WIREDGOV

Budget statement to the House of Commons delivered by the RT Hon George Osborne MP,Chancellor of the Exchequer,Wednesday 23 March 2011

News Release issued by the COI News Distribution Service on 23 March 2011

Check against delivery

Mr Deputy Speaker,

Last year's emergency Budget was about rescuing the nation's finances, and paying for the mistakes of the past.

Today's Budget is about reforming the nation's economy, so that we have enduring growth and jobs in the future.

And it's about doing what we can to help families with the cost of living and the high oil price.

We understand how difficult it is for so many people across our country right now.

That we are able now to set off on the route from rescue to reform, and reform to recovery, is because of difficult decisions we've already taken.

Those decisions have brought economic stability.

And without stability there can be no sustainable growth or jobs.

Without stability governments have to keep coming back to their citizens for more - more taxes and more spending cuts.

In Britain, we do not have to do that today.

We inherited a record budget deficit.

But we have set out a credible, comprehensive plan to deal with it.

We have had to undertake difficult measures.

But we have already asked the British people for what is needed, and today we do not need to ask for more.

So this is not a tax-raising Budget.

But nor can we afford a giveaway.

Taken together the measures I will announce today are fiscally neutral across the period.

This is a Budget built on sound money.

A Budget that encourages enterprise.

That supports exports, manufacturing and investment.

That is based on robust independent figures.

A Budget for making things not for making things up.

Britain has a plan.

And we're sticking to it.

In recent months, many other countries have seen their ratings downgraded and their borrowing costs soar.

Our country's fiscal plans have been strongly endorsed by the IMF, by the European Commission, by the OECD, and by every reputable business body in Britain.

And for anyone who questions whether this matters in the real world, to real businesses and families, consider this.

Market interest rates in Greece are 12.5%, in Ireland they are close to 10%, in Portugal and Spain they are 7% and 5%.

Today our country's market interest rates have fallen to 3.6%.

We have a higher deficit than Portugal, Greece and Spain, but we have virtually the same interest rates as Germany.

This is our powerful monetary stimulus to our recovering economy.

Stability. Credibility. Lower interest rates.

This is what we've achieved.

But stability is not enough.

So today, in addition to the Red Book, we are publishing the Plan for Growth.

For this Budget confronts the hard truth that has been ignored for too long.

Britain has lost ground in the world's economy and needs to catch up.

In the last decade, other nations have reduced their business tax rates, removed barriers to enterprise, improved education systems, reformed welfare and increased exports.

Sadly the reverse has happened in Britain.

We gambled on a debt-fuelled model of growth that failed.

With the state now accounting for almost half of all income, we simply cannot to go on like this.

Britain has to earn its way in the modern world.

Mr Deputy Speaker, I turn now to the forecasts.

Last November I told the House that the recovery was going to be more challenging than recoveries from recessions in recent decades.

That is inevitable when we've had the sharpest fall in output since the 1930s, the highest budget deficit in peacetime, and the largest banking crisis in our entire history.

But I said that thanks to the course we have set, the independent forecast was for our economy to grow in each of the next five years, for unemployment to peak this year and then fall and for employment to rise through this Parliament.

That remains the case in the independent forecast published today.

Those forecasts have been drawn up by the Office for Budget Responsibility.

This important change has transformed the way Budgets are put together.

So instead of Chancellors fixing the figures to fit the Budget, they now have to fix the Budget to fit the figures.

Yesterday, the legislation to put the Office for Budget Responsibility on a permanent, statutory and independent footing received Royal Assent.

I am sure that the whole House will want to thank Robert Chote, Steve Nickell, Graham Parker, and their whole staff for the very professional job they are doing.

Let me start with their growth forecasts.

It has been known for Chancellors in recent years to rattle these off at great speed in the hope that no one will keep up.

I will not do that.

Although average quarterly growth this year is set to be higher than was previously forecast, the annual forecast for 2011 has been revised to 1.7%.

This the OBR attributes specifically to the weaker than expected final quarter of last year, the rise in world commodity prices and the higher-than-expected inflation in the UK.

However, the OBR point out that the effect, in their words, "creates scope for slightly stronger growth in later years" than previously forecast.

So while they expect real GDP growth of 2.5% next year, they forecast it will then rise:

To 2.9% in 2013;

To 2.9% in 2014;

Followed by 2.8% in 2015.

