Tag: Economic Growth

  • 1997 Conservative Party Manifesto – 2 April 1997

    Below is the text of the 1997 Conservative Party manifesto.


    Foreword

    The Conservative administrations elected since 1979 are among the most successful in British peacetime history. A country once the sick man of Europe has become its most successful economy. A country once brought to its knees by over-mighty trade unions now has industrial peace. Abroad, the cold war has been won; at home, the rule of law has been restored. The enterprising virtues of the British people have been liberated from the dead hand of the state. There can be no doubt that we have created a better Britain.

    Why, then, do we still need a Conservative Government? Because resting on what we have achieved is not enough. To stand still is to fall back. Our goal must be for Britain to be the best place in the world to live.

    We live in a tougher, more uncertain world. A fast-moving global free market is emerging. New economic powers are rising in the East. Family life and social attitudes are changing. Europe is adjusting to the end of communism. The European social model is failing. The nation state is under threat. We must respond to these challenges.

    We have turned around our economic fortunes. We have fewer people out of work and more in work than any other major European economy. British people now have the opportunity of a prosperous future. But that prosperity cannot be taken for granted. We have to compete to win. That means a constant fight to keep tight control over public spending and enable Britain to remain the lowest taxed major economy in Europe. It means a continuing fight to keep burdens off business, maintaining our opt-out of the European Social Chapter. If we relax for one moment, our hard won success will slip away again.

    We have strengthened choice and personal ownership for families, and rolled back the state from areas where it was interfering unnecessarily in our lives. But we now have the opportunity to achieve a massive expansion in wealth and ownership so that more families can enjoy the self-respect and independence that comes with being self-sufficient from the state. Our far-reaching proposals for personal pension funds are central to achieving this – so too are our plans to increase support for the family in our tax system. Our aim is to spread opportunity for all to succeed, whoever they are and wherever they come from, provided they are prepared to work hard. To turn the “have nots” into the “haves”. To support the family in providing security and stability.

    We have modernised and reformed many of the areas where the state still has a vital role. But we now have to build on these reforms to deliver even better services. We must continue providing the resources to invest in our modernised health service. We can now provide parents with a hard-edged guarantee of standards in schools. We need also to widen choice in areas where state bureaucracy has constrained it.

    We have pioneered new ways of building partnerships that engage the private sector in areas previously dependent on the public purse. We now need to capture private sector investment on a massive scale to regenerate our cities, transform our crumbling local authority housing estates and modernise other public assets.

    The only way to secure this future of opportunity is to stick with the Conservative programme of continuing reform. Now would be the worst possible moment to abandon the pathway to prosperity on which we are set. We must keep up the momentum.

    At the same time we must maintain the security that a stable nation provides in an uncertain, fast-changing world. We must protect our constitution and unity as a nation from those who threaten it with unnecessary and dangerous change. And we must stand up for our interests in shaping a free-market Europe of sovereign nation states.

    There is, of course, an alternative on offer: to load costs on business while calling it “stakeholding”; to increase the role of the state, while calling it “the community”; to succumb to a centralised Europe while calling it “not being isolated”; to break up our country while calling it “devolution”.

    To risk this alternative would be a disaster for our country. We have come a very long way. We must be sure that we do not throw away what we have gained, or lose the opportunities we have earned.

    Our Record

    The UK is on course to grow faster than both France and Germany for the sixth successive year in 1998 – a post-war record.

    Inflation has now been below 4% for well over 4 years, the longest period of low inflation for almost half a century.

    Mortgage rates are at their lowest levels for 30 years.

    Unemployment has fallen to its lowest level for 6 years. We now have a lower unemployment rate than any other major European economy. Youth unemployment in Britain has fallen to less than 15% whereas by contrast, in France it has risen to 27% and in Italy to 33%.

    A higher proportion of our people are in work than in any other major European economy – 68% against a Continental average of 57%.

    The UK is the favourite location for inward investment into Europe, attracting around one third of inward investment into the European Union.

    We have the lowest tax burden of any major European economy, with the government taking almost 8% less of national income than the European average.

    Public borrowing has averaged 3.4% of GDP since 1919 compared with 6.8% (and a peak of 9.5%) under the last Labour Government. Our level of public debt is now one of the lowest in the European Union – whereas it was one of the highest in 1979.

    In 1994 the UK lost 300,000 working days through strikes, the lowest figure ever recorded; in 1979 the figure was 29,500,000: nearly 100 times that figure.

    Britain ranks fifth in the world in international trade, and exports more per head than America or Japan. Exports account for 28% of GDP as against 9% for Japan, 11 % for USA and 24% for Germany and France. Britain’s current account is broadly in balance, reflecting our increased competitiveness and improved trading.

    1. Doubling Living Standards

    The free market is winning the battle of ideas the world over. From Russia to Vietnam, from China to Romania, people are realising that the socialist model has failed. This is not just an economic triumph. It is a triumph for human freedom. Britain helped to secure it. We should take pride in it.

    The spread of the free market heralds a new age of global competition. That means new markets for British goods and services, but new competitors for British companies as well.

    If we try to protect ourselves from these challenges with more regulations, public subsidies and a cosy dependence on government then Britain will fail. But if we boldly embrace these new opportunities by pushing forward the economic revolution we began in 1979, then we will enter the next millennium with boundless prospects for growth and prosperity.

    That choice – between stagnation and dynamism – is the choice which faces Britain at this election. It is a stark choice between the British way – of trusting the people and unleashing enterprise – and the failing social model, practised on the continent, which the Labour Party wants to impose on us here under the guise of “stakeholding”.

    Hard economic evidence shows how great is the divide between these two strategies. Britain is now in its fifth year of growing faster than France or Germany. Unemployment in Britain has fallen to less than two million, while it rises across Europe. Britain attracts nearly forty per cent of all the American and Japanese investment in Europe. Our aim now is to safeguard these achievements and build on them, so Britain becomes the unrivalled Enterprise Centre of Europe.

    A Low Tax Economy

    For enterprise to flourish, the state must get out of the way of the wealth creators. We are the only party that can cut taxes because we are the only party which is serious about controlling public spending. The choice between the two economic philosophies is clean In the years before 1979, public spending in Britain kept pace with the average for Europe as a whole. Since then, it has continued rising on the continent, while we have restrained public spending here. Now, public spending takes about 40% of our national income as against an average of 50% on the continent. We have broken free from a trend in which the rest of Europe is still trapped.

    Conservative government will keep public spending under tight control and ensure that it grows by less than the economy as a whole over the economic cycle. At the same time we will continue to spend more on the services which matter most to people – hospitals, schools and the police.

    Over the next parliament, we will achieve our goal for the government to spend less than 40% of our national income.

    That means we can reduce the amount government borrows too, and meet our aim of moving towards a balanced budget in the medium term. Our plans show how we can virtually eliminate public borrowing by the year 2000.

    Thanks to our success in controlling public spending, Britain is now Europe’s low tax economy. This is one of the reasons why we are becoming the Enterprise Centre of Europe.

    Our aim is to ensure Britain keeps the lowest tax burden of any major European economy.

    In the election manifesto of 1992, we promised that “We will make further progress towards a basic income tax rate of 20p”. Since then, we have cut the basic rate of income tax from 25p to 23p, and extended the 20p band so that over a quarter of all taxpayers now only pay income tax at the 20p rate. Achieving our public expenditure goals will mean we can sustain permanently low tax levels.

    Over the next parliament, our aim will be to achieve our target of a 20p basic rate of income tax, while maintaining a maximum tax rate of no more than 40p.

    Stable Prices

    Inflation has to be kept firmly under control for an economy to thrive. Britain is now enjoying the longest period of stable prices for almost fifty years. We are on target to reach our goal of 2½% inflation this year.

    Low inflation has delivered lower interest rates whilst preserving the value of people’s savings. Homeowners are now enjoying mortgage rates at the lowest levels for 30 years.

    It has taken tough decisions to break free from our reputation as a high inflation economy. No Conservative government will jeopardise this achievement.

    During the next parliament, we will maintain an inflation target of 2½% or less.

    Rising Living Standards

    The only secure base for rising living standards is a strongly growing economy, low levels of public spending and taxation, and stable prices. That is exactly what Britain is achieving. People are reaping the rewards of their hard work as their take home pay increases. Between 1974 and 1979, the take home pay for a family on average earnings rose, in real terms, by just £1 a week in today’s prices. Since 1979 it has increased by £100 a week; this year alone it will increase by £7 a week.

    The goal which we set ourselves in 1995 is to double living standards over 25 years.

    We are on course to achieve our goal.

    2. Jobs and Business

    Our priority is to create jobs. This is not just an economic priority, but also a social and moral one. Jobs and enterprise are the best ways of tackling poverty and deprivation.

    Britain is succeeding. 900,000 jobs have been created over the past 4 years. By contrast the European social model is stifling job creation on the continent by imposing regulations and burdens on business. In the United Kingdom unemployment is much lower than in the rest of Europe and falling whereas in Germany, France, and Italy it has risen to its highest level for a generation. This is no accident. It is because we have pursued very different policies from those on the Continent.

    Curbing the power of trade unions, opening up markets and cutting red tape, have given us a low strike, low cost economy: and as a result Britain is the number one location for foreign investment in Europe.

    Never have such policies been so important. For the first time this century we face a world full of capitalist competition. The only way Britain will be able to compete and win in world markets is by sticking to the Conservative policies that are delivering success. We can earn prosperity as one of the world’s most successful global trading nations. We should not risk this progress by adopting the very policies that have made the continent uncompetitive and have increased unemployment in Europe by 4.5 million over the past 5 years.

    Small Businesses – Britain’s Risk-takers

    Governments do not create jobs. Businesses do. The source of tomorrow’s jobs will be small businesses, the seedcorn of Britain’s prosperity. Over the last 15 years, small businesses have created over 2 million jobs. By the year 2000, over half the workforce should be working in companies which employ fewer than 50 people. Back in 1979 only a third of the workforce did.

    Entrepreneurs often risk everything when they set up their own business. We have already helped them: raising the VAT threshold, cutting employer’s national insurance contributions, simplifying audit requirements and much more besides. Now we intend to go further, tackling the remaining problems they face.

    High taxes and rates deter enterprise. Our low tax structure has been crucial to our industrial revival. We already have the lowest corporation tax of any major industrialised country. As we want small businesses to flourish, we will go even further.

    We will cut the small companies rate of corporation tax in line with personal taxation as we move towards a 20p basic rate

    Investment and enterprise are deterred if the taxman takes too much of the capital that is built up by a successful business. Capital is ever more mobile, flying around the world to places where the tax on it is low: Britain must be one of those places.

    We will continue to reduce the burden of capital gains tax and inheritance tax as it is prudent to do so.

    One of the heaviest burdens small businesses face is business rates. At the moment, this bears more heavily upon small businesses than large ones.

    In the next parliament, we will reform business rates to reduce the cost that falls upon small businesses.

    No businessman has time to fill out reams of forms. We will continue to simplify the administration of NICs and PAYE for small firms, allowing them to concentrate on satisfying customers not bureaucrats. We are also tackling a problem that hits small businesses particularly hard – the late payment of bills. On top of our programme to ensure government departments and local authorities pay on time we have legislated to require companies to publish their payment policy and to report their record on how quickly they pay their bills to small businesses.

    We have already abolished over a thousand regulations. New regulations must only be introduced if it is clear that their benefits exceed their costs and they do not place an undue burden on a small firm.

    We will introduce “sunset” requirements into new regulations whenever appropriate so that they are automatically reviewed or dropped after a specific period.

    Many businessmen suffer regulatory burdens imposed by local government and quangos.

    We will therefore insist that the whole of the public sector adopts the same stringent rules that we require of central government in justifying the benefits of new regulations against their costs.

    Reducing the Burden on Companies

    Jobs depend on British firms winning orders: the difference between success or failure can be wafer-thin. Any extra burden on business will destroy jobs.

    Britain is enjoying more jobs and record investment, thanks to the competitive edge we have over other European countries. We are a low cost economy But that does not mean we are a low pay economy. Our competitive advantage comes from the lower costs facing our businesses. It can be measured by the social costs an employer has to pay on top of every £100 of wages: in Germany it is £31, in France £41, but in Britain, it is only £15.

    Many countries in Europe have tried to cocoon themselves from global competition behind layers of red tape and regulation – such as the Social Chapter and a national minimum wage. This provides a false sense of security, playing a cruel trick on working people. It also excludes the unemployed from work. As companies in the rest of Europe have grown more uncompetitive, employers have found it too expensive to employ new workers, investment has gone elsewhere, and the dole queues have lengthened. The European social model is not social and not a model for us to follow. But if Britain signed up to the Social Chapter it would be used to impose that model on us – destroying British jobs.

    No Conservative government will sign up to the Social Chapter or introduce a national minimum wage We will insist at the Intergovernmental Conference in Amsterdam that our opt-out is honoured and that Britain is exempted from the Working Time Directive: if old agreements are broken, we do not see how new ones can be made

    We will resist the imposition of other social burdens on the work place through a new European employment chapter.

    Welfare into Work

    Although governments cannot create jobs, they can help people train and find work. We now have in place a battery of schemes working with Training and Enterprise Councils to provide targeted help and training, including remedial education in literacy and numeracy. We are also developing new incentives, alongside Family Credit, to help people move off benefit into work.

    We will always help those in genuine need: in return, the unemployed have a responsibility to look for work and accept a reasonable offer That belief underpins our new Jobseeker’s Allowance which ensures that no-one can refuse reasonable work opportunities and remain on benefit.

    As unemployment falls, we want to focus on those who have been unemployed for some time. At present, Project Work is helping 100,000 people who have been unemployed for more than 2 years in cities around Britain. They are first given help in finding a job – which includes giving employers incentives to take them on. Those who do not find jobs are then required to work for a specific period on a community project. This helps them regain work habits and ensures they are available for work.

    As Project Work succeeds and demonstrates that its costs can be met by the savings from getting people into work, we will extend the programme to cover the long-term unemployed nationwide

    We will also develop an innovative “Britain Works” scheme which uses the experience and ingenuity of private and voluntary sectors to get people off welfare into work.

    Britain has one of the most mobile economies in Europe. People move on, and up, into better paid jobs more easily than on the continent.

    The Information Society

    Britain is at the forefront of creating tomorrow’s information society Already we have exposed domestic telecommunications to competition and stimulated investment in cable and satellite entertainment systems. And by opening up international telecommunications we will continue to encourage companies worldwide to base their global operations here. We will make sure that the digital revolution comes to Britain first.

    We are launching an ambitious programme with industry to spread “IT for All”, giving every adult the opportunity to try out and learn about new IT services. We will work with industry to ensure that all schools are connected to the information superhighway.

    We will use the Millennium Lottery Fund to transform the computer facilities and information links available in schools, libraries, museums, voluntary organisations and other public places after the turn of the century.

    This will give the public much wider access to information services in the years ahead. We will also take advantage of information technology to transform the way government provides services to the public.

    We will keep Britain in the vanguard of new mobile service development – including mobile telephone and information services – by introducing a pricing system for the radio spectrum to achieve more efficient allocation of radio frequencies.

    We will maintain a strong, free and competitive broadcasting and press environment at both national and local level, while continuing to be vigilant in monitoring whether action is needed to curb breaches of standards, and prevent unacceptable press intrusion.

    Science

    British science enjoys a worldwide reputation for excellence and cost-effectiveness, which makes Britain an attractive base for many domestic and overseas companies. We will continue to invest in science and target funds at basic research, which would not otherwise be funded by industry. At the same time we will provide an enterprising environment which encourages firms to invest with confidence in applied science.

    2020 Vision

    There is no part of the globe which has not been reached by British enterprise and British culture. We have always looked out beyond these shores, beyond this continent. Our language, our heritage of international trading links, our foreign investments – second only to America’s – are historic strengths which mean we are ideally placed to seize the opportunities of the global economy.

