§ To those who argue that getting interest rates down and getting inflation down is enough, I say that stability is the essential foundation, but it is only the foundation. We must build on that foundation for Britain a modern knowledge-based economy.
§ Britain must make a quantum leap in skills, innovation, competition, information technology and small business. So, today, we are bringing forward seven major reforms for a new enterprise economy open to all.
§ First, our tax cuts for business.
§ So that more businesses—large and small—will invest, grow and prosper; so that the many and not just the few will have the chance of starting their businesses, we today cut business taxes and introduce a special enterprise management incentive scheme to reward the risk-takers.
177§ When we came into government, corporation tax for companies was 33 per cent. Today, it is 31 per cent. I confirm that, from April, we will further reduce the main rate of corporation tax from 31p to 30p—the lowest rate in the history of British corporation tax, the lowest rate of any major country in Europe, and the lowest rate of any major industrialised country anywhere, including Japan and the United States.
§ When we came into government, small companies tax was 23p in the pound.
§ In my first Budget, to encourage enterprise and investment, we reduced it to 21p, backdated to April 1997.
§ From April this year, the rate will be 20p. Three hundred and fifty thousand companies are benefiting, but I want to do more. I want to create an even lower rate, which will give new incentives for men and women to start their own businesses and work their way up.
§ I believe that the whole House will want to welcome what I am announcing: a new starting tax rate for small businesses of 10p in the pound. Every company making profits of up to £50,000 will benefit.
§ The legislation will ensure that the beneficiaries are genuinely those who take risks. And 85 per cent. of the firms gaining from the 10p tax rate will have fewer than 10 employees—the very firms that we most want to see grow; the very firms whose growth will create the greatest number of new jobs.
§ This is the lowest starting rate for small businesses in the entire history of United Kingdom corporation tax.
§ Where we inherited business tax rates of 33p and 23p, the rates will now be 30, 20 and 10. I give to all companies—large and small—an assurance not just for a year, but for the rest of this Parliament: there will be no return to the higher rates of the previous Parliament. For the life of this Parliament, the rates will be 30, 20, 10, or lower.
§ We will cut not only the tax rate but the cost of investing.
§ I am particularly keen to strengthen the ability of manufacturing industry to invest in new equipment and new technology, with targeted tax advantages for doing so. I recognise the difficulties faced by manufacturing as a result of global instability and the strong pound. And so I will set aside an additional £325 million to allow small and medium-sized companies to write off 40 per cent. of all they invest in the coming year.
§ In other areas, I am extending the tax allowance for new films made in Britain. And the shipping industry has put to me the case for enhanced training incentives and for a lower rate ring-fenced tonnage tax. While I am attracted to these options, I have to be satisfied that lower tax rates will not become a vehicle for tax avoidance and I am grateful to Lord Alexander for agreeing to conduct an independent study of the national and international issues involved.
§ Secondly, I propose next a tax reform that will reward risk and stimulate new enterprise at the cutting edge of technology. I want to recruit, motivate and reward Britain's risk-takers—the innovators capable of creating wealth and jobs in the Britain of tomorrow.
178§ In the past, share option schemes, subsidised by the taxpayer, have rewarded those already at the top whose risks are low and rewards already high—such as utility chief executives, often operating in a monopoly environment.
§ Tomorrow, we will publish details of a very different kind of targeted tax cut for those who are prepared to move from secure jobs to venture their time and effort to create wealth for our country. The new enterprise management incentive will allow the award of equity worth up to £100,000 for success in building the new path-breaking companies our economy needs.
§ Our capital gains tax reforms will reward committed long-term investment.
§ For the first time, Britain now has the long-term rate of only 10 per cent.
§ I now announce the level at which capital gains tax will begin. There is no requirement for me to raise the threshold. But I have decided to do so.
§ For all individuals, from April, the first £7,100 will be free of capital gains tax. This measure will exempt 10,000 more people from capital gains tax altogether. Britain now has the lowest long-term rate of capital gains tax with the most generous threshold in history.
§ I now turn to the rate and threshold for inheritance tax. The rate will be unchanged and fewer people will pay the tax as I raise the threshold by £8,000 to £231,000.
§ Ninety-seven per cent. of estates will now be exempt from tax.
§ Third, I turn to targeted tax cuts and public investment to put Britain and British enterprise at the forefront of innovation.
§ I propose a new R and D tax credit, which will give business and small business—the biggest source of innovative ideas—cash help to research and develop their innovations even before they have made their first profits.
§ At a cost of £150 million a year, this targeted tax cut will underwrite almost one third of research and development costs for small businesses. And Britain therefore now has one of the best incentives for innovation anywhere in the industrialised world.
§ Scientific innovation, as we know, is a prime catalyst of growth. I want a winner's circle in innovation— inventions in Britain, that are then developed in Britain and manufactured in Britain, creating growth and jobs in Britain.
§ The seedbed is basic science, so I can announce £100 million new investment in university science laboratories and equipment, and this will be part of our £1 billion plus upgrading of British science.
§ To transform these British inventions into what we want—British-made products—I propose a 30 per cent. increase in the budget of the university challenge fund. To encourage large companies to invest venture capital in innovative small companies, we will tomorrow publish proposals for a new corporate tax incentive. To ensure the necessary flow of finance to high-risk companies, I am allocating £20 million for start-up funding for high-tech venture capital funds for England, Scotland, Wales and Northern Ireland.