The European Commission has also this month published its growth forecasts.

These show that the UK is forecast to grow more strongly in the coming year than Spain, Italy, France, the average for the Eurozone and the average for the EU.

All countries have to steer a course between two central risks.

The risk of a European sovereign debt crisis on the one hand and on the other the risk that comes from rising global commodity prices.

Food prices around the world have increased by nearly 50% since the beginning of last year.

Oil has risen 35% rise in just 5 months.

That is why the OBR expect inflation to remain between 4 and 5% for most of this year, before dropping to 2.5% next year and then to 2% in two years time.

I have today written to the Governor of the Bank of England to confirm that the inflation target for the Monetary Policy Committee will remain at 2%, as measured by the Consumer Prices Index.

I can also confirm that the Asset Purchase Facility set up by my predecessor will remain in place.

Once cause of current instability is the conflict inside Libya.

The whole House will praise the courage and professionalism of our armed forces, who are trying to bring that conflict to an end and save lives.

And I can confirm that the additional cost of military operations will be met entirely from the Treasury reserve.

The House will also know that last week I authorised for the UK to take part in a co-ordinated G7 currency intervention in support of the Japanese Yen.

Our hearts go out to the Japanese people - and this is one way we can help.

It is still too early to say what lasting impacts the earthquake and tsunami will have on the world economy.

But this is an opportunity for me to report that we had already decided to rebuild the UK's foreign currency reserves, which are at a historically low level.

We will purchase a range of high-quality assets - though unfortunately, with the price of gold now at record highs, we will not be able to replenish the gold reserves sold at record lows.

I turn now to the fiscal forecasts for our debt and deficit.

Borrowing to fund the deficit this year is now set to come in at £146 billion, below target.

Then fall to £122 billion next year.

Then £101 billion the year after.

Then £70 billion in 2013-14.

Then £46 billion.

And £29 billion by 2015-16.

Inflation has had its impact but crucially the OBR assess that next year's structural deficit remains the same as forecast last November.

In other words, the size of the task of repairing Britain's finances is unchanged.

Our national debt, as a share of our national income, is forecast to be 60% this year, before peaking at 71%, and then starting to fall - reaching 69% by the end of the period.

This leads me to one of the central tasks of the OBR.

That of assessing the Government's performance against its stated budget goals - in an open and independent way, so that we avoid repeating the disastrous experience of the so-called golden rule.

Our fiscal mandate is to achieve a cyclically-adjusted current balance by the end of the rolling five year forecast period - which is currently 2015-16.

We have supplemented that with a fixed target for debt: so that debt should be falling as a proportion of GDP by the year 2015-16 as well.

I can report to the House that the OBR confirm that on their central forecast we will meet both these objectives - a balanced structural current budget and falling national debt by the end of the Parliament.

Indeed, the forecast remains that we will meet both these objectives one year earlier.

But, Mr Deputy Speaker, I said at the start that stability and fiscal responsibility was not enough.

Our country has to compete if we are going to create growth and jobs.

Britain has fallen behind many others in the world in the last decade.

We've dropped from 4th to 12th place in the global competitiveness league.

And growth in our country has been so unbalanced.

Consider this staggering truth - during the boom years before the bust, private sector employment actually fell in a region as important as the West Midlands.

So today's Budget is an urgent call to action for Britain.

Private sector growth must take the place of government deficits.

Prosperity must be shared across all parts of the UK.

Yes, we want the City of London to remain the world's leading centre for financial services, but we should resolve that the rest of the country becomes a world leader in advanced manufacturing, life sciences, creative industries, business services, green energy and so much more.

This is our vision for growth.

Difficult decisions and major reforms are needed to make it happen.

But the alternative is to accept Britain's economic decline and a continuing fall in living standards for our population.

And that is not an alternative anyone in this House should be prepared to accept.

This Budget sets for Britain these four economic ambitions.

That Britain should:

* Have the most competitive tax system in the G20;

* Be the best place in Europe to start, finance and grow a business;

* Be a more balanced economy, by encouraging exports and investment;

* And have a more educated workforce that is the most flexible in Europe.

Let me set out the measures now that will achieve these ambitions.

First, taxation.

Here's the truth - Britain used to have the 3rd lowest corporate tax rate in Europe. It now has the sixth highest.

At the same time, our tax code has become so complex that it recently overtook India to become the longest in the world.