    Thanks to Conservative policies of liberalisation and privatisation we are strong in industries of the future such as telecommunications, financial services, and information technology. These are the industries that will benefit from opening up trade around the world. We will push for completion of the European Single Market and continue to pursue the objective of transatlantic free trade against the background of world trade liberalisation.

    Our aim is nothing less than tariff free trade across the globe by the year 2020.

    Free competition is important for free markets. Companies should not make agreements that restrict competition and hence result in poor value for consumers. We have set out proposals to give companies greater protection against price fixing, dumping, and other restrictive practices by larger competitors.

    We will introduce a Competition Bill to take forward these proposals in the first session of the next parliament

    We are committed to pushing forward our competitiveness agenda which is making Britain the Enterprise Centre of Europe.

    Opportunity and Ownership for Individuals and Families

    Our Record – Opportunity

    The right to buy has allowed 1.5 million council tenants to become homeowners. There are over 4 million more homeowners today than in 1979.

    The Government has spent £6 billion through housing associations to provide homes for rent. Between 1992 and 1995 housing associations provided 178,000 new lettings – 25,000 more than promised in the 1992 Manifesto.

    There are now around 10 million private shareholders, up from about 3 million at the time of the last Labour government. 2.5 million people now have tax free savings in PEP accounts, and 4.5 million in TESSAs.

    Since 1979, the success of private pension provision has raised the average income of pensioners by 60% more than inflation. Almost 90% of recently retired pensioners now have incomes over and above state benefits.

    Savings in private pension funds have increased to £650 billion –more than 4 times the level in 1979. Their value is greater than the pension funds in all other EU countries added together.

    Over the period 1979 to 1995, education spending per pupil rose from £515 to £1,890 – an increase in real terms of 48%. Real spending on books and equipment per pupil rose 56%. Teachers’ real pay rose 57%: from £270 per week in 1979 to £420 in 1995.

    In 1979, 40% of three and four year olds attended nursery school; in 1995 the figure was 59%. Our nursery vouchers now give this opportunity to every child.

    The proportion of sixteen year olds staying on in full-time education rose from 4 out of 10 in 1979 to 7 out of 10 in 1995.

    Almost 1 in 3 young people now go on to university, compared with 1 in 8 in 1979.

    The proportion of adults with no academic qualifications has halved since 1979 and the proportion of adults with a degree or equivalent has more than doubled rising from 5% to 12%.

    3. Choice and Security for Families

    The family is the most important institution in our lives. It offers security and stability in a fast-changing world. But the family is undermined if governments take decisions which families ought to take for themselves. Self-reliance underpins freedom and choice.

    Families are stronger if they have the money to look after themselves: that is why we are shifting power and wealth back to working families and away from the state. We have already achieved much – the average family’s disposable income has gone up by 40% since 1979. But we want to go further. The next Conservative government intends to reform the tax system so that it gives substantially more help to families.

    We also want to encourage people to save so they have the security and self-respect that comes from being able to rely on their own resources rather than immediately turning to the state. We have already made much progress here too with widening ownership of homes, pensions, and the new PEPs and TESSAs. We now propose further radical measures for more saving for retirement.

    Families and Tax

    We believe families should be left with as much of their own money as possible. They know better than politicians how to spend it. We have already cut the basic rate of income tax from 33p to 23p, and our aim is to get it down to 20p, benefitting 18 million taxpayers. We intend to do even more to help families in particular

    At the moment, if one spouse does not take paid work in order to look after children or dependent relatives, they not only give up earnings but may also be unable to benefit from their personal tax allowance. Yet this is the time at which their income is often most stretched.

    We believe our tax system should recognise and support the crucial role of families in their caring responsibilities. We will give them that support.

    We will give priority to future reductions in personal taxation that help families looking after dependent children or relatives by allowing one partner’s unused personal allowance to be transferred to a working spouse where they have these responsibilities.

    This will provide a targeted reduction in the tax bill to those families who need it most. Around 2 million one-taxpayer couples with dependent children, or looking after elderly relatives and others needing care, would gain up to £17.50 a week – around £900 a year

    Family Savings

    In the old days people just depended on the weekly pay packet or money from the state. But no job can be secure and the state cannot provide for every eventuality. It is ownership which brings true security and genuine independence from the state. That is why Conservatives have long dreamed of a property-owning democracy. Now we are delivering it in practice. Home ownership is up by 4.7 million. 10 million people own a direct personal stake in our economy. 16 million are gaining shares in their building societies thanks to our deregulation of them. We intend to carry forward our vision of a people’s share. This is a significant increase in personal security. It is the Conservative vision of security through personal savings – not a socialist vision of security through the state.

    We want people to enjoy Britain’s success – especially by owning shares in the companies for which they work. We have already introduced a number of schemes to encourage employee share ownership. To encourage a further expansion of worker shares, our new Share Match Scheme will allow employees to be rewarded with additional free shares if they acquire a stake in their company.

    Our goal is that by 2000, more than half of the employees of Britain’s larger companies will own shares in those companies.

    Four and a half million people now benefit from tax free TESSAs and 2.5 million from PEP schemes to encourage the accumulation of long term saving. We will continue to build on this success by exploring ways in which existing tax exemptions for savings can be developed – allowing individuals to secure their future and protect their families against unexpected contingencies.

    We will continue to raise the threshold for inheritance tax as it is prudent to do so.

    People are not just saving for themselves but for their children and grand-children. These savings should not be penalised by the tax system.

    For many people their biggest asset is their pension. Thanks to the steps we have already taken to encourage occupational and personal pensions, we now have £650 billion invested in private pensions – more than the rest of the European Union put together We now plan to build further on this achievement.

    We will make it easier for small employers to set up personal pension plans for groups of employees.

    We will create more flexibility for people who save in personal pension plans to continue investing in those schemes if they subsequently move to jobs with company pension schemes.

    We will also create flexibility for employees with savings in Additional Voluntary Contributions (AVC) schemes to take part of that pension earlier or later than their main company pension.

    But we believe the time has now come to plan for another important step in improving Britain’s pension provision. Britain is already much better placed than many other countries to afford state pensions in the future, but we want even more people to be able to look forward to properly funded pension that grows with the economy and is free from dependence on taxes paid by future generations. We now propose a practical way of achieving a gradual transformation of the state pension scheme.

    At the start of the next parliament we will set out proposals to provide all young people entering the workforce with a personal pension fund paid for through a rebate on their national insurance contributions. At retirement they would be entitled to the full pension earned by this accumulated investment. This could give them a pension significantly higher than they would currently receive from the state. But they will be guaranteed a pension at least equal to the current bask state pension, increased in line with inflation.

    This will be one of the most significant improvements in the state pension system since it was introduced.

    Older people currently in the workforce would be unaffected – they will continue to contribute as now and receive the normal state pension when they retire.

    This policy would come into effect early in the new millennium. Gradual phasing in of the new system over 40 years will make the impact on public finances affordable. Even at its peak, the net revenue forgone will be only a fraction of the savings from the recent Pensions Act. And eventually, the new policy will produce massive public expenditure savings.

    This far-sighted idea is in the best Conservative tradition. The growing wealth of the nation will provide for the next generation through private funding, underpinned by a state guarantee. British people will be able to look forward to retirement with even greater confidence. And our young people will have a pensions opportunity unrivalled in the world.

    Support for Families

    Conservatives believe that a healthy society encourages people to accept responsibility for their own lives. A heavy-handed and intrusive state can do enormous damage.

    Some families need help to cope with their responsibilities. For them, Social Services play a vital role. They help with children where parental care has failed. They deliver an ever wider range of services to people with learning difficulties or who are mentally ill. Our community care reforms have given them a central role ensuring that elderly people get care of the highest quality: and in their own homes where possible. We need to ensure that role is properly fulfilled.

    Early in the next Parliament we will introduce a Social Services Reform Bill which will create a new statutory framework for social services. The Bill will provide for greater openness and accountability in social services.

    We will provide new guidance to ensure social workers properly reflect the values of the community – focusing their efforts on those families who most need support, and minimising unnecessary interference. Social workers working with children will receive special training to cope with the often heart-rending cases they face.

    We will raise standards through a new regulatory framework which will apply the same standards in both the public and private sector.

    We will also remove the power of local authorities to operate care homes where this is in the best interests of the people for whom they are responsible.

    We believe that families who use social services should be able to exercise choice wherever practicable. We have given cash payments to disabled people to purchase the services they need directly.

    We also want new ways of reinforcing individual choice where possible. We will therefore ensure no barriers stand in the way of local authorities wanting to issue their users with vouchers to buy certain services.

    We will review the direct payment scheme, and provided it has been cost effective, we will extend it to other users of social services.

    Above all, we want to help families to help themselves. Caring for older – or disabled – relatives is one of the most natural human instincts. We recognise the crucial and often demanding role carers play, and will help them more.

    We will introduce a Respite Care Programme. This will enable family members with heavy responsibilities caring for a relative to take a much needed break. We will also offer more practical advice for carers who want to go back to paid work.

    But in some cases, elderly people need more care than their friends or relatives can provide. Financing long term care worries many families. We will create an imaginative, fair partnership between individuals and the public sector to resolve this problem.

    In the first session of the next Parliament we will implement our partnership scheme for long term care, making it easier for people to afford the cost of care in old age without giving up their lifetime savings.

    Good preparation for marriage can be an important aid to a successful family, while timely help in meeting difficulties can often avoid family breakdown. These are matters for voluntary effort, not the state, but we will continue to support such effort.

    We need to make sure efforts to help struggling families does not turn into unnecessary meddling.

    When the state goes too far, it is often the children who suffer They become victims of the worst sort of political correctness.

    We will introduce legislation to remove unnecessary barriers to adoption and introduce new rules to make adoption from abroad more straightforward.

    We will also monitor the workings of the Children Act, and act if necessary to ensure it maintains a proper balance between the rights of children and the responsibilities of adults.

    Social Services departments are now the fourth arm of the welfare state. Most people will need them at some point in their lives. We will ensure that the Conservative revolution in public services now reaches Social Services.

    Disabled People

    We have quadrupled real spending on long term sick and disabled people since 1979, to £22 billion.

    We have introduced the Disability Discrimination Act. This is the first legislation of its kind anywhere in Europe and it provides positive proof of our commitment to disabled people. We will monitor it to ensure it continues to meet its objectives.

    We are also providing a continuing fund to enable the most severely disabled people to stay in their own homes.

    Security in Retirement

    Pensioners continue to make a positive contribution to society in retirement. They give more of their time in charitable work than any other age group. They lift some of the pressures on their own families. They help keep our nation’s history and traditions alive.

    They have paid their National Insurance contributions and taxes and rightly expect us to continue to protect the value of the basic state pension against price rises. We will do so. We will also ensure that less well off pensioners continue to get extra help on top of the basic pension.

    At the same time as protecting the state pension, our encouragement of private pensions is already transforming the living standards of pensioners. The average net income of pensioners has risen by 60% since 1979. This has been achieved by our encouragement of saving for retirement.

    The tax system must help pensioners who have saved. Our new lower 20p rate on income from savings directly helps 1.7 million pensioners and the special age allowances raise the point at which pensioners start to pay income tax.

    A Better Social Security System

    People in need can rely on our continuing support. To ensure that taxpayers are

    willing to go on paying for that support, we have shaped a social security system we can afford, taking a steadily declining share of our national income. We are doing this by focusing benefits on those most in need, helping people off welfare and into work, and curbing welfare fraud. These policies are underpinned by our measures to help families help themselves.

    Social Security must be there to help families, pensioners and people in need. We will protect the value of Child Benefit and Family Credit which help with the cost of bringing up children. This is our Family Benefits Guarantee.

    We will bring the structure of benefits for lone parents into line with that for two-parent families. We will continue to help lone parents obtain maintenance, and assist with childcare in work: both these measures help lone parents obtain work. We will pilot our “Parent Plus” Scheme that gives special help to lone parents who want to work, and extend it if it proves successful.

    Social Security fraud must be stamped out.

    We will intensify our current initiatives of inspections and checks, including more home visits, to crack down further on benefit cheats. We will introduce benefit cards across the country. We will establish a Benefit Fraud inspectorate to monitor local authorities’ performance. We will also improve the sharing of information between government departments to catch more fraudulent claims.

    To ensure as much of the Social Security budget as possible goes into benefits, we will continue to improve the efficiency of administration, using the best mix of public and private sector operations.

    Housing

    Owning one’s own home is an aim shared by millions of people. Over the last 18 years, the number of homeowners has increased by 4.7 million – including 1.7 million who have bought their home under the right to buy scheme. Over the next 10 years, we expect to see another one and a half million people buying their own homes – some 3,000 every week. To meet that demand, we will continue to allow local authority and housing association tenants to buy their homes, or move to houses which they buy.

    We will also carry through our draft Bill, creating the option for those buying flats to choose a new form of commonhold ownership.

    For those who wish to rent their home, we are encouraging a thriving private rental market, building on the success of housing investment trusts and protecting assured tenancies.

    Easier renting will help us meet our target of reducing the proportion of empty homes below 3%. The number of empty houses has fallen in each of the last 3 years. But nothing is more frustrating for people who need social housing, than the sight of a suitable property owned by the public sector boarded up and empty. We will stop that.

    Public landlords will have to sell houses which are available for occupation yet have been left empty without a good reason for more than 12 months.

    Housing associations and housing companies will continue to receive help in building new homes, and we will encourage more public-private partnerships. Together, these policies will help meet the demand for new public housing and make sure that there are decent homes for those in need.

    Opportunities for Women

    Women are succeeding in Britain. More women have jobs in Britain than in almost any other European country. Women have a better education, more financial independence and more opportunities than at any other time in Britain’s history.

    This success reflects the efforts and determination of many women. Government’s role has been simpler – to level up the playing field, whether in education, where girls are now doing better than boys, or in the workplace, where opportunities for women are the best in Europe.

    But we know our job is not yet done. Some women still face barriers to doing well. Some still do not have the financial security they deserve. And crime, and the fear of crime, often affect women more than men.

    We will ensure women have equal opportunities in education and the workplace. This can best be achieved by keeping our economy buoyant and our labour markets flexible. And our proposals to bring crime rates down further will help women especially.

    But many women – and some men – face a particular problem: how to juggle job and family. For those who need or want to work, we will seek further ways to minimise the barriers to affordable, high quality childcare. For those who wish to be full-time parents, our proposals to enable them to transfer their unused personal allowance to their spouse will be worth up to an extra £17.50 a week.

    We also want to give women more financial independence, particularly when they retire. We propose, as explained elsewhere, to improve flexibility in saving for retirement and to allow courts to split pensions on divorce.

    Looking Outwards

    The spread of share ownership, the transformation of pension provision, and the sale of council houses are revolutionising our nation. Personal prosperity and property ownership are not selfish or inward-looking.

    People who are secure at home can look out for others in their community. Over two thirds of adults engage in some form of voluntary activity. By the end of 1997 all young people aged between 15 and 25 who want to volunteer will be helped to find an opportunity to do so.

    We will make it easier for those receiving incapacity benefit to volunteer by removing the 16 hour weekly limit on their voluntary work.

    We will encourage voluntary work by others living on benefit while continuing to insist that those who are capable of work should actively seek employment. We will also develop accreditation for voluntary work to encourage employers to see it as preparation for a paid job.

    It is wrong to imagine that compassion must be nationalised and that we can only help our fellow man through state action.

    4. Education and Opportunity

    All children dream of what they might do when they grow up. Our task is to help them turn those dreams into reality whatever their background may be. It is an exciting world, full of new opportunities for inquiring minds: it should be open to every child. Their future – and Britain’s prosperity – depends on the quality of their education.

