plans to increase certainty and ensure the
stability of the housing market; and
- a new review of the UK mortgage market,
by Professor David Miles, to assess the supply
and demand side factors limiting the development
of the market for fixed and long-term fixed
rate mortgages.
INCREASING EMPLOYMENT OPPORTUNITY FOR ALL
The Government’s long-term goal is employment
opportunity for all – the modern definition
of full employment. Its aim is to ensure a higher
proportion of people in work than ever before
by 2010.
A dynamic and flexible labour market that equips
people to adapt to changes in global and domestic
demand, and which has the institutional flexibility
to deliver high employment and low unemployment
across the economic cycle, is key to achieving
the Government’s goal.
The UK labour market generally exhibits a high
degree of flexibility. This has helped to deliver
a strong performance in recent years, despite
difficult and uncertain global conditions. The
New Deal programmes have helped to deliver substantial
reductions in the numbers of young and older
long-term unemployed people and help has been
extended to other workless benefit claimants,
including lone parents, disabled people and
partners.
Reforms to the tax and benefit system, underpinned
by the National Minimum Wage and the Working
Tax Credit, have improved incentives to work,
helping the labour market to respond flexibly
to economic shocks, while preserving a degree
of stability in workers’ incomes. Unemployment
in the UK on the International Labour Organisation
(ILO) definition is the lowest among the G7
economies and employment has risen to record
highs.
Building on measures to raise levels of skills
in the workforce, Budget 2003 describes the
additional steps the Government is taking to
strengthen flexibility in the labour market,
ensuring it can adapt to changing circumstances
and deliver high and sustainable employment,
including:
- extra help for unemployed people searching
for jobs. Budget 2003 introduces a series
of reforms to improve the effectiveness of
Jobseeker’s Allowance at helping people
adapt to changing economic
conditions, including additional interventions
in the first six months;
- greater flexibility and discretion for
Jobcentre Plus districts to respond to
local conditions, with a new discretionary
fund to address specific employment barriers
affecting local communities, a more flexible
approach to the length and design of the options
within the New Deal for young people, and
greater rewards for successful managers;
- reform of Housing Benefit to improve
financial gains to work, facilitate labour
mobility, and to deliver greater reliability
in the service to claimants. From April 2004,
claims will disregard the first £11.90
of
income for tenants eligible for the Working
Tax Credit, and the claims process will be
simplified. The Government also intends to
introduce a new flat rate local housing allowance
in the private sector throughout the country
as soon as possible, starting with pathfinders
from October 2003. A flat rate system in the
social sector will be introduced as soon as
rent restructuring and increased choice create
a better market;
- extending the help provided by Employment
Zones more widely and encouraging innovation
among providers. From April 2004, Employment
Zones will replace the New Deal for lone parents
(NDLP) in the five London Zones, and will
replace the New Deal for lone parents returning
for a second or subsequent work-focused interview
in the other Zones. Multiple providers will
also be introduced in the five London Employment
Zones, as well as in the Birmingham, Liverpool
and Glasgow Zones;
- a package of reforms to help lone parents,
including a new £20 per week worksearch
premium in eight pilot areas for lone parents
actively seeking work, a flexible fund to
help Jobcentre Plus managers improve access
to debt advisory services, and a new communications
and outreach strategy in six cities with high
lone parent populations;
- an enhanced New Deal for partners in
April 2004, offering greater help to unemployed
partners of benefit claimants. The enhanced
New Deal will provide the same package of
support as that available to lone parents,
including a training allowance and help with
childcare; and
- extra support to help people from ethnic
minorities, including a new policy fund
of £8 million over the next two years
to help Jobcentre Plus managers help people
from ethnic minorities into work, and specialist
advisers in areas with high ethnic minority
populations.
As announced last month, the National Minimum
Wage for adult workers aged 22 or over will
be increased to £4.50 an hour from October
2003 and, subject to a review by the Low Pay
Commission (LPC) next year, to £4.85from
October 2004. For workers aged between 18 and
21 and those in training, the rate will rise
to £3.80 from October 2003 and to £4.10
from October 2004. The LPC estimates that at
least 1.3 million low paid workers will benefit
from the new rates in October 2003 and 1.7 million
in 2004.