Adam Smith first set out the principles of good taxation.

This Government declares these principles again today for the modern age.

Our taxes should be efficient and support growth.

They should be certain and predictable.

They should be simple to understand and easy to comply with.

And our tax system should be fair, reward work, support aspiration and ask the most from those who can most afford it.

In July last year, we set up the Office of Tax Simplification to provide independent advice on how to reduce the complexity of the existing system.

I want to thank Michael Jack and John Whiting for the work they have done.

Following their recommendations, I can announce today that this Budget abolishes no fewer than 43 complex reliefs.

This includes the 'millennium gift aid system' - which we won't need for another 989 years.

I have decided not to follow their advice to abolish the Community Investment Tax Relief - and instead I encourage people to take it up.

But this Budget at a stroke removes over 100 pages from our tax code and begins the work of simplification.

In the last Budget, I announced that from next month welfare payments and public service pensions would be up-rated in line with the Consumer Prices Index.

I said at the time we should also consider up-rating the tax system in the same way.

So from April 2012, the default indexation assumption for direct taxes will move to CPI.

There will be protection through this Parliament for those eligible for age-related, married couple and blind person's allowances - and for employers National Insurance Contributions.

The increase in the personal tax allowance already announced will vastly exceed anything lost through employee NICs up-rating, and that's even before any further increases in that allowance.

This will bring coherence to the tax and benefit system, and we look at moving indirect taxes onto the same basis when the fiscal position allows.

But there is one further step we should now undertake that will dramatically simplify the tax system.

For decades, we have operated Income Tax and National Insurance as two fundamentally different taxes and forced businesses large and small to operate two completely different systems of administration, with two different periods and bases of charge.

The resulting anomalies are legion.

And it imposes totally unnecessary costs and complexity on employers, and costs the taxpayer in the extra burden it places on HM Revenue & Customs.

So I am announcing today that the Government will consult on merging the operation of National Insurance and Income Tax.

I am not proposing we extend National Insurance to pensioners, or to other forms of income, or that we abolish the contributory principle.

Our purpose is not to increase taxes, it is to simplify them.

And this huge task will therefore require a great deal of consultation and take a number of years to complete.

But it is time we took this historic step to simplify dramatically our tax system and make it fit for the modern age.

Making our tax system more competitive is another challenge for the times we live in.

Again, let's face facts.

Other countries are quite deliberately making their tax systems more competitive, and attracting multi-national companies away from the UK.

We could stand there and do nothing.

But increasing the living standards of every hard pressed family in the country depends on keeping those companies, and the jobs and the investment and the tax revenues that come with them, here in the UK.

So we will go ahead with the highly competitive tax rate on profits derived from patents in industries like pharmaceuticals.

We will fundamentally reform the complex rules for Controlled Foreign Companies and make them more territorial.

We will introduce new rules that effectively apply an ultra-competitive 5.75% rate on overseas financing income.

That will give us a far more attractive system than France, America or Germany.

I want Britain to be the place international businesses go to, not the place they leave.

But today I want to do even more.

So I can today announce that from April this year corporation tax will be reduced not just by 1% as I previously announced but by 2%.

And it will continue to fall by 1% in each of the following three years - taking our corporate tax rate right down to 23%.

16 per cent lower than America, 11 per cent lower than France and 7 per cent lower than Germany - the lowest corporation tax rate in the G7.

Let it be heard clearly around the world - from Shanghai to Seattle, and from Stuttgart to Sao Paolo: Britain is open for Business.

And to ensure that this is not a net tax cut for banks, I am adjusting the bank levy rate next year to offset its effect.

In each and every year of this Parliament our permanent bank levy raises more than the one-year bonus tax of the last Parliament.

The most competitive tax system in the G20 is the first of our economic ambitions.

The second is that Britain becomes the best place in Europe to start, finance and grow a business.

Again, let's face facts: we are not that today.

In the last decade, countries like Germany, Denmark, Finland and the Netherlands have all overtaken us in the international rankings of competitiveness.

That is not surprising when the total cost of regulation imposed on business since 1998 is almost £90 billion a year.

So in today's Plan for Growth we take action:

* £350 million worth of specific regulations will go - including the Equality Act's costly dual discrimination rules;

* Lord Young's recommendations on health and safety laws will be implemented in full;

* The no-win no-fee legal services that prey on employers will be restricted;

* Existing regulation will be scrutinised by the public.