    Our Education Guarantee

    A good education is the birthright of every child. Literacy is the building block of all future learning: English is the global language of commerce and, much more, a thing of beauty. Without basic science and mathematics, the modern world is incomprehensible. Every child therefore must be taught to read, write and add up from an early age.

    Years of mistaken, progressive education in the 1960s and 1970s denied these precious skills to too many children. We have worked ceaselessly since 1979 to put that right. Our decision to test children and publish the results has allowed standards to be measured and exposed. We have reformed the curriculum, toughened inspections, and given more information and power to parents. Our many excellent teachers now know what is expected of them, and already standards in schools are rising. But they are still not good enough. We must do more.

    Building on what we have done, we can now offer a new pledge to parents – a guarantee of education standards.

    First, we will set national targets for school performance that reflect our objective of ensuring that Britain is in the top league of international standards across the whole spectrum of education.

    Second, we will require every school to plan how to improve its performance, and to set targets which relate to similar schools and national standards.

    Third, we will give all parents full information on the performance of their child’s school

    Fourth, to underwrite our pledge, we will ensure action is taken to bring any under-performing school up to the mark.

    We will meet this pledge by using the full set of levers for improved standards that we have put in place.

    We are revising and simplifying the National Curriculum in primary schools to emphasise high standards in the basic skills.

    Parents and teachers must have an overview of not just how much a child has learnt while at school, but how the school performs against others. Poor schooling must not be protected by a veil of secrecy. Parent power is a vital force for higher standards.

    Regular tests and exams are essential if teachers are to discover how much their pupils have learnt, and parents are to know how much progress their children are making against national standards. That is why children are already being tested at 7, 11 and 14.

    We will publish all school test results, including the results of tests of 7 and 14 year olds.

    We propose also to assess every child at five.

    This will give teachers and parents a benchmark against which they can measure future progress. To give a better measure of pupil’s performance, marks out of 100 will be made available to parents as well as the broad-brush levels.

    We will also introduce a new test for 14 year old children that covers the whole National Curriculum – assessing progress before they choose subjects for GCSE.

    Tests and exams need to be rigorous and demanding. We will insist that they establish children’s command of spelling, punctuation, and grammar in English tests. Children will sit arithmetic tests without calculators. We will not allow such extensive use of open books in tests and in GCSE exams. We will establish an English Language GCSE. We will continue to uphold the gold standard of A-levels, and ensure that the great classics of our literature are studied at A-level. At the same time students should have the chance to study more subjects in the sixth form.

    Rigorous tests show how individual children and schools are performing and expose schools that are not giving children the education they deserve. To underwrite our guarantee, we will then take action to improve standards. We cannot tolerate schools that fail their pupils.

    By this summer every secondary school in the country will have been inspected by independent inspectors, and by summer 1998, every primary school will have been inspected as well. We have the power to take over failing schools directly and close them if necessary We will now go further and require every school to set, and publish, regular targets, and plans for improving their academic results. Independent inspectors will monitor the results of weaker schools and their plans for improvement at regular intervals.

    Sometimes, though, schools are failing because the local education authority which runs them is failing. The authorities with the worst GCSE results and the worst results at Key Stage 2 (11 year olds) are run by Labour. Those children need our help.

    We will allow for on independent inspection of education authorities and intervene directly to raise standards where education authorities are letting children down.

    Failing authorities will be required to set out their plans to raise standards, and work with education teams – directed by independent inspectors – to implement those plans.

    The vast majority of teachers do an outstanding job. They have played a key part in implementing the reforms that we have introduced. A few, though, let their pupils down.

    We will establish a more rigorous and effective system of appraising teachers, which reflects how well their pupils perform in tests and exams: this will identify which teachers need more help and, where necessary, which teachers need to be replaced.

    Many feel that the professional standing of teachers would be strengthened by the creation of a single body which could speak with authority on professional standards. We will consult with teachers and other interested parties about the possible role of such a body.

    The school should be a place of stability and stimulation for children, especially if they come from a hostile or turbulent environment. To improve standards in future our new teacher training curriculum will stress traditional teaching methods –including whole class teaching and learning to read by the sounds of letters. We will also encourage more teachers to enter the profession through practical training schemes focused on classroom experience such as the Graduate Teacher Scheme. A child is likely to learn more in a well-ordered school. Teachers must have the powers they need to maintain discipline. We will give teachers greater power to set detentions, to exclude disruptive pupils and to use reasonable physical restraint where necessary.

    Schools also have an important role to play in spiritual and moral education. We will take steps to ensure that every school fulfils its role of providing religious education and collective worship.

    Choice and Diversity

    When we came to power in 1979 the school system was totally dominated by one type of school – the monolithic comprehensive. The system failed our children. It treated every child the same. It told parents where to send their children. It did not give schools the freedom to run their own affairs.

    Since 1979 we have created a rich diversity of schools, to serve the varied talents of all children and give parents choice within that diversity, because we believe that parents know what is best for their children.

    That is why we – and only we – are committed to giving the parent of every four year old child a voucher for nursery education so they can choose the pre-school education they want for their child, whether in a play-group, a reception class, or a nursery school in the private or state sector.

    We will give more talented children, from less well-off backgrounds, the opportunity to go to fee-paying schools by expanding the Assisted Places Scheme to cover all ages of compulsory education, in line with our current spending plans. We propose to develop it further into a wider scholarship scheme covering additional educational opportunities. The freedoms and status of fee-paying schools will be protected.

    Grant-maintained schools have been popular with parents across the country –whatever their politics. We will encourage more schools to become grant-maintained and will allow new grant-maintained schools to be set up where there is sufficient local demand. We will give all grant-maintained schools greater freedoms to expand and to select their pupils.

    Grant-maintained schools are leading the way. Local authority schools are also benefitting from our policy of local management of schools. Our ultimate objective is that all schools should take full responsibility for the management of their own affairs. In the next parliament we will take another step towards giving them that freedom.

    We will extend the benefits of greater self-governance to all LEA schools. We will require local authorities to delegate more of schools’ budgets to the schools themselves. We will give them more freedom over the employment of their staff and over admissions. And, where they want it, we will allow them to take over ownership of their assets, so they can make best use of the resources.

    Local authorities will continue to be responsible for their schools’ standards. They will provide funds, and compete with other organisations to provide services to schools. We would expect the increased responsibility of head-teachers, and their role in achieving efficiency-savings, to be recognised by their pay review body.

    Schools are stronger and more effective where head-teachers and governors can shape their own distinctive character Sometimes that means developing a speciality in some subjects. Sometimes it means selecting children by their aptitudes: where parents want this we should not stand in their way. Special abilities should be recognised and encouraged.

    We will continue to encourage the establishment of more specialist schools in technology, arts, languages and sport. We aim to help one in five schools become specialist schools by 2001.

    We will allow all schools to select some of their pupils.

    We will help schools to became grammar schools in every major town where parents want that choke.

    The high standards, real choice and genuine diversity which we have introduced will produce the best results for all our children.

    Lifetime Learning

    Lifetime learning is a reality in Britain today. Over a half of all students in universities, and seventy per cent of those in further education colleges, are adults who have returned to education later in life. We will continue to create new opportunities for more people to participate.

    There has been a revolution in further and higher education. Three and a half million people are in further education –up from just half a million in 1979. The number of young people going to university has risen from one in eight to one in three over the same period.

    We will ensure consistently high standards and will consult on the development of higher education when we receive the results of the Dearing Review. We have world class research in British universities which we will continue to support.

    Every young person should have the opportunity to continue in education or training.

    We will give students between 14 and 21 a learning credit which will enable them to choose suitable education or training leading to recognised qualifications up to A levels or their equivalents.

    We will also introduce National Traineeships and encourage employers to offer more work-based Modern Apprenticeships to young people. Objective external assessments of a proper syllabus will be made a part of all National Vocational Qualifications.

    We will continue to support the network of Training and Enterprise Councils, which have created a valuable partnership between business and government. We will encourage more employers to become involved in “Investors in People”, with the public sector matching the performance of the private sector.

    Competitive markets demand high skills. If Britain is to win, we need to encourage learning and give people the opportunity to go where their interests and inquiring minds take them.

    World Class Health and Public Services

    Our Record – Health and Public Services

    Government spending has concentrated on priorities, not wasteful bureaucracy and overmanning. Despite tough overall public spending plans, real spending on the NHS has risen nearly 75% since 1979 , on schools by 50% and on the police by more than 100%.

    The Health Service is treating over 1 million more patients each year than before our reforms.

    The number of people waiting over 12 months for hospital treatment has fallen from over 200,000 in 1990 to 22,000 last year. The average wait has fallen from nearly 9 months to 4 months.

    The Government has set up the Citizen’s Charter to provide first class public services for all citizens. Nearly 650 organisations have received a Charter Mark for meeting demanding standards of performance, customer satisfaction and value for money.

    There are now 55,000 more nurses and midwives and 22,500 more doctors and dentists than in 1979. For every senior NHS manager, 77 people are providing direct patient care.

    Nurses average earnings have grown 70% in real terms: from £68 a week in 1979 to £325 in 1995. Doctor’s pay has risen by a third. Under Labour both were cut.

    Infant mortality has fallen from 13.2 to 6.2 per thousand over the last 18 years.

    Deaths through road accidents are now the lowest since records began in 1926. Since 1979 road deaths and serious casualties have fallen by 43% despite an 85% increase in motor traffic.

    The government has invested record amounts on transport – more than £26 billion since 1979 in investment on motorways and trunk roads; £16 billion in investment on railways; and £8 billion in investment on London Transport.

    Privatisation is delivering better services at lower costs. BT’s main prices are down by more than 40% in real terms. Average household bills for gas and electricity have also fallen in real terms since 1990.

    5. Security in Health

    We have been the guardians of the NHS for most of its life, improving its services and securing its funding. The benefits can be seen in our rising standards of health. 1993 was for example the first year in which no child in this country died of measles. Between 1979 and 1995 life expectancy at birth in England has increased from 70.4 years to 74.3 years for men and from 76.4 years to 79.6 years for women. We are getting healthier and we are better looked after when we are sick.

    Growing Resources for a Modern Health Service

    This progress has been possible because we have increased spending since 1979 by nearly 75% more than inflation, to almost £43 billion. And we are not stopping there. The next Conservative Government will honour a firm guarantee to the NHS.

    We will continue, year by year; to increase the real resources committed to the NHS, so NHS spending will continue to share in a growing economy

    Under Labour there have been years when resources for the NHS actually shrank – something that would be inconceivable with the Conservatives.

    Money is only really a means to an end: better patient care. Now we are treating 9.2 million hospital in-patients and day cases as against 6.9 million in 1992 and 5.1 million in 1979.

    Investing in Skilled Staff

    We are committed to expanding the medical staff of the NHS. We shall therefore increase medical school intakes to 5,000 a year by the year 2000 and are ahead of schedule in reaching the target.

    Good nursing is the bedrock of the NHS. In particular we will increase the number of nurses with specialist qualifications in paediatric intensive care,emergency care, and cancer care. The number of nurses qualifying each year will increase by 2,500 within the next 5 years as we continue to expand Project 2000 training.

    Higher Standards of Service

    We are tackling the problem of long waiting times which can cause so much worry; distress, and pain. We have set tough targets under the Patient’s Charter and as a result average waiting times for in-patient hospital treatments have fallen from more than 6 months 5 years ago to 4 months last year.

    Patients no longer put up with being kept in ignorance. They want to know more.

    We will publish more information on how successfully hospitals are treating patients so that they and their GPs can make more informed choices between services in different hospitals and help stimulate better performance

    Better Primary Care

    Our vision of the NHS is one in which hospitals and family doctors gain greater power to run their own affairs. That is why we will continue to encourage the spread of fundholding among GPs. Labour by contrast would destroy the new freedoms that fundholding doctors enjoy by imposing a new layer of bureaucracy on top of them.

    However, we do not want the benefits of better healthcare to be confined to patients of GP fundholders. Our proposals to shift more healthcare towards family doctors are open to all

    We shall implement the new Primary Care Act which will enable all family doctors to provide a broader range of patient services within their surgeries. This will include (“super surgeries” and practice-based cottage hospitals that can offer faster and more local treatment.

    We expect to see the number of nurses working in GP practices continue to grow, as will the number of GPs.

    We will extend nationwide our plans to enable more nurses to prescribe a wider range of drugs for patients, recognising their contribution to primary care.

    Mental Health

    The last decade has also seen major changes in the care of mentally ill people. We will continue to develop a full range of services – including 24-hour nursed hostels and secure units – that can care for them in a way which is most appropriate to them and the interests of the wider community.

    We will not close any long-stay mental hospitals unless it can be shown that adequate care services exist in the community.

    We will strengthen co-operation between health and social services in the delivery of mental health services. Our recent Green Paper showed how this can be done. And we will monitor the progress of Health Authorities in developing proper mental health care plans.

    Health of the Nation

    A modern health service is not just about treating illness, it is also about keeping people healthy. This is why we launched the Health of the Nation strategy in 1992 – the first time England has had a strategy for health. Its aim is to reduce illness and premature death by identifying common causes of ill health, like excessive smoking and obesity. Different groups in and outside the health service then work together to tackle the problems.

    We are already seeing progress. Between 1990 and 1994, deaths from coronary heart disease among the over-65s, the suicide rate, and the number of teenage pregnancies fell substantially And last year we announced that environmental targets would be added to Health of the Nation.

    Improved general health means fewer people requiring attention in hospitals and GP surgeries – and more resources available for patients who need them. Our Health of the Nation strategy is a vital part of our vision for creating a health service fit for the 21st Century.

    A Modern Health Service

    Healthcare is changing fast. Modern technology is constantly increasing the range of treatments which are available. Conservatives believe that the benefits of these advances should be made available to patients on the basis of their clinical need, without regard to their ability to pay.

    Furthermore we also believe that the NHS must have access to sufficient resources to allow it to invest in the facilities required to deliver up-to-date healthcare. Since 1979 capital investment in the NHS has proceeded at an unprecedented rate. In the future we believe these requirements will be best met in a partnership with the private sector which allows the private sector to improve the facilities in which NHS healthcare is delivered.

    We will promote the Private Finance Initiative which will unleash a new flow of investment funds into the modernisation of the NHS.

    The NHS is a British success story. It commands universal support in Britain. It is widely admired all over the world. Conservatives are proud of the part we are playing in improving the NHS still further.

    6. Better Public Services

    The public sector is being transformed the world over. Britain is in the vanguard. Everyone else wants to learn from our vision of a smaller state doing fewer things and doing them better.

    Old style public services were centrally planned with little information or choice for the public who used the service. Our reforms have made these services more responsive to the public by breaking up cumbersome bureaucratic structures and shifting power to small responsive local institutions and the people who work in them. The schools, hospitals and police have all been transformed in this way. We support the people who do, not the people who plan.

    In order to get better standards we are liberating services from centralised control over capital. We will push forward our Private Finance Initiative to break down these old barriers.

    We have made public services genuinely accountable, with useful information and real choices for the people who use them. We set tough standards and they will get tougher. The Citizen’s Charter has raised standards of customer service. When these high standards are reached we recognise and reward excellence through our Charter Mark initiative. There are now 647 Chartermarks and we will aim for more than 2000 Chartermarks by the year 2000.

    We will require all government agencies to apply for Chartermarks.

    The days of the bureaucratic paperchase are behind us. The future is “government direct”. We will harness the latest information technology to place the public sector directly at the service of the citizen. People will be able to use simple computer terminals to enter information directly. This will transform time-consuming transactions like completing a tax return or registering a new business.

    Privatisation and Competition

    In 20 years, privatisation has gone from the dream of a few Conservative visionaries to the big idea which is transforming decaying public sector industries in almost every country in the world. Britain has led the way with this new industrial revolution: we can be proud of what we have achieved.