Paid from this month, the Working Tax Credit
will help to tackle poor work incentives and
persistent poverty among working people. Alongside
the National Minimum Wage, it will help to ensure
that the labour market
responds flexibly to economic shocks, while
preserving a degree of stability in workers’
incomes. From October 2003, the Working Tax
Credit and the National Minimum Wage will guarantee
minimum incomes of:
- £241 a week for a family with one
child and one earner working full-time on
the National Minimum Wage; and
- £187 a week for a single earner couple
aged 25 or over and working fulltime
on the National Minimum Wage.
BUILDING A FAIRER SOCIETY
The Government is determined to ensure that
flexibility and fairness are advanced together
so that rising national prosperity can be shared
by all. Policies for flexibility need not be
implemented at the expense of those for fairness,
but should be pursued together. Budget 2003
sets out the next steps in the Government’s
strategy for supporting families, providing
security in old age, encouraging saving, and
delivering a modern and fair tax system.
Support for families and children
The Government is committed to ensuring that
every child has the best possible start in life
and has set a long-term goal to halve child
poverty by 2010 and to eradicate it within a
generation.
The Government is committed to a Public Service
Agreement target to reduce the number of children
living in low-income households by a quarter
by 2004-05. Between 1998-99 and 2001-02 the
number of children in low-income households
fell by 400,000 after housing costs and by 500,000
before housing costs. The Government is therefore
around halfway towards meeting its target in
half of the time. On one measure it is over
halfway, while on the other, it is slightly
less than halfway.
Paid from this month, the Child Tax Credit
will help to lift more children out of poverty,
advancing the Government’s child poverty
goal. Around 5¾ million families with
children are expected to benefit from the Child
Tax Credit. As a result of all personal tax
and benefit measures taking effect from this
month, including the Child and Working Tax Credits
and the freezing of the income tax personal
allowance and increase in national insurance
contributions announced in Budget 2002:
- a single earner family on median earnings
of £21,400 and with two children will
be nearly £5.00 a week better off, largely
because of the new Child Tax Credit; and
- 50 per cent of families with children will
be better off, even after the changes to income
tax and national insurance contributions.
As a result of all personal tax and benefit
measures since 1997, on average, families with
children are £1,200 a year better off
in real terms, while those in the poorest fifth
of the population are £2,500 a year better
off in real terms.
Building on the reforms already introduced,
Budget 2003 announces further steps to improve
support for families with children, including:
- a review of financial support for 16
to 19 year olds, including the financial
incentives for young people to participate
in education and training. The Government
has also agreed that the Low Pay Commission
should look into the advantages and disadvantages
of a minimum wage for 16 and 17 year olds
and will consider the interaction between
existing support and any new minimum wage
as part of this review. The review will report
in spring 2004;
- tax relief for employer contributions
to home-working costs. From April 2003,
the income tax charge that arises when employers
contribute to additional household costs incurred
by employees working at home will be abolished,
increasing incentives for employers to offer
flexible working arrangements for their staff;
and
- a new personal tax exemption for foster
carers receiving less than £10,000
a year per residence plus an additional amount
per child, to facilitate recruitment and retention
of carers.
Fairness for today’s pensioners
The Government is committed to tackling pensioner
poverty and to ensuring that all pensioners
are able to share in rising national prosperity.
The introduction of the Pension Credit from
October 2003 – at a cost of £2 billion
in the first full year – will ensure that
millions of pensioners who have saved for their
retirement benefit from having done so. Around
half of all pensioner households stand to gain
an additional £400 a year on average under
the Pension Credit, with some gaining up to
£1,000 a year.
The Government is pursuing a comprehensive
strategy to maximise take-up, involving personal
direct mailing and extensive publicity to ensure
that all pensioner households claim what they
are entitled to. The Government is determined
that at least three million households should
receive the Pension Credit by 2006 – the
first time a Government target has been set
for the takeup of an entitlement.
