§ Most fundamentally, the tax reforms of this Budget provide a better deal for the hard-working majority—a ladder of opportunity for those who want to work, a chance to keep more of what they earn and, for all, a fundamental guarantee that work will pay.
§ Our reforms in national insurance will give employers an overall tax cut of £1.5 billion and employees an overall tax cut on work of £2.5 billion—an average of £130 per year per employee.
§ This April, as I implement the report by Martin Taylor, I am abolishing the perverse tax on work, the entry fee that every employee has to pay simply to be part of the 187 national insurance system. From this cut on work worth over £1.4 billion a year, every one of 20 million employees will gain £69 a year from April.
§ Over the two financial years to follow, I will further align the starting point with that of income tax so that no one will have to pay either national insurance or income tax on the first £87 of their weekly earning. From this tax cut on work worth £1.8 billion a year, every employee will gain £99 a year.
§ From April 2001 therefore, the lower limit for employees, self-employed and employers national insurance will be harmonised at £87 a week—the same as income tax. As with the lower earnings limit which is rising faster than inflation, the upper limit will rise to £575 and to complete our reforms we will also align employers national insurance and income tax in the treatment of benefits in kind.
§ I also propose to extend to the self-employed national insurance rights to the full maternity allowance.
§ Again, to implement the recommendations of the Taylor report, we will align national insurance arrangements for the self-employed closer to those of employees. We will reduce the unfair entry fee from £6.35 a week to £2 and we will set the class four threshold at the same point as the personal income tax allowance. But I will set contributions at a lower rate than envisaged by the Taylor report, at 7 per cent. in contrast with the 10 per cent. employees pay.
§ Some 230,000 young people are now benefiting from the new deal. Now we must bring in those young unemployed who, for whatever reason, have yet to join.
§ I say to them, this is our new deal for 1999: there will be better provision but there will be tougher conditions. Our responsibility is to offer training and intensive coaching to help young people get jobs. In return, their responsibility is to come into the new deal, get the skills and prepare to take a job.
§ We will also help lone parents make the transition into jobs. Benefits will continue when they first start work.
§ For them and others, the working families tax credit will make work pay more than benefits.
§ Every working family will be guaranteed a minimum income. It will be introduced in October not at the previously announced rate of £190 a week, but at £200 a week—more than £10,000 a year. No income tax will be paid until earnings reach £235 a week.
§ This is a tax cut available to 1.4 million families that will help 3 million children in our country.
§ I propose that, over time, we seek to extend this principle.
§ The old tax system that we inherited set a personal allowance that failed to ensure that work paid, and also made thousands pay tax even when they were forced to claim benefits.
§ Not just families but all who work should be guaranteed a minimum income, and this minimum income will be paid through targeted tax cuts and credits. No one who is in work should in future have to go to the benefits office to receive a living income.
§ We start in this Budget with a minimum income guarantee—a new deal for over-50s returning to work.
§ Nearly 30 per cent. of men over 50 are outside the labour force—twice as many as 20 years ago.
188§ We need their talents. For those unemployed for six months or more, we will create a new employment credit which will guarantee a minimum income of £9,000 a year, for their first year back in full-time work—at least £170 a week.
§ And, over time, I want this better deal for work to include help with housing costs—not just help with rent but also help for home owners going back to work. Taking a job should not put them in danger of losing their homes.
§ Successive Governments have lowered mortgage tax relief from 40 per cent. to 10 per cent. of interest costs and they have frozen the limits at the first £30,000 of a mortgage.
§ Today the allowance is worth an average of £2.50 a week.
§ In the last year, mortgage rates have come down significantly and I now recognise that there is a consensus across this House.
§
I have had many Budget representations and read many contributions to the long-standing debate about the housing market. One of them said that MIRAS has
outlived its usefulness … it should be abolished the sooner it happens, the better.
§ Those are the words of the now shadow Chancellor.
§ For our part, as we complete the phasing out of MIRAS, we will ensure that families are better off.
§ We said in our manifesto that we would introduce a 10p starting rate of income tax for individuals when it was prudent to do so.
§ I repeated in the last Budget that we would introduce the 10p starting rate when it was prudent to do so.
§ However, I have to tell the House that the 10p rate will not start in April 2000, like other income tax changes we are making today.
§ It is prudent instead for people to get the benefit of the 10p starting rate now.
§ So it will take effect in April 1999, a 10p starting rate on the first £1,500 of income, the lowest starting rate of tax since 1962, and it will be delivered a few weeks from today. People will see it in their pay packets in May.
§ Nearly 2 million people will see their income tax bills cut in half, and take home 90p of every pound they earn.
§ The new income tax structure will this year be 10, 23, and 40. And income tax allowances, income limits and tax thresholds will rise as usual in line with inflation. The tax rates on savings will remain unchanged.
§ So this is a Budget with a 10p starting rate of income tax, a 10p starting rate of small business tax, a 10p long-term rate for capital gains tax. The maximum small business tax is now down to 20p and corporation tax for big companies is down to 30p in the pound.
§ As a result of all the tax reforms we are making, the typical one-earner family on the average wage with two children will be £460 a year better off and a two-earner family on 175 per cent. of the average wage will be £500 a year better off.
189§ The tax cuts I have made today are tax cuts to encourage work and make work pay, tax cuts for a purpose. They help all middle and lower-income families. They are tax cuts for the many and they are being made at the best time for the economy.
§ I can confirm that the share of tax in national income next year will fall. The tax burden on the typical family with children will fall below 20 per cent. for the first time in 20 years, after our reforms.