    In 1979 the Government inherited a range of businesses which had come into the public sector for different reasons. Many were known for their poor standards of service, and most were making large losses.

    Over the past eighteen years that situation has changed substantially. Privatisation has enhanced productivity, improved customer services, raised safety and environmental standards and substantially reduced prices.

    Telephone, gas and electricity bills to the customer have fallen as never before. Telephone waiting lists are unknown, and water, gas and electricity disconnections have fallen dramatically. Nearly £40 billion in private sector funding has been committed to a major investment programme to meet higher quality water standards. We can now look forward to water prices falling over the years ahead.

    Service standards have improved substantially. Before privatisation published service standards did not exist. Now industry regulators monitor legal requirements to provide quality services in a competitive environment. Refunds may be made when performance standards are not met.

    Privatisation has benefitted – and will continue to benefit – consumers, shareholders, employees, and taxpayers. In 1979 the then-nationalised industries required a £50 million per week subsidy from the taxpayer In 1996 those now privatised companies paid taxes of £60 million per week.

    We will ensure private ownership, competition and regulation continue to deliver lower prices and better services for consumers.

    We will extend competition for domestic gas users, and introduce competition in the water industry, starting with large users.

    The Post Office occupies an important part in national life. It comprises Counter Services, the Royal Mail and Parcelforce. The network of sub-post offices is vital and most are already run as private businesses. The Royal Mail provides a universal service at a standard price in every part of the United Kingdom. No one can imagine a stamp that does not bear the Queen’s head. These characteristics must continue, but reforms are needed to allow the services to develop. The Royal Mail must face up to the challenges and opportunities that are arising from increasing competition and the international liberalisation of services.

    We will guarantee to preserve the national identity, universal service and distinctive characteristics of the Royal Mail, while considering options – including different forms of privatisation – to introduce private capital and management skills into its operations.

    We will transfer Parcelforce to the private sector whilst ensuring that every Post Office in the land continues to provide a full parcel service at an economical price

    Privatisation works. We will therefore continue to pass government activities into private ownership where this can bring benefits to consumers and taxpayers.

    Local Government

    We are developing a new vision for local government.

    We believe local government should take a lead in the planning and development of their communities. To achieve that, we have encouraged them to work in partnership with central government, with private enterprise, and other organisations in their community. The impact of local government is multiplied when they work in this way.

    To encourage this partnership, we have developed the new approach of Challenge Funding. We set up a fund to meet a particular objective and then invite competing bids for the money. Those who form effective partnerships are far more likely to win those bids. The Single Regeneration Budget Fund, for example, has stimulated many working partnerships that are bringing new life to their communities.

    We will push Challenge Funding further to reward effective local government.

    This innovation has the potential to transform the financing of the public sector.

    In addition, we are encouraging higher standards and more cost-effective provision of local services. Local authorities can enable things to happen rather than necessarily running them themselves. They must look after the interests of users of their services – and that is often best done by being a purchaser, not an employer.

    Standards of service are rising in many local authorities. There are, however, still great disparities between the best and worst performers, as the Audit Commission shows in their thought-provoking reports.

    We will keep up the pressure for higher standards and improved value for money by insisting on compulsory competitive tendering.

    The development of Challenge Funding and the shift in the role of local authorities from direct employers to purchasers of services will transform local authorities over the coming years. In the meantime we will, for so long as is necessary, retain the power to cap local authorities to protect taxpayers.

    Strikes in Essential Services

    Industrial relations in this country have been transformed. In so far as there is a still a problem it is concentrated in a few essential services where the public has no easy alternative and strikers are able to impose massive costs and inconvenience out of all proportion to the issues at stake. We will protect ordinary members of the public from this abuse of power.

    We will legislate to remove legal immunity from industrial action which has disproportionate or excessive effect Members of the public and employers will be able to seek injunctions to prevent industrial action in these circumstances. Any strike action will also have to be approved by a majority of all members eligible to vote and ballots will have to be repeated at regular intervals if negotiations are extended.

    Transport

    Our railways are already improving now they have been liberated into the private sector Passenger numbers are up: more people are using the railways every day. Investment is up: Railtrack plans to spend £4 million each day on improving stations and maintaining and renewing the network. The new train operators are committed to investing £1.5 billion in new and refurbished rolling stock. And key fares are set to fall in real terms for the first time in a generation, with guaranteed price controls keeping fare increases below the level of inflation until at least 2003. We intend to build on this growing success story to create a thriving railway network for the new century.

    We will complete the successful transfer of British Rail into the commercial sector

    We now want to draw in private investment to modernise London Underground and improve services to passengers.

    We will bring forward plans to privatise London Underground. Proceeds from privatisation will be recycled in order to modernise the network within 5 years – creating an underground system to serve the capital in the 21st Century. We will regulate fares so they rise by no more than inflation for at least 4 years after privatisation. We will also protect services – including the Travel Card and concessionary fares.

    After completing the modernisation of the network, the majority of the remaining surplus from privatisation will be channelled into additional support for transport investment in London and elsewhere in the country.

    We will continue to encourage public transport. In particular, we will use the existing funding for local authorities to promote developments which make it easier to interchange between bus and rail.

    We recognise the needs of road users, and will continue to work with the private sector to sustain our road building and maintenance programme. Already under the Private Finance Initiative the private sector is contributing some £1 billion to investment in roads and achieving significant savings in construction costs. We will also tackle road congestion by introducing new regional traffic control centres, by extending the use of variable speed limits, and by ensuring that local authorities have the necessary powers to act. We will promote a cleaner environment by supporting a Europe-wide reduction in vehicle emissions, and encouraging the manufacture of more fuel-efficient vehicles.

    We will continue to build on our record of improving safety on roll-on roll-off ferries and cargo ships through higher standards of survivability and the measures in the Merchant Shipping Act.

    We will continue to make it easier for people to travel by air Already over the last 5 years opening up the market in Europe has led to more services and lower fares. We will build on that success in negotiations with the United States and other countries. We will also continue to encourage the development of regional airports offering new direct services to the rest of the world in the same way that we have already opened up new regional links with Europe and the United States. We will privatise the National Air Traffic Service because it will be run better in the private sector.

    Competition and enterprise are the best way to improve our transport system.

    A Safe and Civil Society

    Our Record – A Safe and Civil Society

    Spending on the police has doubled since 1979 after allowing for inflation. There are now about 16,000 more police officers than when we took office. 2,360 more constables have been recruited since the last election and the Government is giving Chief Officers the resources to recruit 5,000 police constables over the 3 years to 1999.

    Recorded crime has dropped in each of the last 4 years. It is now over 10% down on 1992 levels – more than half a million fewer offences – the biggest drop since records were first kept.

    There are now 153,000 Neighbourhood Watch schemes in England and Wales – 38,000 more than in 1992 – covering 5.5 million homes. We have helped fund over 4,000 closed circuit TV schemes over the last 2 years for additional security.

    Our national DNA database – the first in the world – now has over 112,000 samples on it. 3,300 matches have so far been made between suspects and crime stains.

    The Government has increased the maximum penalty for taking a gun to a crime and for attempted rape to life imprisonment. Since 1985 the average sentence for violence against the person has risen by a third and for sexual offences by nearly 40%.

    The number of cars stolen has fallen by nearly 20% in the last four years – that is about 100,000 fewer cars stolen.

    We have built 22 new prisons since 1980. Slopping out has ended. No prisoners now sleep three to a cell designed for one. Prison escapes have fallen by 80% since the last election.

    Mandatory drug testing has been introduced throughout the Prison Service. Home leave has been cut back – down by half in two years.

    We have made witness intimidation a crime. 500 people were charged with that offence in 1995 alone.

    We have stepped up the fight against drugs and organised crime, giving the Security Service powers to support the police and Customs and Excise in tracking down the serious criminals.

    7. Law, Order and Security

    People have a right to sleep safely in their homes and walk safely on the streets. Governments have a duty to maintain that security.

    Our reforms are aimed at ensuring that crime does not pay. And they are working – the pessimists and the scoffers are wrong. Recorded crime has fallen every year for the last 4 years. It is now 10% lower than it was in 1992. That is over half a million fewer crimes – the biggest drop since records were first kept in the middle of the 19th century.

    But crime is still too high. We must do more. Our aim is to keep crime falling over the lifetime of the next parliament. This is what we will do.

    Safer Communities

    Anti-social behaviour and petty crime disrupt communities and spread human misery. The police are rightly now vigorously tackling problems such as graffiti vandalism and drunkenness. Where such behaviour goes unchecked more serious crimes will follow.

    We will support chief constables who develop local schemes to crack down on petty crime and improve public order.

    Closed circuit television has proved enormously successful in increasing public safety.

    We will fulfil the Prime Minister’s pledge to support the installation of 10,000 CCTV cameras in town centres and public places in the 3 years to 1999. We will provide £75 million over the lifetime of the next parliament to continue extending CCTV to town centres, villages and housing estates up and down the country that want to bid for support.

    We will also continue to take other steps to improve the safety of our streets and communities. In this parliament we have given the police power to seize alcohol from under-18s caught drinking in public. The police have been given the power to stop and search in a specified area for up to 48 hours if they reasonably believe people to be carrying knives.

    Identity Cards can also make a contribution to safer communities.

    We will introduce a voluntary identity card scheme based on the new photographic driving licence it will, for example, enable retailers to identify youngsters trying to buy alcohol and cigarettes or rent classified videos when they are under age.

    Tackling Juvenile Crime

    A fifth of all crime is committed by under-18s. We are encouraging schools to reduce truancy through the publication of league tables and by supporting local projects to tackle the problem. We are developing a network of local teams to identify children who are at risk of turning to crime and to take early steps to address the factors which put them at risk.

    We will encourage these local child crime teams to refer children from primary school age upwards who are at risk of, or who are actually, offending to programmes to tackle their behaviour and fully involve their parents.

    The courts would be able to impose an order – a Parental Control Order – on the parents of children whom they believed could keep control of their children but were refusing to do so.

    Courts will be given the power to attach conditions to Parental Control Orders. Conditions might include a requirement to keep their children in at night, taking their children to and from school, attending a drug rehabilitation clinic or going to sessions to improve their skills as parents. Parents who breached these conditions – in defiance of the court – would face a range of possible sanctions.

    Appearing before a youth court should be a daunting experience for the juvenile concerned. All too often it is not. At the moment about a third of all juveniles appearing before the youth courts are discharged without any punishment at all This sends all the wrong signals to youngsters – particularly first time offenders – who then feel they can get away with crime.

    We will give the courts the power to impose speedy sanctions on youngsters, involving wherever possible an element of reparation to the victim. The probation service – rather than social services – will be responsible for enforcing community punishments for under-16s.

    Persistent juvenile offenders need to be properly punished. We are piloting a tough new regime, with a heavy emphasis on discipline, at a young offenders institution and at the military prison in Colchester In 1994 we doubled the maximum sentence for 15-17 year olds to 2 years detention in a young offenders institution. We have given the courts the freedom to allow the publication of the names of convicted juveniles. We will give the courts the power to detain persistent 12-14 year old offenders in secure training centres once the places become available.

    We have given the courts the power to impose electronically monitored curfews on 10 to 15 year old offenders. We will introduce pilots to test their effectiveness. If successful we will consider extending them nationwide.

    Catching, Convicting and Punishing

    We back the police every inch of the way. There are now about 16,000 more police officers – and over 18,000 more civilians helping them – than when we took office. We are providing chief constables with the resources to recruit 5,000 extra police constables in the three years to 1999.

    We support police initiatives to target the hard core of persistent criminals. Intelligence is crucial for this.

    We will establish a national crime squad to provide on improved nationally coordinated approach to organised crime.

    Once caught, criminals must be convicted and then properly punished. The public needs to be protected. We have reformed the right to silence, despite opposition from Labour. The number of suspects refusing to answer police questions has nearly halved as a result.

    We have piloted curfew orders for adult offenders. They have been shown to keep criminals indoors – curbing their freedom as a punishment – and keeping them out of trouble in the meantime.

    We will extend electronically monitored curfew orders nationwide for those aged 16 and over.

    Persistent offenders account for a high proportion of all crime. Prison works – not only as a deterrent, but in keeping these criminals off the street. Those sent to prison are less likely to re-offend on release than those given a community punishment. We will provide another 8,500 prison places by the year 2000.

    We will introduce minimum sentences for violent and persistent criminals to help protect the public more effectively, reversing Labour’s wrecking amendments to our tough Crime Bill.

    Anyone convicted of a second serious sexual or violent crime, like rape or armed robbery, will get an automatic life sentence.

    Persistent house burglars and dealers in hard drugs will receive mandatory minimum prison sentences of 3 and 7 years respectively.

    We will restore honesty in sentencing by abolishing automatic early release.

    Support for Victims

    Concern for the victim must be at the heart of our entire approach to the criminal justice system. We will continue to give strong backing to Victim Support.

    We will give courts in all cases the discretion to allow witnesses to give evidence anonymously if they believe them to be at risk from reprisal.

    We will also take action to allow a judge to stop a defendant from personally questioning the victim in rape cases and other cases where the victim is particularly vulnerable.

    Conservatives are on the side of the victims not the criminal.

    Strengthening the Fight Against City Crime

    Crime that takes place through manipulation of financial accounts and markets is as serious as crime on the street.

    The City’s unchallenged position as Europe’s most dynamic and successful financial centre owes a great deal to its reputation for honesty and fair dealing. We will help ensure that this reputation is maintained.

    We will bring forward in the next parliament a package of measures designed to modernise the current systems for dealing with City fraud.

    This will include legislation to allow the Inland Revenue to pass confidential information to the police, the Serious Fraud Office and the financial regulators to assist in the investigation of cases involving serious financial fraud. We will also remove the remaining legal obstacles to the controlled exchange of confidential information between the police and the regulators in this kind of case.

    Faster Justice

    Justice delayed is justice denied. It is wrong that people who are innocent should face an excessive wait before the start of their trial. The guilty must be held to account for their actions promptly. And victims should be given the chance to draw a line under their experience as quickly as possible. We are determined to speed up justice without diminishing the genuine rights of every citizen to a fair trial.

    Last October the government set up a review of delays in the criminal justice system. It made a series of detailed recommendations. We see merit in those recommendations and will seek the views of interested parties. We believe that taken together they could dramatically speed up the prosecution process, bringing the guilty to justice and acquitting the innocent more quickly.

    All defendants would appear in court the next working day after they were charged. At least half of them would be convicted the next day compared with just 3 per cent at the moment. And the time taken to bring juveniles to court would be cut from 10 weeks to a matter of days.

    Civil Justice

    The civil justice system of this country is a vital part of its competitive economy and has a high international reputation. The commercial courts attract substantial litigation from all over the world, generating significant foreign earnings. We will work to maintain the high standing of these courts.

    We have greatly improved the service the civil courts provide for the aggrieved citizen. The simple procedure for small claims has been extended to claims up to £3,000. For large claims the county court now provides an efficient local service with specialised courts in many locations around the country leaving the High Court to deal with the more complex and difficult issues.

    We will push ahead with the major reforms now under way which will greatly speed up the process and improve the delivery of justice without imposing additional burdens on the taxpayer.

    The Legal Profession

    We will ensure that the framework in which the legal profession operates is responsive to the changing needs of our people and is one in which unjustified restrictions have no place. We have, for example, given most solicitors rights of audience in the higher courts under appropriate conditions.

    Legal Aid

    People are rightly concerned about the rising costs of legal aid. We have taken many steps to control the burden and to deny access to legal aid to the “apparently wealthy” – those who qualified technically, but whose lifestyles suggested they should not.

    But more is required:

    We will change the structure of legal aid to ensure that it, like other vital public services, functions within defined cash limits.

