Budget Line
The chancellor stood up at 3:32pm
The Chancellor stated today’s budget will reduce public spending and provide more money for priority spending. He stated that he was setting out a policy for five years to come. He forecast that the economy would grow by 2.5% this year and 3.5% for 1997. Consumer expenditure will be grow by 3% this year and 4% next year.
Export volumes will rise by 7% this year and 6% next year – he predicts the current account will remain in balance.
He stated that underlying inflation should remain at 2.5% or less now and into the future.
Public Sector Borrowing Requirement – Government borrowing is expected to be £26.5bn this year, £19bn next year and in balance thereafter. Maastricht criteria will be met by next year. Spending to fall to 40% of GDP by next year.
Spending on Schools – School expenditure will raise by £830m this year, £633m will be channeled through LEAs. £50m will be made available for school building/maintenance, £280m for further/higher education over the next two years, including £20m for science equipment.
Crime – Law and order spending will increase by £450m, planning for 200,000 new constables by next year.
Health – NHS will see increases of £1.6bn, or 2.9% in real terms next year.
Social Security – Lone parent premium will be abolished by 1998 as will one parent benefit. Tax and benefit fraud will be cracked down on – a 800m fund available to facilitate this.
Indirect Tax – Steps will be taken to reduce VAT non payment. The right of customs to claim under paid tax will be restricted to 3 years.
Tax relief on profit related pay will be abolished by 2000, being phased out from 1998.
Capital Allowances cut for long lived assets.
Insurance premium tax will increase up to 4%
Transport – Air passenger duty will increase to £10 for European travel and £20 for elsewhere from November. Car tax will increase by £5, lorry tax remains unchanged.
Fuel – Petrol and diesel will increase by 3p per litre from midnight. Ultra low sulpher diesel will be reduced by 1p per litre.Road fuel gases will be cut by 25%.
Tobacco – Cigarettes will increase by 15p per pack, cigars by 7p and pipe tobacco by 8p.
Alcohol – Taxes on beer and wine will remain unchanged, whilst spirits will go down by 26p per bottle. Alcoholic soft drinks will see taxes increase by 7-8p per bottle, in line with beer.
Business rates will be frozen for small businesses, who would have seen increases.
Capital gains and inheritance taxes will see no change, although inheritance tax threshold will increase to £215,000.
Direct Tax – Personal allowances will increase by £280. Married couples allowance will increase by £40. Blind persons allowance will increase by the rate of inflation. 40p tax threshold will increase by £600 and the 20p tax band will be widened to £200.
Additionally the basic rate of income tax will reduce by 1p to 23p in the pound.
The chancellor sat down at 4:45pm.