A flourishing British venture capital industry is vital to growth and I will consult on raising the annual limit for Venture Capital Trusts and Enterprise Investment Schemes to £200,000 pounds and increasing, for two years, income tax relief’s for VCT investments to 40 per cent. And we will extend tax relief for the cost of managing investments from investment companies to trading companies.
Small firms in Britain seeking investments of up to two million pounds still face an equity gap. So following the model of American Small Business Investment Companies, we will create a new framework of incentives for small business investment and launch the first round of a new British fund for enterprise capital.
To encourage new companies to enter the North Sea, I will enhance tax relief for their costs of exploration. And manufacturers and firms with turnovers up to £22 million pounds will benefit from 40 per cent capital allowances worth, over 3 years, nearly £400 million.
So that British manufacturers and British workers do not lose out from European rules unfairly applied to British firms, the Secretary of State for Industry and I have asked Alan Wood of the Engineering Employer’s Federation and Siemens UK to review how procurement rules are practised in Europe and make recommendations.
I can announce the following deregulations: firms applying international accounting standards will not have to submit a second and separate set of accounts to the Inland Revenue. For firms with turnovers below £5.6 million there will now be no independent audit requirement. I will extend the flat rate VAT scheme whereby firms simply pay a percentage of total turnover: lowering the VAT charged by up to 3 per cent; for first year start up businesses by up to 4 per cent, in total the Government is announcing today 147 regulations for reform or removal, 650 over two years.
Because half of regulations emanate from Europe, the coming Irish, Dutch, British and Luxembourg Presidencies are proposing a joint initiative to drive forward deregulation as we seek more flexible capital, product and labour markets not just in Britain but in Europe.
Mr Speaker, our goal is full employment for every region and nation of the United Kingdom. And we are closer than ever to achieving it.
While the first stage of Britain’s New Deal was to move people from welfare into jobs, the next stage is to help people move from low skilled work to higher skilled work.
So I can announce today that the Windfall Tax Reserve – previously for job creation – will now be reallocated to a new deal for skills.
To extend employer training pilots to a third of the country – from 14,000 up to 80,000 employees, most of whom have left school early and without qualifications – we will provide £190 million in the coming year for paid time off and skills training.
To further this new deal for skills, everyone on jobseekers allowance will be assessed for their skills and – starting with pilots for the long term unemployed – attend a mandatory skills course. Overall, a second chance for adults in or out of work without basic skills to learn, whether through further education, work-based learning, distance learning or trade union learning – and today to further boost skills training we are publishing a paper on the tax treatment of subscriptions and fees for professional bodies.
Alongside the Allsopp report published today on regional statistics, the Secretary of State for Work and I are also publishing for each region of the country full employment plans. For 2,000 enterprise areas covering high unemployment communities in 417 constituencies: in addition to fast track planning and abolishing stamp duty, I can announce – subject to state aid approval – first year 100 per cent investment allowances to renovate vacant commercial premises. And I can confirm that as a result of the Lyons Review we will relocate out of London and the south east 20,000 civil service jobs, to the benefit of the regions and nations of the UK. Local authorities who successfully promote small business creation should be rewarded for doing so. And the Deputy Prime Minister and I propose that any additional business rate income be shared with local authorities. Although I will consult further before the Budget, we expect local authorities to be eligible for an additional £150 million in 2005, £300 million in 2006, rising to £450 million a year.
Budget 2002 announced relief’s on income and donations for local Community Amateur Sports Clubs. The importance of sport to our communities and to our whole country has been demonstrated most powerfully as the England Rugby World Cup triumph is enthusiastically celebrated throughout the whole of the United Kingdom. I know that the whole House will not only want to congratulate their success but encourage the next generation of sportsmen and women. There are 100,000 amateur sports clubs in Britain who deserve greater support. Under our proposals, becoming a Community Amateur Sports Club entitles them to 80 per cent rates relief – worth between one and three thousand pounds a year for the typical club – and by doubling the thresholds at which community clubs are exempt from corporation tax to a new rate of £50,000, the vast majority will be exempted from any such tax altogether. And in partnership with the sports governing bodies we will work to ensure that all sports clubs – over 100 in each constituency – can share in the considerable financial benefits as they promote sports in their communities.