    This will enable us to identify priorities and serve them much more efficiently than the present system.

    Drugs

    Drugs are a menace to the very fabric of our society They ruin the lives of addicts and their families. They can destroy whole neighbourhoods. The promising youth of today can too easily become the sad dropouts of tomorrow turning to crime and violence.

    The Conservative Government has a comprehensive strategy, launched in 1995, committed to fighting drugs in communities and in schools. It is tough on criminals and vigilant at our ports. It is respected throughout the world. We spend over £500m every year in tackling all aspects of drug problems.

    We will continue the fight against drugs through a coordinated approach: being tough on pushers; reducing demand by educating young people; tackling drug abuse at local level through Drug Action Teams; saying “No” to legalising drugs; and working with international agencies and foreign governments to resist the menace spreading.

    This pernicious evil has to be fought by all of us.

    A Confident, United and Sovereign Nation

    Our Record – The Nation

    Many of our old cities have been rejuvenated through a partnership of public and private investment.

    The area of green belt has doubled since 1979.

    Water and air quality in the UK have improved significantly.

    We are one of only a few nations on course to meet our commitment to return emissions of all greenhouse gases to 1990 levels by 2000.

    The Lottery has been established as the most successful in the world – raising £3 billion for good causes in a little over 2 years.

    More support is now given to arts and heritage than at any time in our nation’s history. We now provide nearly 20% more for the arts than the last Labour Government, over and above inflation.

    British talent was this year nominated for 30 Oscars. British music is again receiving international acclaim. The industry is worth £2.5 billion, more than shipbuilding or electric components: one in 5 CDs and records sold anywhere has a British connection.

    There is record investment in our sports facilities. Already the Lottery has provided £480 million for sport, including the planned British Academy of Sport, English National Stadium and, for the first time, direct funding for British athletes.

    We have continued to stand up for British interests in Europe, protecting our opt-out from the Social Chapter, maintaining our border controls, and preserving our budget rebate – worth £18 billion since it was introduced.

    We have the most professional armed forces in the world. We have modernised our nuclear deterrent by replacing Polaris with Trident.

    8. The Best Place in the World to Live

    Britain is admired the world oven Every year, millions of tourists travel here to enjoy our heritage and culture, our cities and countryside, our way of life. Our nation’s history is an anchor in a sea of change. We need to protect, cherish and build upon what is great about our country so our children grow up in a better Britain. We also must make sure that everyone, wherever they live, has the support of a strong, tolerant and civilised community.

    Our aim is for this generation and future generations to take pride in Britain as the best place in the world to live.

    Britain’s Cities

    London is one of the world’s greatest cities. It is livelier than even Our vision of its future is set out in a separate manifesto.

    Many of our cities have undergone a complete transformation over the last decade. We have promoted partnerships –through schemes such as Urban Development Corporations, the Single Regeneration Budget and City Pride – to attract private enterprise and investment back to inner-cities. These initiatives are bringing hope, opportunity and prosperity to what were once wastelands of urban decline.

    As the country thrives and becomes more prosperous, one of our central tasks is to apply the same approach in transforming the legacy of soulless, decaying public housing estates. They are places that suffer from the very worst kind of poverty – poverty of aspiration.

    We have already made a start – spending more than £2bn over the last 10 years on improving 500 of the worst estates. And we have shown how it is possible to tackle the economic and social problems alongside new investment in buildings – where possible, bringing in a greater mix of public tenants and private housing to recreate a more balanced community. Now we will extend this approach, focusing the Single Regeneration Budget to launch a combined attack on crime, unemployment and under-achievement, and developing the government’s partnership with the private sector to help fund the massive investment that will be required.

    Over the next decade, we aim to raise some £25bn of new private investment in housing estates by encouraging tenants in more than half of the remaining public sector housing stock to opt for transferring their homes to new landlords. These transfers will only occur where tenants choose this mute to improve theft estates.

    We will use this approach to regenerate the worst housing estates and transform the lives of those who live in them –targeting support for programmes to improve education standards, employment and crime prevention alongside new private sector investment.

    As well as this attack on poor housing, we will continue to help the homeless. We will carry through our planned extension of the Rough Sleeper Initiative from London to other big cities.

    We will provide sufficient hostel places to ensure that no-one need sleep out on the streets.

    Rural Communities

    Britain is blessed with some of the most beautiful countryside in Europe.

    We need to protect the best of the countryside whilst ensuring good jobs and living conditions for people who live there.

    We have to strike a balance: our rural communities must not become rural museums, but remain vibrant places to live and work. We will make sure government departments work together to ensure that balance is kept.

    We will continue to protect the green belt from development, making sure that derelict and under-used urban land is developed in preference to greenfield sites.

    We will use the planning system to ensure that more new homes are built on reclaimed sites in our towns and cities. We will aim for more than 60 per cent of all new homes to be built on derelict sites.

    This will reduce the pressure to build in our countryside and expand choice where it is needed most.

    We will support our rural communities, by giving special rate support to small village shops and post offices. The planning system can do more to help too.

    We will introduce a new Rural Business Use Class to encourage job creation in the countryside.

    We will increase support for schemes which promote care for the countryside – like Countryside Stewardship.

    We believe participation in traditional country pursuits, including fishing, is a matter for individuals. A Conservative Government will not introduce legislation that interferes with the rights of people to take part in these activities.

    We will also encourage managed public access to private land – in agreement with farmers and landowners – but strongly resist a general right to roam, which would damage the countryside and violate the right to private property.

    We aim to double Britain’s forest cover over the next fifty years. We will continue to encourage tree planting by targeting grants, encouraging investment in wood processing, and using new freedoms with the reform of the Common Agricultural Policy.

    Agriculture and Fisheries

    We will continue to provide robust support to the British beef industry through the BSE crisis until its long term strength is restored. We will vigorously pursue the eradication of BSE in the United Kingdom, as we have been doing successfully for the last eight years. We will spare no efforts in our fight against the unwarranted ban on British beef exports.

    Public health and food safety have been the government’s top priorities throughout the BSE crisis.

    We will tighten up control over food safety by appointing a powerful and independent Chief Food Safety Adviser and Food Safety Council to advise government

    We will continue to push for fundamental reform of the Common Agricultural Policy, moving away from production support to measures that will give our farmers the opportunity to compete while safeguarding the rural environment. We will ensure that no change to the Common Agricultural Policy unfairly disadvantages British farmers.

    Fishing is a vital industry in many parts of coastal Britain. We will continue our fight to secure a prosperous long term future for the industry and sustainable management of our fish stocks.

    We will insist at the IGC and elsewhere on measures to stop quota hopping and prevent the vessels of other countries from using UK fishing quotas.

    The integrity of our 6 and 12 mile fishing limits is not negotiable. We reject any idea of a single European fishing fleet.

    We believe that fishermen should have more say in decisions affecting their industry We will press the European Commission to establish regional committees to give fishermen a direct influence in fishing policy. We will use these committees to develop new ways of managing quotas and regulating fisheries which are more sensitive to the industry’s needs.

    Animal Welfare

    A civilised society respects animals. Britain will continue to take the lead in improving standards of animal welfare in Europe. In 1995 we secured a major breakthrough in the treatment of animals in transport; in 1996 we won victory in our campaign to ban veal crates throughout the EU. We are determined that standards should continue to rise and that all EU countries should have to meet them.

    We will seek to ensure that all European countries have to raise animal welfare standards.

    We are not going to take any risks with rabies. There may however be ways other than quarantine which maintain or increase protection for public health, while improving the welfare of pets and reducing the costs to travellers.

    We will publish a Green Paper on rabies protection, setting out all the options including the existing controls, early in the new parliament.

    Britain’s Environment Britain has an enviable track record in protecting our environment. Our rivers, beaches and water are cleaner and we are using our energy more efficiently. We are leading the world in reducing the level of the “greenhouse gases” that cause global warming and pressing for policies that will enable the world to sustain development without long-term damage to the environment. Our Green Manifesto is published separately.

    We have clear objectives to build on this record. We will set tough, but affordable targets, with published environmental strategies to improve air quality and banish city smog – with tighter standards on vehicle emissions and pollution crackdowns around the country We aim for sustained improvements in water quality, at a pace which industry and consumers can afford. We will develop labelling of products that gives consumers information to show the environmental impact of how they were made.

    In addition, we will continue to use the tax system and other incentives to encourage the use of vehicles and fuel which do not pollute the environment. And we will continue to explore policies based on the principle of polluter pays: those who contaminate land, pollute the environment or produce harmful waste should be made responsible for their actions and pay for the consequences.

    Britain – A Tolerant Country

    Tolerance, civility and respect have always been hallmarks of our nation. It is thanks to them that we have an excellent record in race relations.

    Everybody, regardless of colour or creed, has the right to go about his or her life free from the threat of intimidation. We are taking tough action to tackle harassment. Under proposals in the Protection from Harassment Act 1997, it will be a crime to behave in a way which causes someone else to be harassed. The maximum penalty will be 6 months in prison.

    Firm, but fair, immigration controls underpin good race relations. We will ensure that, while genuine asylum seekers are treated sympathetically, people do not abuse these provisions to avoid normal immigration controls.

    A World Leader In Sports, Arts and Culture

    Britain is enjoying a cultural renaissance. British music, films, television, fashion, art and food are winning plaudits the world oven They add excitement, fun and enjoyment to our lives. Our success brings pride to everyone.

    The National Lottery, which John Major set up, will pump billions of pounds into Britain’s good causes. Its proceeds will weave a new, rich thread of opportunity and charity into the tapestry of British life. In addition to benefitting major national institutions, about half of the awards are for amounts under £25,000 – benefitting local communities up and down the country. We will encourage new ways of distributing awards to support the performing arts – through support for amateur productions and community events, providing more musical instruments, and helping productions tour round the country.

    The National Lottery will also help us train and promote British sporting talent. The English National Stadium and British Academy of Sport, funded by the Lottery, will be new focal points for sporting events and excellence. We will encourage more young people to play sport by ensuring every school plays a minimum level of sport, including competitive sports, and developing a network of Sporting Ambassadors – sporting celebrities who will visit schools to inspire young people. We will also encourage the Sports Council to use Lottery money to employ over 1000 additional community sports coaches to assist in schools.

    We will encourage the use of Lottery money to train young athletes and artists, with revenue funding for bursaries, concessionary tickets to professional performances and support for young people’s organisations and productions.

    The development of young talent is important in all fields.

    The Lottery will also fund our Millennium celebrations. They will be inspirational as well as enjoyable. We want these be a showcase of British excellence. Britain will be able to look back on past achievements with pride, and look forward with confidence.

    9. Europe and the World

    Britain is a world leader as well as a European nation. Our economic strength, our history and our language make us a global trading nation with links right around the world. Only the United Kingdom is a member of the European Union, the United Nations Security Council, the Commonwealth, NATO and the Group of Seven leading industrial nations. In the Gulf, Bosnia, Cyprus and Northern Iraq, John Major has shown how our nation can contribute to world peace.

    We will continue to work with international partners to secure peace and stability in areas of tension such as former Yugoslavia; in Kashmir; in Cyprus; and in the Middle East. We will promote reform of the United Nations to make it a more effective organisation for securing international stability. Britain will continue to deploy our outstanding Armed Forces as peacekeepers under the United Nations. And we will support the aspirations of the Poles, Czechs, Hungarians and others to join the European Union and NATO.

    After the transfer of Hong Kong, we will work under the terms of the Joint Declaration to help sustain the prosperity and way of life of the people of Hong Kong and build on the substantial British interests that will remain.

    We will continue to support the Commonwealth, our unique global network, to encourage the spread of democracy; as set out in the Harare Declaration. We will focus our aid programme to encourage sustainable development in countries that are growing towards self sufficiency under democratic government. We have taken the lead in alleviating the burden of debt for the world’s poorest countries. We also have significant flows of private investment to developing economies. We are more than achieving the long term UN target of 1% of GDP for the transfer of wealth to less developed countries. We will continue to maintain a significant bilateral and multilateral aid programme reflecting the aspiration of meeting the UN’s target of 0.7% of GDP for aid as a long-term objective.

    We will also continue to provide leadership in Europe and internationally on environmental issues, building on the Rio Conference to encourage sustainable development – meeting our commitment to reduce Carbon Dioxide (CO2) emissions by 10% on 1990 levels by 2010 to prevent climate change. The Prime Minister has committed himself to attending the next UN Environmental Conference in June.

    Britain and the European Union

    We believe that in an uncertain, competitive world, the nation state is a rock of security. A nation’s common heritage, culture, values and outlook are a precious source of stability. Nationhood gives people a sense of belonging.

    The government has a positive vision for the European Union as a partnership of nations. We want to be in Europe but not run by Europe. We have much to gain from our membership of the European Union –in trade, in co-operation between governments, and in preserving European peace. We benefit from the huge trade opportunities that have opened up since Britain led the way in developing Europe’s single market. We want to see the rest of Europe follow the same deregulated, enterprise policies that have transformed our economic prospects in Britain.

    However, in June, the nations of the European Union will gather in Amsterdam to negotiate possible amendments to the Treaty of Rome. It is a moment of truth, setting the direction in which the European Union will go. It will also be crucial in ensuring that we have a relationship with the rest of Europe with which we can be comfortable.

    A Conservative Government will seek a partnership of nation states. Some others would like to build a federal Europe. A British Conservative Government will not allow Britain to be part of a federal European state.

    The diversity of Europe’s nations is its strength. As more nations join the European Union, it needs to become flexible not more rigid We must also ensure that any developments which only include some members do not work to the disadvantage of others.

    Our priorities for Europe’s development will be enlargement of the Community, completion of the single market, reform of the European Court of Justice, and further strengthening of the role of national parliaments. We will seek more co-operation between national governments on areas of common interest – defence, foreign policy and the fight against international crime and drugs. We also believe the European Union itself should do less, but do it better. So we have proposed incorporating the principle of subsidiarity – that the European Union should only do that which cannot be done by member states acting alone – into the Treaty. This is how we are approaching the Inter-Governmental Conference.

    We will argue for a flexible Europe which fully accommodates the interests and aspirations of all its member states and where any new proposals have to be open to all and agreed by all. We will not accept other changes to the Treaty that would further centralise decision-making, reduce national sovereignty, or remove our right to permanent opt-outs.

    We will retain Britain’s veto and oppose further extension of qualified majority voting in order to ensure we can prevent policies that would be harmful to the national interest. We will defend the rights of national parliaments and oppose more powers being given to the European Parliament at the expense of national parliaments.

    We will take whatever steps are necessary to keep our frontier controls. We will resist attempts to change the inter-governmental nature of co-operation in justice and home affairs. We will not accept the development of new legal rights that extend the concept of European citizenship.

    Britain’s rebate has so far saved British taxpayers £18bn and we will protect it.

    One of the greatest challenges Europe faces is to cut unemployment and make its businesses competitive. Here Britain is leading the way. We will continue to argue for deregulation and lower costs on Europe’s businesses, the policies that have helped give Britain one of the strongest economies in Europe. We will not put that achievement at risk by signing up to the Social Chapter, which would open the door to imposing the high costs of the European social model on British business. Once Britain accepted the Social Chapter we could not stop many of these damaging policies being imposed on us by qualified majority voting.

    We will insist that any new Treaty recognises that our opt-out from the Social Chapter enables Britain to be exempt from the Working Time Directive, and prevents any abuse of our opt-out. And we will not accept a new employment chapter in any revised Treaty, which would expose British businesses to new costs.

    We made it clear in the previous chapter that we will continue to work for further reform of the Common Agricultural Policy and the lifting of the worldwide ban on British beef and will insist on measures to stop quota hopping by foreign fishing vessels.