§ My fourth measure is a new competition policy. The sharpest spur to enterprise, the ingredient too often missing in our country, is—as we found in our productivity review—competition.
179§ The productivity review has concluded that competition is not only the best stimulus to innovation and efficiency but gives the best prospect of a better deal for all consumers. It is time for more competition and lower prices in basic essentials like the utilities, financial services, indeed the whole range of consumer goods, where too often British consumers are paying far more than they should for what they need to buy.
§ It is wholly unacceptable that consumer goods can still cost up to twice as much in Britain as in America.
§ In 1997, so that interest rate decisions would be set for the long-term needs of the economy, the Government made the Bank of England—Britain's monetary authority—independent. Tomorrow, so that competition will be encouraged for the long-term needs of the economy and consumers, the Secretary of State for Trade and industry will set out a new competition policy for our country.
§ With 20 per cent. extra resources, the Office of Fair Trading will now be charged with a proactive remit to root out cartels and restrictive behaviour. Obstructing investigations will be a criminal offence. Wherever there is monopoly power, we will open up the way to competition and to new entrants.
§ The Deputy Prime Minister will review competition in airports and in the water industry, starting with industrial and commercial consumers.
§ The Financial Services Authority will now publish league tables of costs and charges in savings, insurance and pension products, to guarantee a better deal for consumers and to avoid the mis-selling of the past. To help all home owners, all building societies and banks will, for the first time, be obliged to publish reliable price information on mortgages.
§ Britain will have the most open competition policy the country has seen.
§ Fifth, to match our small business tax cuts with a new champion for small businesses in government, we will establish for the first time in our country a single small business service, devoted entirely to the needs of small business.
§ This one-stop open-door service—the small business service—will have new resources to offer loan guarantees, to support innovation, to advise on electronic commerce and deliver, for the first time, an automated payroll service to help new small companies starting out. Small businesses that file their tax returns electronically will be offered a discount.
§ Sixth, to open Britain's economy to the enterprise of all, we propose employee shares for all. Britain can and must become a democracy of enterprise, that gives all who create wealth a greater stake in the wealth they create.
§ Under our new programme of shares for all, employees will be able for the first time to buy shares in their own company from their pre-tax income. Every employer will be able to match, tax-free, what each employee buys.
§ This will be the most tax-advantaged all-employee share ownership scheme that Britain has had. Our only stipulation is that it really must be shares for all, offered right across the company's entire work force.
§ My seventh measure for enterprise. New targeted tax cuts and public investment to equip all our companies and all our people for what is the newest and most decisive 180 challenge of the 21st century—the mastering in our economy of the new information technologies, from the PC to the internet, from e-mail to e-commerce.
§ This industry is the greatest driver of world economic growth today. Britain can no longer afford to lag behind America.
§ So, today, we are allocating an additional half a billion pounds from our capital modernisation fund to launch a £1.7 billion "Computers for AH" initiative, a nationwide effort enlisting schools, colleges and companies, public and private sectors together, across the board, so that Britain can lead in the information economy.
§ Our target is a national network of 1,000 computer learning centres, one for every community in Britain. They will be in schools, colleges, libraries and internet cafes in the high street. It is a whole network of computer learning with one purpose only: that the whole of Britain is equipped for the information age.
§ Our targets for the new economy are ambitious: within three years, 1 million small businesses able to benefit from e-commerce; 32,000 schools connected to the internet, as a result of the work of my right hon. Friend the Secretary of State for Education and Employment, and 370,000 teachers computer trained; new help worth £20 million making it possible for more teachers to have computers for home use.
§ Inequality in computer learning today will mean inequality in earning power tomorrow, so to bring more computers into more British homes, we will legislate so that employees will be able to secure computers on loan from their companies as a tax-free benefit.
§ Anyone left out of the new knowledge revolution will be left behind in the new knowledge economy. So we will pioneer a system under which local partnerships will be able to loan computers and software in the new century, in the way that local libraries loaned books in the past century.
§ In the new economy, the more individual talent we nurture, the more economic growth we will achieve. The tax system will offer further incentives for people to upgrade old skills and learn new ones.
§ From this year, 1 million men and women will start to receive £150 to set up their own individual learning accounts. This puts the power to plan and prepare for their careers in their own hands.
§ In this Budget, we will expand individual learning accounts and open up tax-free learning in computers, in basic skills and advanced skills to millions more people.
§ We will legislate so that employers will be able to contribute tax-free to the new individual learning accounts.
§ Employees will also pay no tax on such payments.
§ And this will be skills for all, because the opportunity to learn must be offered across the company's entire work force.
§ We need to do more and the Budget will go further, offering discounts for learning.
§ Any adult with an individual learning account will now be able to claim a discount of 20 per cent., an additional grant of up to £100, on the cost of vocational learning.
§ For all adults signing up to improve their basic education—including computer literacy—there will be a discount of 80 per cent. on course fees.
181§ We will pay for this measure in tax-free learning by phasing out the existing vocational tax relief which, among other things, has been subsidising non-vocational courses like diving and flying lessons.[Interruption.] It was introduced by the Conservative party.
§ This century, Britain has achieved universal free education for children. This Budget introduces the new opportunity for universal education for adults—lifelong learning so that everyone will have the chance to succeed in the new economy.