And from April, we are going to impose a moratorium exempting all businesses employing fewer than ten people - and all genuine start-ups - from new domestic regulation for the next three years.

We will take this fight against regulation to Brussels, where my RHF the Prime Minister is this week recruiting other European allies to ensure our continent doesn't price itself out of the world.

And we are going to tackle what every government has identified as a chronic obstacle to economic growth in Britain, and no government has done anything about: the planning system.

Councils are spending 13 per cent more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third.

Yes, local communities should have a greater say in planning, but from today:

* We will expect all bodies involved in planning to prioritise growth and jobs;

* We will introduce a new presumption in favour of sustainable development, so that the default answer to development is 'yes';

* We will retain existing controls on greenbelt - but we will remove the nationally imposed targets on the use of previously developed land;

* And we will allow certain use class changes, introduce time limits on applications and pilot for the first time ever auctions of planning permission on land.

Cumbersome planning rules and bad regulation stand in the way of new jobs.

So too does the shortage of finance.

Small businesses are the innocent victims of the credit crunch.

That is why we have agreed with the banks a 15% increase in the availability of credit to small businesses.

But the lack of start-up capital has been a long standing problem in the British economy.

Too often we have the great ideas in Britain but it's other countries that exploit them.

So today I announce sweeping changes to improve the generosity, the simplicity and the reach of the Enterprise Investment Scheme.

From April this year, income tax relief will increase from 20% to 30%.

Next year we will double the amount that any individual can invest through the EIS, increase the size of company that can qualify for investment - and raise the limit on the amount that can be invested in a company by 400%.

And next week my RHFs the Prime Minister and Business Secretary will launch 'Start-Up Britain', a new campaign by entrepreneurs for entrepreneurs, supported by many of Britain's most successful firms, that will help people start and grow businesses.

Today we can add to that help.

From 6th April this year I am doubling the size of Entrepreneurs Relief to £10 million.

Let Britain be the home of enterprise in an age when people can invest all over the world.

It's time too that we ended the uncertainty around the taxation of non-domiciles.

They are very welcome in this country, but I've always believed that they should pay something in return for their special tax status.

The last government followed our advice and introduced a £30,000 charge for those who had lived here for seven years.

I think we can ask more from those who've been here even longer, so I'm increasing the charge to £50,000 for non-doms who have been in the country for 12 years.

This will raise over £200 million in the coming years.

But in return - and to encourage investment in our country - I am removing the tax charge when non-doms remit foreign income or capital gains to the UK for the purpose of investing in a British business.

And we will introduce a statutory residence test.

To end the speculation and uncertainty, and to provide stability, I confirm that I will be making no further changes to the taxation of non-domiciles in this Parliament.

In an age when businesses and capital and people can increasingly move anywhere, high tax rates can do real damage.

That's true for high corporate taxes.

It's true for high personal tax rates too.

They crush enterprise, undermine aspiration and often undermine tax revenues as people avoid them.

I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent.

That is why I regard it as a temporary measure.

Just as my Labour predecessor, the RHM for Edinburgh South West, did when he introduced it.

I've said before that now wouldn't be the right time to remove it, when we're asking others in our society on much lower incomes to make sacrifices.

For we're all in this together.

But I think it's sensible to see how much revenue it actually raises.

I've asked HMRC to find out the truth when the self-assessment forms start coming in.

Of course, taxation must be fair. It's right that the wealthiest should pay more than others.

And it's especially wrong when they avoid taxes.

I'll have more to say later on tax avoidance and evasion, but there's one area that needs extra work in the coming months, and that's on the taxation of very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share.

So as well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.

Help for small businesses. A boost for enterprise. Reforms to planning. Cuts to existing regulations and a moratorium on new ones.

All part of our ambition to make Britain the best place in Europe to start, grow and finance a business.

Our third ambition is to encourage investment and exports as a route to a more balanced economy for Britain.

In the Plan for Growth we publish today, we set out specific measures we can take to help a wide range of businesses.

In life sciences, where we will radically reduce the time it takes to get approval for the clinical trials.

In our digital and creative industries, where we will improve the intellectual property regime.

In our professional and business services, one of our unsung success stories, we will reform our burdensome money laundering regime, promote the UK as the global centre of legal arbitration,