To provide further support for some of the
most vulnerable pensioners in society, Budget
2003:
- provides an additional £100, on
top of the £200 winter fuel payment,
to households with a pensioner aged 80 or
over, for the lifetime of this Parliament;
and
- extends, to 52 weeks, the period over
which all pensioners in hospital receive their
full state pension. Since the introduction
of the welfare state, hospital inpatients,
including pensioners, have seen their benefits
and state pension reduced after just six weeks,
leading to financial insecurity and distress.
This reform will provide greater financial
security for all those who experience longer
stays in hospital.
From 2004-05, following the introduction of
the Pension Credit, the Government will be spending
around £9.2 billion more in real terms
on pensioners as a result of measures introduced
since 1997. Compared with the 1997 system, as
a result of the Government’s measures to
support pensioners, including the Pension Credit,
on average, from October 2003:
- pensioner households will be £1,250
a year better off in real terms – around
£24 extra a week; and
- the poorest third of pensioner households
will have gained £1,600 a year in real
terms – over £30 extra a week.
Support for tomorrow’s pensioners
Above the foundation of support provided for
today’s workers in retirement, individuals,
where possible supported by their employers,
are responsible for deciding the level of income
on which they plan to retire, and need to plan
their saving and working patterns accordingly.
The Government is taking steps to help today’s
workers plan effectively for their retirement,
by:
- consulting on proposals set out in the
Pensions Green Paper to raise levels of
pension saving. A series of seminars and events
have been held with key stakeholders and around
750 responses have been submitted. The Government
is currently considering responses and has
established a new Pensions Commission to review
the regime for private pensions and long-term
savings and to assess the voluntarist approach.
The Commission expects to publish its work
programme shortly; and
- consulting on proposals to simplify the
taxation of pensions. The consultation
period ends on 11 April and the Government
intends to publish its plans for legislation
in the summer.
Promoting saving and asset ownership
Saving and assets provide people with security
in times of adversity, longterm independence
and opportunity, and comfort in retirement.
Budget 2003 introduces a new Child Trust
Fund providing every child born from September
2002 with an endowment at birth of £250,
rising to £500 for children in the poorest
one third of families who also qualify for the
full Child Tax Credit. Both progressive and
universal, the Child Trust Fund will help to
strengthen the saving habit of future generations
and spread the benefits of asset ownership to
all. Further details are set out in press release
PN 03.
The Government welcomes the aim of the Sandler
Review of Long-term Savings to minimise tax-generated
distortions and create a more level tax playing-field
in savings and investment. The Government intends
to consider the Review's recommendations relating
to the taxation of life insurance policies further
within a wider framework that takes account
of ongoing regulatory change and other developments
such as corporation tax reform.
Delivering a modern and fair tax system
Budget 2003 introduces further measures to
deliver a modern and fair tax system which keeps
pace with developments in business practice
and raises sufficient revenue to support the
Government’s objectives.
Taxpayers who contribute their fair share of
taxes expect that others will do likewise and
that the Government will take action against
those who abuse the system. Budget 2003 therefore
takes further action to prevent abuse, avoidance
and non-compliance in the tax system, including
through:
- the launch of a new compliance and enforcement
package designed to strengthen the Inland
Revenue’s ability to target its compliance
activity towards high-value and high-risk
areas and to produce £1.6 billion in
total additional revenue over the next three
years. An additional £66 million is
being provided to the Inland Revenue to implement
the package, which will focus on three high
risk areas, including the nonpayment of tax
and national insurance debts from failure
to file tax returns, the use of offshore accounts,
and avoidance of corporation tax and national
insurance contributions;
- immediate action to close loopholes in
the direct tax system. Measures announced
today will save up to £250 million per
annum in future years, reducing burdens on
compliant taxpayers and protecting revenue
for investment in public services; and
- a package of further measures to reduce
VAT fraud and avoidance, building on the
first ever concerted strategy for tackling
VAT revenue losses launched at the time of
the 2002 Pre-Budget Report.