    Protecting Britain’s interests demands tough, experienced negotiation. John Major has proved he has these qualities – including the resolve to say no when necessary even if that means being isolated. Labour have said they would never let Britain be isolated in Europe: they would damage Britain’s success by undermining our veto, signing up to the Social Chapter and following in others’ footsteps – even where they lead in the wrong direction. They support policies that would fragment the United Kingdom’s influence within a Europe of Regions. The Liberal Democrats welcome the end of the nation state. Only the Conservatives can be trusted to stand up for Britain in Europe: our national interest must be protected.

    A Single Currency: Our Referendum Guarantee

    The creation of a European single currency would be of enormous significance for all European states whether they are members or not. We must take account of all the consequences for Britain of such a major development of policy.

    John Major secured for us at Maastricht an opt-out from the commitment to enter a single currency. It is only because of this opt-out that we have the right to negotiate and then decide whether it is in Britain’s interest to join.

    It is in our national interest to take part in the negotiations. Not to do so would be an abdication of responsibility. A single currency would affect us whether we were in or out. We need to participate in discussions in order to ensure the rules are not fixed against our interests. The national interest is not served by exercising our option – one way or the other – before we have to.

    For a single currency to come into effect, European economies will have to meet crucial criteria. On the information currently available, we believe that it is very unlikely that there will be sufficient convergence of economic conditions across Europe for a single currency to proceed safely on the target date of January 1st 1999. We will not include legislation on the single currency in the first Queen’s Speech. If it cannot proceed safely, we believe it would be better for Europe to delay any introduction of a single currency rather than rush ahead to meet an artificial timetable. We will argue this case in the negotiations that lie ahead.

    We believe it is in our national interest to keep our options open to take a decision on a single currency when all the facts are before us. If a single currency is created, without sustainable convergence, a British Conservative government will not be part of it.

    If, during the course of the next parliament, a Conservative government were to conclude that it was in our national interest to join a single currency, we have given a guarantee that no such decision would be implemented unless the British people gave their express approval in a referendum.

    Defence in an Unstable World

    The old rivalries of the Cold War have been replaced by new tensions. Britain must be able to react rapidly to protect our security and interests around the globe.

    Our armed forces are the most professional in the world. We have cut unnecessary bureaucracy and increased efficiency, and directed money to support our Services in the frontline. We have made the changes necessary to adapt our Services to the threats which we might now face. We have set out defence plans based on stable levels of funding. There is no need for a defence review, which would raise fear and uncertainty about the future.

    We will continue to ensure the Services have the modern weapons they need to guarantee their superiority against potential aggressors. We will make sure we can conduct military operations throughout the world, and develop our capability to deploy the three services together and rapidly, including the ability to transport heavy equipment into an operational zone. We will take part in ballistic missile defence research so we can decide whether we should procure any such system for the United Kingdom.

    We will continue to target our efforts on recruiting for the armed forces. We will set up an Army Foundation College, which will provide 1,300 places for 16 and 17 year olds who want to join the Army. We will also enable the reserve forces to play a more active role in operations. We appreciate the enormous value of cadet forces, and our current plans include resources to encourage their further development.

    We will continue to support Britain’s defence industry, and we will work with companies to identify the technologies of the future.

    NATO will remain the cornerstone of our security. We will resist attempts to bring the Western European Union under the control of the European Union, and ensure that defence policy remains a matter for sovereign nations.

    10. The Constitution

    Alone in Europe, the history of the United Kingdom has been one of stability and security; We owe much of that to the strength and stability of our constitution – the institutions, laws and traditions that bind us together as a nation.

    Our constitution has been stable, but not static. It has been woven over the centuries – the product of hundreds of years of knowledge, experience and history.

    Radical changes that alter the whole character of our constitutional balance could unravel what generations of our predecessors have created. To preserve that stability in future – and the freedoms and rights of our citizens – we need to continue a process of evolution, not revolution.

    Conservatives embrace evolutionary change that solves real problems and improves the way our constitution works. In recent years we have opened up government, devolved power and accountability, and introduced reforms to make parliament work more effectively. It is that evolutionary process that we are committed to continue.

    Open, Accountable Government

    In recent years we have taken significant steps to open up government to public scrutiny, and give individuals more information to hold government and public services to account.

    We have introduced a code on access to government information, policed by the Ombudsman. We have published information on the workings of government previously held secret –including the composition of cabinet committees, and the structure of the security and intelligence services. We have introduced a new civil service code, and reformed the process for public appointments. We are pledged to legislate on the commitments in our 1993 White Paper on Open Government, including a statutory right of access by citizens to personal records held about them by the government and other public authorities. And we have set up the Nolan Committee and have implemented its proposals to ensure that the highest standards are maintained in public life.

    But our reforms go even wider than that. We have transferred power from central bureaucracies to local organisations such as school governors and hospital trusts. We have introduced the Citizen’s Charter We have also required them to publish information on their performance – information which enables the local community to keep a check on standards and apply pressure where needed. Wherever possible, we are widening competition and choice in public services. We showed in Chapter 6 how we wished to push this agenda forward.

    Regional government would be a dangerously centralising measure – taking power away from elected local authorities. We wish to go in the opposite direction, shifting power to the local neighbourhood – for example, by giving more power to parish councils.

    Parliament

    Parliament – alongside the Crown and our legal system – is one of the three key institutions that uphold our constitution. The supremacy of parliament is fundamental to our democracy, and the guarantee of our freedoms. The last 17 years have seen many changes to strengthen parliament and make it more effective – the flourishing of select committees, new procedures to scrutinise European legislation, reform of parliament’s working day, and a budget that brings together tax and spending.

    We have therefore already done much to improve the way parliament works and will do more. We have accepted the proposal from the Public Service Select Committee and put before the House of Commons a clear new statement of the principles underlying ministerial accountability to parliament.

    All these developments have made parliament open to the citizen, and the government more accountable. In the next session of parliament we will continue this careful reform.

    To give parliament more time to consider legislation thoroughly we will extend the Queen’s Speech to cover not only legislation for the immediate year but also provisional plans for legislation in the year after that

    This will mean that more draft bills will be subject to public scrutiny before they reach the floor of the House of Commons. It will give select committees more time to take evidence and report. And this should also mean better legislation.

    We do not believe there is a case for more radical reform that would undermine the House of Commons. A new Bill of Rights, for example, would risk transferring power away from parliament to legal courts – undermining the democratic supremacy of parliament as representatives of the people. Whilst this may be a necessary check in other countries which depend upon more formalised written constitutions, we do not believe it is appropriate to the UK.

    Nor do we favour changes in the system of voting in parliamentary elections that would break the link between an individual member of parliament and his constituents. A system of proportional representation would be more likely to produce unstable, coalition governments that are unable to provide effective leadership – with crucial decisions being dependent on compromise deals hammered out behind closed doors. This is not the British way.

    We have demonstrated we are not against change where it is practical and beneficial. But fundamental changes which have not been fully thought through – such as opposition proposals on the House of Lords – would be extremely damaging. We will oppose change for change’s sake.

    The Union

    The Union between Scotland, Wales, Northern Ireland and England underpins our nation’s stability. The Conservative commitment to the United Kingdom does not mean ignoring the distinctive individuality of the different nations. On the contrary, we have gone further in recognising that diversity than any previous government. We are publishing separate manifestos for Wales and Scotland.

    While preserving the role of parliament at the centre of the Union, we have given new powers to the Scottish Grand Committee and Welsh Grand Committee – enabling Scottish and Welsh MPs to call Ministers to account and debate legislation which affects those countries – something that would be impossible with separate Assemblies. For the first time, Welsh members of parliament can ask their questions to Ministers in Welsh in Wales. Most recently we have similarly extended the basic powers of the Northern Ireland Grand Committee.

    We believe this is the right way to go. By contrast, the development of new assemblies in Scotland and Wales would create strains which could well pull apart the Union. That would create a new layer of government which would be hungry for power. It would risk rivalry and conflict between these parliaments or assemblies and the parliament at Westminster. And it would raise serious questions about whether the representation of Scottish and Welsh MPs at Westminster – and their role in matters affecting English affairs – could remain unchanged.

    Nor do we believe it would be in the interests of the Scottish or Welsh people. A Scottish tax-raising parliament, for example, could well affect the choice of where new investment locates in the United Kingdom.

    In a world where people want security, nothing would be more dangerous than to unravel a constitution that binds our nation together and the institutions that bring us stability. We will continue to fight for the strength and diversity that benefits all of us as a proud union of nations.

    Northern Ireland

    While we cherish the Union and Northern Ireland’s place within it, we recognise that there exist within the Province special circumstances which require further action to be taken.

    After a quarter of a century we wish to see the unique and originally temporary system of direct rule ended and a successful restoration of local accountable democracy achieved. We want to see this brought about in a form which carries the broadest agreement possible. And we want to see the rights, traditions and interests of all parts of the community recognised within any such agreement.

    We will accordingly continue to pursue a policy of dialogue and negotiation with and between the democratic Northern Ireland parties. We will continue to underpin such negotiations with the guarantee that the constitutional position of Northern Ireland cannot and will not be changed without the broad consent of the people of Northern Ireland. At the same time we will continue to take whatever security measures are required to protect the people of Northern Ireland from those who seek to achieve their political goals by violent means.

    We seek peace. But we will never be swayed by terrorist violence nor will we ever compromise our principles with those who seek to overthrow the rule of law by force.

    A Choice of Two Futures

    At this election the British people face a stark choice. A choice of two futures.

    They can elect to continue down the road of success and achievement. An opportunity that has been hard won by the efforts and sacrifices of the British people. An opportunity that has only come about because successive Conservative governments have been determined to face up to the long term problems facing Britain, and take the tough steps needed to arrest our slow decline.

    Or they can elect to take a huge risk with that future – the future of themselves, their children, their nation – by handing over the government of the country to politicians who have fought, opposed and denigrated every step that has been taken to restore Britain’s economic health and standing in the world. Politicians whose own declared policies would burden the United Kingdom with new spending and taxation, new regulations, and new threats to the stability and sovereignty of the nation itself.

    You can only be sure with the Conservatives.

    Our Vision for Britain:

    25 Pledges for the Nation

    The Enterprise Centre of Europe

    TAX AND SPENDING. keep tight control of public spending priorities, aiming for our target of a 20p basic rate of income tax over the next parliament.

    PRICES AND MORTGAGES. Stick to the policies which have delivered the lowest inflation levels and mortgage rates for a generation, meeting our inflation target of 2½ % or less.

    JOBS. Protect jobs by keeping Britain out of the European Social Chapter; build on our record of falling unemployment; and help get the long term unemployed back to work – including by requiring those on benefit for some time to undertake work experience on a community project.

    ENTERPRISE. Support growth and investment by keeping Britain the lowest tax major economy in Europe. pursuing Britain’s global trade opportunities. and curbing unnecessary regulations.

    SMALL BUSINESS. Reform business rates to help small businesses.

    THE FUTURE. Keep Britain ahead in the technologies of the future, encouraging new entertainment and information services and using the Millennium Lottery Fund to give people access to new computers and information links in schools, libraries, and other public places.

    Opportunity and Ownership for Individuals and Families

    HELP FOR FAMILIES. Give priority to reducing tax bills for families looking after dependent children or relatives by allowing one partner’s unused personal allowance to be transferred to a working spouse where they have these responsibilities.

    HELP FOR CARERS. Help family members with heavy responsibilities caring for a relative to take a much needed break through a new Respite Care Programme.

    OWNERSHIP. Encourage schemes that help employees build a shareholding in the company they work for, alongside tax benefits for other savings schemes.

    PENSIONS. Transform pensions by providing all young people entering the workforce with a personal pension fund paid for by a rebate on their national insurance contributions, while maintaining a state pension guarantee.

    CARE IN OLD AGE. Make it easier for people to afford the cost of care in old age without giving up their house and savings.

    SCHOOL STANDARDS. Guarantee school standards by intervening directly to raise standards where schools or local education authorities are letting children down.

    SCHOOL CHOICE. Widen choice and diversity in schools, with more freedom for schools to develop their own character, more specialist schools, and a grammar school in every town where parents want that choice. We will also maintain our nursery voucher scheme offering a choice of places for parents of all 4 year olds.

    World Class Health and Public Services

    NHS FUNDING PLEDGE. Continue, year by year, to increase the real resources committed to the NHS, so NHS spending will continue to share in a growing economy.

    FAMILY DOCTORS. Enable all family doctors to provide a wider range of services in their surgeries and in practice-based cottage hospitals – offering faster and more local treatment.

    CITIZEN’S CHARTER. Continue to improve the standards and value for money of Britain’s public services, giving those who use them more information and, where possible, wider choice.

    ESSENTIAL SERVICES. Introduce measures to protect the public against strikes that cause excessive disruption to essential services.

    A Safe and Civil Society

    PUBLIC SAFETY. Support local police schemes to crack down on petty crime, and continue our funding for the installation of TV security cameras in town centres and public places that want them throughout the next parliament.

    JUVENILE CRIME. Give the courts power to impose speedy sanctions on youngsters, including an element of reparation to the victim; and continue our war against drugs.

    PERSISTENT CRIMINALS. Ensure persistent house burglars and dealers in hard drugs receive mandatory minimum prison sentences.

    A Confident, United and Sovereign Nation

    QUALITY OF LIFE. Continue the renaissance of our towns and cities, in particular harnessing private capital to regenerate the worst public housing estates; continue to protect our countryside and heritage; and use the National Lottery to help promote British sports, arts and culture.

    THE ENVIRONMENT. Maintain our international leadership role in protecting the environment, and continue improving air and water quality at home alongside effective conservation of our wildlife.

    THE NATION. Maintain the unity of the United Kingdom and preserve the stability of the Nation through an evolutionary – rather than revolutionary – approach to constitutional change.

    EUROPE. Seek a partnership of nation states in Europe, and not allow Britain to be part of a federal European state.

    THE POUND. Guarantee that Britain will not join a single currency in the next parliament unless the British people give their express approval in a referendum.

  • Text of the 1996 Budget – 26 November 1996

    Below is the text of the 1996 Budget, held on 26th November 1996 and presented in the House of Commons by the Chancellor of the Exchequer, Kenneth Clarke.


    Budget Statement

    Mr. Deputy Speaker (Mr. Michael Morris): Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that, at the end of the Chancellor’s speech, copies of the Budget resolution will be available to hon. Members in the Vote Office.

    The Chancellor of the Exchequer (Mr. Kenneth Clarke): Contrary to popular belief, I always look at the mirror in the morning. I am reasonably well prepared for this occasion and I am about to deliver the real Budget statement. I think this is positively my last appearance in the House in a speaking capacity this week, or so at the moment I expect it to be.

    The British economy is today prosperous and successful. This Budget is going to make it even more prosperous and an even bigger success over the coming years.

    When I presented my first Budget in 1993, it was against a very different economic background from today. Although the recovery had begun then, consumer confidence had not yet returned. Growth was not yet firmly established. Further firm action was needed on the public finances, and our critics, in 1993, were peddling doom and gloom about the British economy. The recovery is now in its fifth year. Consumer confidence has returned and we are achieving something unprecedented for a generation in this country – growth with low inflation and without a widening trade gap. But one thing has not changed in 1996 – our critics are still peddling doom and gloom. With all their predictions of impending disaster, it is obvious that there is probably more than one Cassandra lurking in the Labour party.

    In my first two Budgets I curbed the growth of public spending and took firm decisions on tax, which have brought borrowing down by almost a half since 1993. Last year, in my third Budget, I was able to return to cutting tax while spending more on the public services which the people I know care about most – health, schools and the police – and keeping borrowing on a firm downward path.

    This year, I am presenting a Budget which builds on the last three. This Budget reduces public spending plans further, while providing more money for priority services. It makes responsible progress on our tax-cutting agenda, while getting borrowing down faster. This is not a reckless Budget on either tax or spending. In the run-up to Christmas I am not going to play Santa Claus, but this year I do not have to play Scrooge either.