The Home Secretary – who will announce tomorrow the details of our £125 million ‘Futurebuilders’ fund for voluntary and community organisations – the Culture Secretary and I will report in the Budget on what more we can do to encourage and help all those prepared to volunteer in school sports, local sports as well as mentoring in community service. We will also review Inland Revenue treatment of football supporter’s trusts.
I have two announcements on whisky and spirits. While tobacco fraud, VAT fraud and oils fraud are now in decline, recent trends suggest that despite a freeze in spirits duty for six Budgets an estimated one bottle in every six of spirits sold is evading duty. So I will now make provision to implement in the next Finance Bill the Roques Report recommendation – that we stamp spirits bottles. If, after discussion with the industry, there is still no workable alternative proposed, we will legislate. If we have to impose stamping, the Economic Secretary will discuss with the industry the most cost effective scheme and I will consider extending the freeze on the duty for whisky and all spirits not just for one year but for every year of this Parliament
I propose also to consult on a new framework for the tax treatment of green fuels – a commitment to prior announcements, three years ahead, of incentives to increase usage and promote investment in new fuel efficient technologies. The Budget will also introduce incentives for rebated low sulphur fuel and gas oils. And we will consult on recycling revenues from landfill tax; extending eligibility for 80 per cent reductions from the climate change levy; and, subject to new industry wide commitments on the environment, extending in Northern Ireland until 2012 an eighty per cent discount on the aggregates levy.
Also published today are measures extending our VAT compliance strategy, and closing loopholes involving trusts, seafarers foreign earnings deductions and tax paid on the personal income of owner managers of small companies.
Our pension proposals published in detail today include a single set of rules that set the tax free lump sum at 25 per cent of the value of an individual’s pension fund; more flexible annuity rules; and provision for older workers to draw occupational pensions. Because consultation on the proposed single lifetime tax allowance for pension saving has revealed contrasting interpretations of its impact, I am asking the National Audit Office to provide, by Budget time, an independent evaluation of the numbers affected. Our aim is to secure a broad based national consensus on the way forward. If a decision is made to proceed, the measures will be introduced in April 2005. Otherwise the current regimes will remain in place.
I turn to the coming spending round.
In advance of the independent Gershon efficiency review, the Chief Secretary has written today to all Government Departments asking them to bring forward their plans for reform and cost savings in transaction services, in back office services and in procurement – where we propose a new framework. With modernisation and reform the condition of future spending settlements, the Treasury in return, will – for Public Service Agreements – abolish the input and process targets, and abolish Service Delivery Agreements entirely. And while local performance standards and local publication of performance data will progressively replace national targets, the Deputy Prime Minister and I are agreed that:
having set aside for English local authorities an additional £3.3 billion for the coming year;
the Government will, to ensure next year reasonable levels of council tax, be prepared to use capping powers where appropriate and necessary. I turn now to the public finances.
I reported to the House last week on our resolve to ensure our Armed Forces are properly supported in all they do.
The whole House will wish to thank them for the service they give in peace and in war.
And I can also reaffirm that we will meet all our international development responsibilities in Iraq and for the war against poverty in Africa and round the world.
To date the money spent or set aside for the war against terror including in Afghanistan and for our action in Iraq is £5.5 billion.
I can tell the house that for Iraq £2 billion has been carried forward into the Special Reserve for 2003-4.
And I believe it prudent and right today to set aside a further £500 million for this year, and an extra £300 million for next year: raising our allocations for the war against terrorism and for action in Iraq to £6.3 billion.
So having taken account of these new provisions for Iraq and elsewhere, and the cost of incentives for enterprise and other measures announced today to equip Britain to take advantage of the opportunities of the global upturn, our current budget figures for 2003-4 – and for the years to 2008-9 – are, in billions: minus 19, minus 8, minus 5, zero, plus 4 and plus 8.
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