Further details of these measures are set out
in the separate press release, PN 07. In addition,
Budget 2003 announces further action to modernise
and simplify the tax system, including:
- details of a major reform of stamp duty,
announced in Budget 2002, to tackle avoidance
by companies and reduce distortions in the
charge applying to leases, while protecting
small businesses and paving the way for e-conveyancing.
From December 2003, subject to further consultation,
the existing charge applying to leases will
be replaced with a single one per cent charge
on the total value of rental payments, and
a new exemption for all commercial transfers
under £150,000 will be introduced, lifting
many small business purchases and leases out
of stamp duty. Further details are set out
in the separate release, PN 05;
- new rates of tobacco and alcohol duties.
Budget 2003 raises tobacco duty in line with
inflation – adding eight pence to a typical
packet of 20 cigarettes. Beer and wine duties
rise in line with inflation, adding one penny
to a pint of beer and four pence to a standard
bottle of wine. The duty on spirits, cider
and sparkling wine is frozen;
- further steps to modernise the taxation
of gambling, replacing the existing bingo
duty with a single 15 per cent tax on the
gross profits of bingo companies from 4 August
2003. The Government will also consult shortly
on reform of Amusement Machine Licence Duty;
and
- review of the residence and domicile
rules as they affect the tax liabilities
of individuals. As the next steps in this
review, a background paper is published alongside
the Budget to provide a framework for further
analysis and discussion and ensure that any
specific options for reform are based on the
widest possible understanding of their effect.
DELIVERING HIGH QUALITY PUBLIC SERVICES
Strong and dependable public services lay the
foundations for a flexible, high productivity
economy. They are also central to the Government’s
strategy for tackling poverty and social exclusion.
A healthy and educated workforce, modern and
reliable transport network, and adequate supply
of affordable housing promote productivity and
flexibility and help to ensure opportunity and
security for all. The Government’s long-term
goal is to deliver world-class public services
through sustained increases in investment and
reforms to deliver efficient and responsive
services which meet public expectations throughout
the country and deliver value for money to taxpayers.
Budget 2002 delivered the largest ever sustained
increase in spending on the UK National Health
Service (NHS) – 7.2 per cent annual average
real terms growth over five years – funded
by a 1 per cent increase in national insurance
contributions (NICs) on all earnings above the
NICs threshold from this month and a freeze
in the income tax personal allowance for those
aged under 65 in 2003-04. Matched with comprehensive
plans for reform, these resources reverse three
decades of underinvestment in health and will
secure the future of an NHS that is free at
the point of use and accessible to all. Budget
2003:
- provides £332 million to invest
in counter-terrorism measures over the
next three years, to ensure that UK citizens
are protected within the UK from the threat
of international terrorism;
- sets out key issues to be investigated
in the run-up to the next Spending Review,
including a new study into the scope for relocating
public service staff from London and the South
East to other parts of the country, and an
update of the long-term challenges in implementing
the ‘fully engaged’ scenario set
out in last year’s Wanless Review of
longterm health trends, with a particular
focus on preventative health and health inequalities;
- sets out a framework for raising public
services productivity, which complements
the Government’s wider approach to raising
productivity in the private sector, in a new
discussion paper, Public services: meeting
the productivity challenge, published alongside
the Budget; and
- provides details of the next steps in
reform, with steps to increase regional
and local flexibility in public service pay
systems and to increase transparency about
performance, including through the introduction
this month of regular reporting on the Treasury
website of performance against all new Public
Service Agreement targets.
PROTECTING THE ENVIRONMENT
The Government’s Sustainable Development
Strategy aims to deliver a better quality of
life for everyone, today and for future generations.
This requires action to improve and preserve
the quality of the environment. The Government
is determined to meet the challenges of climate
change, poor air quality and degradation in
urban and rural areas, ensuring that economic
and social progress go hand in hand with environmental
improvement.