    I have one overriding aim, which is the lasting health of the British economy. [Hon. Members: “And winning the election.”] The lasting health of the British economy might win elections, that is true, but my first aim is the lasting health of the British economy. We are securing that by creating the best conditions for British businesses and British men and women to earn a living. All my Budgets and all my policies have been designed to set this country on course to be the strongest industrial economy in western Europe in years to come.

    ECONOMY

    The British economy is in its fifth successive year of steady, healthy economic growth, with falling unemployment and low inflation. These are the best circumstances we have faced for a generation and that is the only sensible background to debate in this House. It is a Rolls-Royce recovery and it is built to last.

    The International Monetary Fund and the Organisation for Economic Co-operation and Development confidently expect the United Kingdom to be the fastest growing major European economy again next year. By next year we will have grown faster than either France or Germany for five years in succession for the first time in half a century.

    This time – unlike so many previous recoveries that many of us remember – healthy growth has been accompanied by the best inflation performance for nearly 50 years and restrained growth of earnings has been good news for jobs. The British labour market has become our flexible friend. Employment began to rise sooner and unemployment began to fall sooner than in the previous recovery. Growth creates jobs quicker, as long as we retain a flexible labour market.

    The OECD has praised us for having one of the least regulated labour markets in the industrialised world. High social overheads, minimum wages and unnecessary legislation do not protect workers – they cost jobs. Unemployment is still rising in France and unemployment is still rising in Germany. It has fallen sharply here, to its lowest level for over five and a half years.

    In the bad old days, recoveries were derailed by balance of payments crises. In this recovery, the current account has actually improved, despite the slowdown in our main European markets. In fact we now have a current account broadly in balance, which is our best overall trading performance for nearly 10 years.

    Economic policy

    Mr. Deputy Speaker, I want to ask the British people this question: in the years ahead do we seriously want to be prosperous in this country? I think that we do. That is why I am setting out an economic policy aimed at the next five years, not just the next five months. I am setting out an economic policy that will go on delivering our enviable combination of rising prosperity, low inflation and more jobs. That is my purpose in this Budget. This Budget secures a prosperous future for all sections of our people and their families.

    The last thing that the British economy needs now is a change of direction. We need at least another five years of this Government’s continuous vigilance on inflation. We need more of this Government’s determination to get government borrowing down. We need another five years of this Government’s commitment to raise the wealth-creating potential of the British economy, by improving incentives, reducing the role of the state and creating a climate for enterprise.

    Growth

    Let me begin by turning to my forecast for growth. I expect the British economy to grow by 2.5 per cent. this year and 3.5 per cent. next year – and there are few serious commentators who would disagree with me. I hear mutterings from the shadow Chancellor; there are few serious commentators who would disagree with me.

    By keeping a close eye on the prospects for inflation up to two years out, and by taking sensible early action if and when necessary, I intend to ensure that healthy growth continues without inflationary pressures emerging. That is what I have always promised–no return to boom and bust.

    Consumer spending

    I expect consumers’ expenditure to continue to be the main engine of growth next year. The real value of take-home pay is growing strongly.

    The housing market recovery is now firmly established. I hope that negative equity can soon be consigned to the economic history books.

    People are feeling the improvement in their family finances. Consumer confidence is at its highest levels for more than eight years.

    I expect consumer spending to grow by 3 per cent. in 1996 as a whole. But it has been strengthening through the year. So I expect stronger growth to continue, with consumers’ expenditure rising by more than 4 per cent. next year.

    Investment

    But this recovery is not just about a more confident consumer. Businesses are optimistic too. The climate for business is excellent. Strong demand at home and a recovery in our key export markets present British industry and commerce with tremendous opportunities.

    Interest rates and tax rates remain low, and profitability is high. The result has been business investment growth of 6 per cent. so far this year. I expect business investment to continue to grow strongly – by almost 10 per cent. next year.

    These excellent conditions for business are not lost on overseas companies looking to invest for the future inside the European market. Let us never forget the most valuable practical endorsement that we get for our sound economic policies.

    The United Kingdom remains the No. 1 destination for inward investment into the European Union. Keeping our enterprise economy on course at the heart of Europe will keep us in pole position.

    Exports

    Exports have grown by almost 20 per cent. over the past two years – an impressive performance in the face of weak demand in our key European markets. The achievement is down to our strong cost-conscious British exporters. They will benefit further next year as the tentative recovery on the continent becomes more established. I expect export volumes to rise by more than 7 per cent. this year and by 6 per cent. next year.

    The current account has been close to balance during the last two and a half years, thanks to strong growth in exports and income from our investments overseas. I expect the current account to remain broadly in balance this year and next.

    Jobs

    As I said earlier, I am glad to say that our thriving economy is creating jobs. Employment in the United Kingdom has risen by more than 0.75 million real jobs since the recovery began. Unemployment has fallen by almost a million from its peak. It will soon drop through the 2 million mark. But that is still too high. I want it to go on falling and I expect it to go on falling.

    I hope that during the debate the shadow Chancellor will say that he forecasts that unemployment will now rise, month after month. That seemed to help our performance in the labour market the last time he said it.

    Inflation

    We are on course to get underlying inflation down to our target of 2.5 per cent. or less, and to keep it there. In October underlying inflation rose to just over 3 per cent. This should not have surprised anybody who looked at last year’s statistics. It is a temporary and inevitable reflection of the exceptional falls in the price level 12 months before.

    Let me give the House my concrete reasons for being so confident about low inflation. Apart from oil prices, which have risen sharply, commodity prices are steady and are not putting upward pressure on inflation. Earnings growth remains sensible and modest. Producer price inflation – a good indicator of what is in the pipeline for retail price inflation – is at it lowest levels in this country since the 1960s. Producer input prices are actually lower than they were a year ago.

    Any risk to this recovery from inflationary pressures re-emerging remains a good way off. But as I have demonstrated again and again, when I see any risks, I will act. I will continue to stay ahead of the game on monetary policy. Eddie will keep me steady and I intend to continue to be canny.

    I expect underlying inflation to meet our target of 2½ per cent. or less. I will ensure that we go on meeting that target for the foreseeable future.

    PSBR

    We have made good progress in reducing public sector borrowing, but it has not been as fast as I expected. The Budget therefore targets public sector borrowing again. The general public may ask why I concentrate on public sector borrowing in the way that I do. [Interruption.] It is suggested that I do so because I am a Tory. That is a good reason for concentrating on public sector borrowing as I do.

    One reason why I continue to concentrate so heavily on public borrowing in setting policy is that money spent paying the interest on our debt is, in my opinion, money that I would prefer to spend on public services and the reduction of taxation.

    We are making good progress on bringing down borrowing, but lower than expected tax revenues mean that it has not fallen as fast as I expected in the last Budget. This is not bad news for everyone. People are no doubt quite glad not to be paying as much tax as I expected. But as I am the Chancellor, I strongly prefer to keep any tax cuts under my own control.

    The causes of these shortfalls in our forecasts of tax revenue – primarily on VAT, but also on direct taxes – cannot wholly be explained by any experts inside or outside the Revenue Departments. But there does seem to be an increasing tendency to exploit loopholes and use special reliefs in an artificial way to reduce tax bills. Those sort of tax cuts are unacceptable. On that, I seem to have agreement. If they are not tackled every year in the Budget, they mean that a few people pay less tax, but the rest must pay more.

    In this Budget I will propose a number of measures to stem tax leakage, to protect the ordinary tax payer and to make sure we get the right tax from the right people. When I reduce tax, I want to do so in a way that is fair for all businesses and fair for all hard-working British men and women.

    Government borrowing has been steadily coming down for three years. This Budget will ensure that Government borrowing keeps coming down. I expect the public sector borrowing requirement to be £26.5 billion this year. That will mean it has halved as a share of GDP over the past three years. I expect it to come down to £19 billion next year and to be broadly in balance by 1999-2000.

    That pattern of declining borrowing is very much better than the one I had to put in my summer economic forecast last July. Since I produced the summer forecast, which was debated in the House last summer, I have reduced my expectations for next year by £4 billion.

    A large part of that improvement is the result of the measures that I am taking in this Budget. This Budget tightens fiscal policy. The reason why I am tightening fiscal policy now is to reduce the risk of having to tighten monetary policy excessively as I set policy to hit my inflation target.

    My decisions are always taken solely in British interests to benefit the British economy. But my decisions in this Budget also mean that, by happy coincidence, we will meet the Maastricht debt and deficit criteria in 1997, and we will do even better than that in the medium term. [Interruption.] I do not need any assistance from nationalists. It is a happy coincidence for everyone because those criteria make sound economic sense, as we all agree, with or without a single currency.

    Our option whether to join or stay out of a single currency, based on British national interest, remains a genuine choice. We will qualify, but we will choose in the next Parliament when the time comes.

    This Government is the champion of sound public finances, of limited government and of low taxation. Our combination of low taxation, low public spending and low debt is the best in Europe. We intend to stay in that enviable position. We can do that only if we continue to bear down on public spending.

    Public Spending

    In the 1980s, across the rest of Europe, the modern state remorselessly took an ever greater share of almost every nation’s wealth. We in Britain held the line. The proportion of GDP going into Government spending in the United Kingdom is now 8 per cent. lower than the average in the rest of the European Union. If our spending had risen to continental levels we would now have to raise nearly £2,300 a year more in tax from every British household.

    I have set a target of 40 per cent. or below for the share of national income that goes on public spending. Making progress towards that desirable target means tough decisions on public spending every year, but this year we have had to cope with the costs of BSE, and with larger than expected increases in the costs of social security, as more and more elderly and disabled people receive benefits to which they are entitled.

    Against that background, we had to keep the rest of public spending within the tightest possible limits, in order for us to spend more on the public services that people really care about: education, combating crime and our national health service. This country has been well served by my right hon. Friend the Chief Secretary who has successfully tackled that problem. Despite all the difficulties, we have been able to reduce public spending plans over the next three years by a further £7 billion in this Budget. Public spending next year will be more than £24 billion lower than was projected when I became Chancellor – a reduction of 7 per cent.

    We have been able to reduce spending plans because we have lower inflation, falling unemployment, a continuing campaign for efficiency in the public sector, sensible policy priorities and a Government capable of taking decisions about those priorities. On top of that, the Government’s relentless drive against fraud and the abuse of tax and benefits will be stepped up another gear.

    Next year, we will meet our target of 40 per cent. for the share of national income that goes on public spending. In last year’s Budget I said that I would make 40 per cent. in 1997-98. This year’s Budget secures that important goal. So long as we keep – as the next Conservative Government will keep – the growth in public spending down below the growth in the economy, we will go below that.

    Education

    Education is the key to the future of any prosperous and civilised society. It helps to determine how well the economy performs in the long run. It also helps to determine the sort of citizens that we have and the sort of society that we have. The Government are committed to raising standards in education.

    As a result of last year’s Budget, £878 million extra was provided for schools this year. We are giving schools priority again in this Budget. Planned expenditure on schools will rise by another £830 million next year. A large proportion of that money – £633 million, an increase of 3.6 per cent. – will be channelled through the local authorities. I see the hon. Member for Sheffield, Brightside (Mr. Blunkett) shaking his head. Perhaps the money did not reach his schools; I am not as familiar with Sheffield as he is.

    Judging by last year’s experience, some local authorities are reluctant to pass on the increases in their standard spending assessment to their schools, preferring to spend the money on other areas. It is no good local authorities campaigning for more spending on education in the autumn and then spending their money on other things in the spring. Parents will want to make sure that their local authorities spend money on the things that they want for their children: good teachers and better equipped schools. I hope that the hon. Member for Brightside makes the same efforts to ensure that Sheffield passes the money on, if it did not last year.

    A good school has a value far beyond its buildings; but the quality of school buildings in which our children are taught is still very important. We have a long way to go in the post-war era to get up to the standards that we require. We will be providing an extra £50 million on top of the previously planned provision for more capital investment to improve the fabric of our schools.

    By setting high standards for schools and increasing choice for parents, this Government are delivering better trained and better qualified young people. Almost one in three young people now goes on to university, compared with one in eight in 1979. And our universities and colleges maintain some of the highest standards in the world despite the pressure on their unit costs that this unprecedented explosion of opportunity for young people has produced.

    But I recognise this pressure – I have heard about these pressures – and I also realise that our universities and colleges make an important contribution to the economy.

    My Budget therefore includes £280 million to boost further and higher education over the next two years. This includes an extra £20 million next year for science equipment. We want to ensure that the British science research base remains the best in the world, which it certainly is at the moment.

    As my right hon. Friend the Secretary of State for Education and Employment announced in September, the Government are planning a substantial sale of student loans debt. It makes no sense for the Government to keep a huge portfolio of loans on their books when the private sector could manage it more effectively and is better placed to cope with the risk. I emphasise that the sale will have no effect on the terms on which students can get loans.

    The substantial reduction in the figures for education that Members will find published in the new spending plans is more than accounted for by the sale of this debt. As I have just described, we will actually spend more on the things that really matter – educating our children and young people.

    Combating Crime

    This Government believe that effective law and order are an essential part of making Britain a nation at ease with itself. A good quality police service and an effective system of criminal justice are very high on the list of this Government’s priorities.

    When it comes to spending on law and order this Government have a record as long as your arm. [Interruption.] Spending more money on a much better police service and a much better criminal justice system – I plead guilty as charged, if that is indeed the charge against the Government. Spending on law and order has already doubled in real terms since 1979.

    Provision for combating crime – police and prisons – will now rise by another £450 million next year. Our plans provide for 2,000 more police constables by the end of next year. We are well on course to meet the Prime Minister’s pledge for 5,000 more constables.

    Health

    Our British national health service, with treatment free at the point of delivery, is the envy of the world. It is the best system of health care that I have ever encountered. In every modern civilised society the demand for better health care, for new techniques to save lives and improve our quality of life grows constantly and remorselessly. This Government completely understand that. That is why we have increased spending by some 75 per cent. in real terms since 1979.

    That is why the Prime Minister has pledged on our behalf more resources for the national health service in real terms every year, throughout the next Parliament – a pledge which, to my continual mystification, the right hon. Member for Sedgefield (Mr. Blair) has not yet brought himself to match.

    We are also spending that money better. We have reformed the NHS so it is much better managed and much more efficient. It is no good opposing these improvements, because when waste is reduced, more can be directed to higher quality patient care. This means that patients get more treatment and care out of every extra pound that we spend.

    For next year, we will increase current spending on patient services in the NHS by £1.6 billion, or 2.9 per cent. in real terms. The real increase in current spending for hospitals next year over and above inflation will be 3 per cent.

    On top of this, private finance initiative investment will play an increasingly important role in providing new health care facilities. The PFI contract for the Norfolk and Norwich hospital scheme, worth close to £200 million, was signed yesterday, and others will follow. [Hon. Members: “Oh.”] I am grateful to my right hon. Friend the Secretary of State for Health for not signing it tomorrow, but I do not think that he had the Budget in mind. There are many in the pipeline–[Hon. Members: “Oh.”] He had the people of Norfolk and Norwich in mind and the efficacy and investment in our national health service. PFI investment in the NHS will reach some £900 million over the next three years on top of the increased public spending I am announcing. I think that the Labour party has at last belatedly become converted to that source of investment in our great national health service.

    The NHS will continue to grow and continue to improve. We are totally committed to the national health service as a public service providing high quality up-to-date treatment, free at the point of delivery.

    By our decisions on public spending, we prove that the NHS remains at the top of the Government’s priorities. The NHS has been safe in our hands, it is safe in our hands and it will always be safe in our hands.

