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“Whatever he does with his budget- we have the right place for yours”

The chancellor stood up at 3.35pm. His priorities are to sustain recovery which is now underway, and to take no risks with inflation.

He began by saying that it is now clear that the recovery started in the first half of 1992.

GDP next year should be up 2.5%. He expects inflation to increase a little over the next few months, but not to increase more than 4% in the medium term, ranging between 1 and 4%. Two risks to economic recovery in 1994:

1. Weakness of world economic activity especially Europe.

2 Public Finances in Britain – the immediate task of the government is to put public finances on a sound footing – the chancellor said this is the main aim of his budget today.

The measures he is announcing today will result in reducing the PSBR by £5.5bn next year, and in 1995/6 by £7bn and 1996/7 by £10.5bn.

Income support benefits will increase by 3.5%.

VAT on Fuel – no change from March

Non-pensioner households 1995 – uprating brought forward to 1994

Cold weather payments of £7 a week next winter and £7.50 the following.

Benefits for all pensioners:

• Home energy efficiency scheme boosted
• guaranteed income bond
• 94 & 95 all pensioners receive help with fuel bills

Over the next three years public spending will fall to 42.5% of national income.

Two proposals to increase employment:

• Introduce a single benefit for the unemployed “Jobseekers allowance” and reducing claim period from 12 to 6 months.
• Introducing next autumn a new allowance for child care aimed at helping single mothers go back to work worth £28 per family per week.

The main rate of employers’ NICs to be cut by 0.2% from next April. The lower rate will also be cut by 1% next April.

Invalidity Benefit – to refocus it on those genuinely unable to work – a new benefit called inacapacity benefit to replace sickness and invalidity benefits. This will involve a more stringent medical test. Incapacity benefit will be taxable.

By 2010 women’s retirement age will be altered to 65. This will not affect anyone over the age of 44. Local authorities’ standard spending growth limited to 2.3% next year.

Defence spending will be cut by £250m and £500m over the next two years.

NHS spending will be up by £1.5bn in 1994/5.

Education spending will be increased by £1bn over the next two years. Student grants – move closer to loans, reducing the level of means tested grants. Will introduce a new apprenticeship scheme.

Law and order spending protected. Science spending protected.

Public sector capital spending – £22bn a year for 3 years.

Expanding Docklands railway to Lewisham given the go ahead Scottish air traffic control centre go ahead NHS – private finance for Liverpool hospital

Electronic motorway charges to be introduced when technology available. Private finance and management – new private sector contracts for building roads.

TAXATION

To reduce tax evasion – where salaries are payed in goods to avoid tax and NICS.

New VAT areas

Air passengers from UK airports £5 for departures to UK and Europe £10 for other destinations

3% rate on insurance premiums as from next September – will avoid taxing savings.

DIRECT TAXATION

Personal allowances frozen 1994/5 Inheritance tax frozen Income tax rates – no change. 1994/5 20% income tax band increased to £3,000 Married couples allowance restricted to 15% 1995/6

Mortgage tax relief restricted to 15% 1995/6 Self employed tax assessment simplified

Raising to £45,000 the VAT registration threshold from tomorrow. Small companies – audit requirements abolished. Capital Gains Tax retirement relief up Corporation Tax – no change. Enterprise investment scheme set up.

Late payments to be prevented; looking at different measures such as legislation to provide for interest on late payments.

Car tax disc up £5 per year. Petrol up 3p per litre from 6pm tonight

In future road fuel duties up 5% in real terms. From 6pm tonight cigarettes up 11p per packet of 20. Increase tobacco by 3% in real terms in future budgets to reduce smoking; the chancellor said other countries who ban tobacco ads but reduce taxes are hypocritical.

Beer – no increase.

Spirits – no increase

Wine up 2p per bottle after Xmas.

Before announcing there would be no change to VAT base, the chancellor stressed that no amount of lobbying would have affected his decision over VAT on newspapers and magazines – but none was introduced.

He concluded his budget speech by calling it a no-nonsense budget “determined to bring lasting recovery to Britain.”