Promoting energy-efficiency and better waste
management
Budget 2003 outlines the next steps in the
Government’s work to promote greater energy
efficiency by businesses and households and
more effective management of resources in the
waste stream, including:
- further action to improve waste management
to help tackle climate change and local disamenity
and to promote recycling, including:
- an increase in the standard rate
of that landfill tax of £3 per
tonne in 2005-06 and increases of at least
£3 per tonne in future years, on
the way to a medium- to long-term rate
of £35 per tonne. The landfill tax
rises to £14 this year, to £15
in 2004-05, and to £18 in 2005-06;
- further detailed consultation on
options to ensure that landfill tax increases
are revenue neutral to business as a whole;
- a Waste Management Performance Fund
to help local authorities improve waste
performance for all households; and
- a new sustainable waste delivery
programme to reduce waste volumes
and to promote recycling and the development
of new waste management technologies;
- a freeze in the rates of the climate
change levy;
- new enhanced capital allowances to
promote investment in energysaving new technologies
and to encourage more efficient water use;
- detailed consultation on specific measures
to encourage household energy efficiency,
following initial consultation; and
- a freeze in the rates of the aggregates
levy.
Transport and the environment
Decisions on fuel duties and other transport
taxes must take account of environmental, economic,
and social objectives. Budget 2003:
- defers annual revalorisation of the main
road fuel duties until 1 October 2003,
owing to the recent high and volatile level
of oil prices as a result of military conflict
in Iraq. The duty on biodiesel also rises
in line with inflation from the same date,
while that on road fuel gases is frozen;
- introduces a duty differential for sulphur-free
fuels of half a penny per litre relative
to the rates for ultra-low sulphur fuels from
September 2004, to encourage the early introduction
and use of these fuels;
- introduces a new lower rate of duty for
bioethanol 20 pence per litre below the rates
for ultra-low sulphur fuels from 1 January
2005;
- increases the duty on red diesel and
fuel oil by one penny per litre above
revalorisation, in view of the high sulphur
content of these fuels;
- introduces a new lower rate of vehicle excise
duty (VED) for the most environmentally-friendly
cars with very low levels of carbon dioxide
emissions. Car and van VED rates are revalorised
and rounded to the
nearest £5. VED for motorcycles and
lorries is frozen; and
- freezes the rates of air passenger duty.
Further details of the Government’s environmental
strategy are set out in the separate press notice,
PN 04.
NOTES FOR EDITORS
Further details of Budget 2003 announcements
can be found on the HM Treasury website: www.hm-treasury.gov.uk.
Additional detail is also included in the press
notices listed below. Copies of Inland Revenue
and HM Customs and Excise Budget Notes can be
found on their websites at www.inlandrevenue.gov.uk
and www.hmce.gov.uk respectively.
PN 01 Building a Britain of economic
strength and social justice
PN 02 Promoting flexibility across the
regions
PN 03 Strengthening the saving habit
of future generations
PN 04 Protecting the environment
PN 05 Modernising the taxation of property
PN 06 Supporting business and entrepreneurship
PN 07 Fairness in taxation – protecting
tax revenues
PN 08 Inland Revenue rates and allowances
for 2003-04
PN 09 Reviewing housing supply and simplifying
planning
HM TREASURY PRESS OFFICE
Press enquiries: 020 7270 5238
Non-media enquiries: 020 7270 4558
INLAND REVENUE PRESS OFFICE
Press enquiries: 020 7438 6692 / 6706 / 7327
(out of hours: 07860 359544)
Non-media enquiries: 020 7438 6420/6425
(office hours only)
HM CUSTOMS AND EXCISE PRESS OFFICE
Press enquiries: 020 7865 4775 / 5472
(out of hours:020 7620 1313)
Non-media enquiries: 0845 010 9000 (National
Advice Service)
GOVERNMENT DEPARTMENT INTERNET SITES
Further information and all published documents
relating to Budget 2003 may be found on the
Internet at the following addresses:
HM Treasury www.hm-treasury.gov.uk
Inland Revenue www.inlandrevenue.gov.uk
HM Customs and Excise www.hmce.gov.uk
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