    OTHER PROGRAMMES

    This year’s spending round was as tight as any that I can remember – I keep describing it as eye-wateringly tight – but we never lost sight of our objective, which is to sustain and improve the key public services that the British public care about: education, combating crime and our national health service. In part we have achieved that by increasing efficiency within the priority services, but inevitably we have also had to find savings in other programmes. [Hon. Members: “Whisky.”] You will find out in a minute.

    Falling unemployment and lower inflation has helped to reduce the social security and employment programmes. We are also continuing to transfer activities to the private sector where this is more efficient as it is for student loans. We have refocused the housing programme to encourage the use of private finance and the transfer of the local authority housing stock to the private sector. We are stepping up our programmes against fraud. We are continuing our remorseless squeeze on the costs of bureaucracy itself. And we have looked in every department for ways of achieving our objectives more economically. With efficiency savings, most departments will be able to deliver their programmes next year, but with less public money in real terms.

    Private Finance Initiative

    People pay their taxes in order to get good quality public services, not to accumulate state-owned buildings. This simple truth has led to the development of the private finance initiative.

    The PFI helps to square the circle of sound public finances and growing demand for better and more modern public services by tapping the expertise and the resources of the private sector.

    A year ago we had agreed £1.5 billion worth of deals – now we have agreed £7 billion, and we are on course to double that by March 1999. Time and again the taxpayer is getting better value for money, through new road schemes, new prison services, and information technology projects. And reforms to local government rules are bringing the PFI into new areas, notably schools.

    London is currently experiencing a transport investment boom under the PFI: the channel tunnel rail link, Thameslink 2000, the Docklands light railway extension, and the A40 and A13 improvements. This is in addition to conventional public and private capital spending on the Jubilee line extension, the Heathrow express and the new A12-M11 Hackney link. Investment in London Transport is now running at 50 per cent. in real terms above the average for the 1980s. London will soon become one of the biggest construction sites in the country. As a defiantly provincial Nottingham man, I can only say that I hope that London will be even nicer when it is finished.

    Adding traditional capital spending to PFI investment, publicly sponsored capital spending in the United Kingdom in the next three years will be substantially higher in real terms than it was in the 1980s.

    Social Security

    One third of all public spending goes on social security. Our social security system is there to provide an income when people cannot earn because of sickness, disability, unemployment, caring for relatives or old age. People on the left and the right of politics continue to search for a radically different and better way of meeting those needs in our wealthy nation. I have studied many of their proposals closely and so far, I am afraid, nobody has yet come up with anything remotely sensible or practicable.

    Until people come up with a radical alternative, if they ever do, our welfare safety net must remain affordable. We must not allow the welfare state to damage the incentives of individuals or businesses in the private sector, because it is the wealth-creating enterprise economy that sustains our entire social security system.

    In the post-war period social security has grown in real terms by around 5 per cent. each year. In recent Budgets we have taken action to bring that growth under control. We now expect future growth of 1.5 per cent. a year – well below the growth of the economy.

    Year after year, this Government have also vigorously attacked fraud and reformed benefits to target them on those in genuine need. The measures that I now propose in this Budget intensify those efforts yet again.

    We plan a further move to align the benefits paid to lone parents and couples with children, because both care for children. From April 1998, new awards of family premium and child benefit will be the same in value for lone parents as for couples. We are introducing a number of measures on housing benefit and council tax benefit to ensure that those on benefits do not have a more comfortable life style than some of those who are supporting themselves on modest incomes. The contrary would be unfair and unwise. Full details will be made available later today by my right hon. Friend the Secretary of State for Social Security who, with your permission, Mr. Deputy Speaker, will speak later in the Budget debate.

    In my Budget two years ago, I announced a whole package of measures to help the unemployed get back to work – from improvements to the family credit system to national insurance holidays for employers taking on long-term unemployed people. Those are contributing to the steadily improving jobs position.

    In this Budget I am providing another £100 million worth of new money for new measures mainly targeted on people who have been unemployed for two years or more. First, they will be required to attend a compulsory programme of interviews with the Employment Service to give them a helping hand to compete in our ever improving market for jobs.

    We are expanding Project Work pilots to a further 28 areas. That will create up to 100,000 new opportunities, on a programme with a good track record for getting long-term unemployed people back to work. The pilots have been successful.

    I can also announce pilots for a new scheme called Contract for Work. Private contractors will help people to find work. Those firms will be paid by results. As with Project Work, if the scheme works better than the existing approach, we will expand it. We have drawn on some American experience. We will adapt it to Britain and, if it works, we will widen its application. We must tackle the problem.

    Dependency on welfare impoverishes us all. The welfare system should provide a safety net. It must provide the support that a caring society wants to give to our less fortunate fellow citizens. But the welfare system must never be allowed to become a way of life. We do not want our social security system to be undermined by resentment.

    We have to take these careful measures. We must move people from dependency to responsibility for themselves and their families, because we are serious about protecting those in genuine need and we want to go on delivering that protection for the future.

    Spend to Save

    We want to combine a strong, affordable welfare system with a successful low-tax economy. That means that when we spend money on social security, it must go only to those who need it. It also means that when we levy taxes, we must make sure that they are paid and not evaded by those who ought to pay them.

    As part of our continuing fight against tax and benefit fraud and tax loopholes, I am introducing a package of measures called “spend to save”. That involves the planned spending of money, carefully targeted to save much more money for the general public, and to raise revenue. There will be more money next year to clamp down on benefit fraud. There will be more visits and checks on benefit claimants in high-risk groups, and the information that we already have on benefit claimants will be used more effectively to catch cheats.

    Inland Revenue tax experts will be redeployed to investigate even more rigorously how some big, sophisticated companies seem to pay so little tax. They will make sure that companies are paying what they owe, and what we intended they should owe. In short, we intend to do more about companies being “economical with their tax”.

    There will be more resources in the Revenue and Customs to stem the growth of the shadow economy. Tax cheats put law-abiding small entrepreneurs out of business, and we all lose from that. There will be more Customs and Excise officers to tackle value added tax and other tax abuse, including yet more to target the smuggling of alcohol and tobacco.

    The “spend to save” package will cost £800 million over the next three years to secure, in a well-planned and measured way, revenue and expenditure savings of well over eight times that amount – £6.7 billion. These measures are additional to the effective steps that we have taken previously.

    Running Costs

    “Spend to save” protects the ordinary taxpayer and the people in genuine need of benefits. It is certainly not about more bureaucracy or more red tape.

    We remain a Government committed to deregulation, and we are committed to a more efficient civil service. We have cut overall central Government Departments’ running costs by 8 per cent. in real terms since the start of this Parliament and we are going to reduce them by a further 7 per cent. by the end of the decade. Civil service numbers are already below half a million, and we expect this fall to continue.

    TAXATION

    The first duty of Government is to make sure that people can live their lives as they want and that businesses can flourish. People must have the opportunity of a good quality job to go to, a good standard of living, good schools and hospitals, and safe streets to live in. It is only when those essentials are secure and only when the Government have made sure that they are not borrowing more than they should, that a responsible Government can start to think about tax cuts.

    Last year I cut taxes paid by the ordinary family and this year I am able to cut a little more. I think that the message I have repeated over recent months has now been understood. If there are to be tax cuts, in my opinion they must be for keeps. That means that they must be backed not only by sound spending decisions but by a sound fiscal judgment.

    Consumer spending is strong and inflation remains in check. But a fiscal stimulus to the economy at this stage could be just as damaging as letting go of monetary policy. So, in setting my Budget, I have struck a careful balance.

    I want to cut taxes, but first I have to continue my drive to secure the tax yield. I want to make sure that the tax due is turned into tax paid. The balance of the tax burden must be distributed sensibly and fairly and it must not distort decisions or competition.

    I am introducing a number of measures which will help us to achieve this. I am plugging some loopholes to raise revenue, I am ending some tax reliefs that have done their job to raise revenue and I am adjusting some indirect tax rates.

    Securing the Tax Base

    Even though VAT revenues have revived in recent months, they are still coming in significantly below what was expected last year. This Budget includes a crackdown on some of the rather ingenious wheezes that have sprung up to get around paying VAT. The measures I am announcing will raise £0.75 billion in revenue next year, but they also protect a further £1.5 billion a year of existing revenue from further attack from ingenious accountants, acting lawfully and acting to take our revenue.

    Customs will restrict access to special VAT schemes for retailers. We will also tighten up the rules of VAT relief schemes for bad debts and the option to tax commercial property to prevent widespread abuse of these reliefs. I also propose to take steps against retailers who reduce their VAT bills when selling insurance with their products.

    We have already announced a three-year limit on repayments of VAT claims. This was a sensible precautionary measure in the national interest – not just that of the Exchequer. Recent high-profile court cases have revealed the potential exposure of the Exchequer to enormous claims for tax going back to when VAT was first introduced. No responsible Government could leave the Exchequer and, ultimately, all taxpayers exposed in that way. Government needs to strike a balance between what is fair to the individual taxpayer, and what is fair to the whole body of other taxpayers. The three-year cap that I have announced strikes that balance.

    But one feature that attracted particular criticism from not only accountants and their clients but others was that Customs and Excise retains the right to claim underpaid tax going back six years. That argument was rather disingenuous, because Customs and Excise does not claim underpaid tax on unexpected changes to the interpretation of the law when they go against taxpayers. However, Government must not only be fair – it must be seen to be fair. I have, therefore, decided that Customs’ right to claim underpaid tax, in cases where no fraud or malpractice is involved, should be restricted to three years as well.

    I will be releasing today details of a package of measures to stamp out tax abuse in a number of areas, including leasing transactions, the abuse of foreign tax credit rules and paying employees in their own company’s shares. I am sure that they will be accepted by the House and others as necessary and sensible measures to stem the growing loss of tax revenues, and thereby to protect the ordinary tax payer. I will not tolerate tax abuse. A number of those measures are being introduced – subject to the Finance Bill becoming law – with effect from today.

    Special tax reliefs can be a powerful tool. They can play an important pump-priming role, and encourage companies and individuals to change their behaviour in a way that benefits the wider economy. But by their very nature, they need to be used very selectively. We owe it to the ordinary taxpayer to keep each and every special tax relief under constant review to determine whether it is still justified, or whether it has now served its useful purpose.

    Profit-related Pay

    The tax relief that the Government introduced in 1987 to promote profit-related pay schemes has been a success. It has played a key role in reinforcing the Government’s strong beliefs that employees’ rewards should depend on the success of the business for which they work.

    I have always believed, and have argued publicly for many years, that in a modern enterprise economy people’s pay should be closely linked to the performance of the business for which they work. The best way for businesses to motivate their staff is to let them share in the rewards of success. I am delighted that tax reliefs have helped to get that idea accepted so widely.

    Tax relief on profit-related pay was always intended to be a pump-priming measure, and it was introduced in very different circumstances. In the 1986 Green Paper, Nigel Lawson said:

    “There is considerable inertia to overcome, so it might make sense to offer some temporary measure of tax relief.”

    Profit-related pay is now firmly established as part of British businesses’ pay policy. It is one of the reasons for our success. More than 3.7 million people are in schemes. Ten years on, the temporary tax incentive has successfully served its pump-priming purpose.

    I can no longer justify the ever increasing cost of the tax relief to the 22 million taxpayers who are not in profit-related pay schemes. We cannot permanently divide the work force into groups of people who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not. The aim of the relief – a widespread use of PRP – has been achieved, and I would rather make faster progress on lower taxes for everybody. We have changed the culture.

    Good managers in today’s enterprise economy no longer need a tax relief to know that pay should be linked to their firm’s performance. Pay linked to profits produces it own rewards on the bottom line in a thriving economy.

    I shall describe to the House how the Government will start to withdraw this special tax relief. I intend to do that gradually, so I must ensure that businesses which need to adjust their pay packages and their sharing of the rewards of success have ample time to make those adjustments.

    The upper limit of pay attracting the relief will remain unchanged at its present £4,000 until 1998, which means that no one will be affected before then. [Hon. Members: “In time for a general election.”] But during the lifetime of a Conservative Government. It will then be progressively reduced until the year 2000, when the relief will be withdrawn altogether.

    Capital Allowances for Long Life Assets

    Investment is vital to our recovery, and business investment is now growing strongly. The tax system recognises investment through capital allowances. These allow the cost of investment to be written off against tax bills, frequently faster than it is written off in commercial accounts. But within that system, for plant and machinery with a long lifespan, the rate at which costs can be written off for tax is far more generous than for other types of investment, and bears no relation to the useful economic life of the asset. This is an unjustifiable distortion in the tax system in favour of particular types of business and investment.

    I propose changing the capital allowance for plant and machinery with a life of more than 25 years to 6 per cent. on a reducing balance basis. That will spread the tax relief more evenly over the average life of these assets. Groups spending less than £100,000 a year on such assets will be exempt. This will mean that the vast majority of small companies will not be affected. Ships and railways will also be exempt.

    Oil Production

    I also propose to withdraw the 100 per cent. corporation tax deduction for the intangible costs of drilling most production oil wells.

    OTHER TAX CHANGES

    The Government recognise that low marginal tax rates on income are a spur to hard work and enterprise. Taxes on spending do less damage to effort and enterprise than taxes on income, but the balance of the taxes that we do impose on spending must be right, and I am making some changes to taxes which help to move towards a better balance for the tax system as a whole.

    Insurance Premium Tax

    I propose to increase insurance premium tax, which applies to most general insurance, to 4 per cent. Three quarters of all insurance – including life insurance, and other long-term insurance – will remain exempt. Insurance remains undertaxed for consumers compared with other services in this country.

    The introduction of the tax – I made it a very low rate – did not harm the healthy insurance industry that we have. Most companies absorbed the tax, and some premiums actually fell for a time. Even after this further modest change – which I think is lower than many people expected – the overall rate of insurance premium tax in the UK remains very low, lower than in almost any other European Union country.

    Air Passenger Duty

    Air travel has also been undertaxed, because it has proved difficult – still proves difficult – to get international agreement to tax its fuel. The rates of air passenger duty are to be increased. The £5 rate on flights to most European countries will be increased to £10, and the £10 rate on flights to the rest of the world will be increased to £20. Those increases will not come into effect until 1 November 1997. [Laughter.] I realise that we are all thinking of a forthcoming election, but the reason why the Opposition cannot produce a responsible economic policy is plainly that they are obsessive about it. The very good reason for delaying until November 1997 is to give tour operators who have already sold their packages time to reflect the new rates in the prices that they publish in their holiday brochures. I announce necessary things before an election. That is responsibility; that is what is totally lacking among Opposition Members, who seem to propose to announce nothing whatever of any substance, apart from a windfall tax, this side of the election.

    Business travel is soaring, and the holiday business is booming at the moment in prosperous Britain. This modest change will not stop it booming in future prosperous years. About 40 per cent. of the revenue raised by passenger tax is borne by overseas visitors.

    Vehicle Excise Duties

    I am making the same changes to the main vehicle excise duties this year as I did last year. The cost of a car tax disc will go up by £5, around the rate of inflation. The cost of a lorry tax disc will be frozen for the seventh year in succession.

    Road fuel duties

    I firmly believe that motorists should bear the full costs of driving – not only wear and tear and congestion on the roads, but the wider environmental costs. Even those of us who frequently have to drive – and, contrary to rumours that Ministers always travel in limousines, that includes most hon. Members – can take steps to cut fuel consumption and we all ought to consider carefully the use of our car.

    I intend to stick to my 1993 Budget commitment to raise road fuel duties by an average of at least 5 per cent. each year in real terms. In line with this, I am raising the tax on all petrol and diesel by 3p per litre from 6 o’clock tonight. Those tax rises will encourage fuel efficiency and help to control harmful pollution.

    Air quality package

    I am glad to say that pollution from vehicles is already coming down, helped by tax measures in previous Budgets. The tax measures that we took to encourage unleaded petrol were a huge success. It now accounts for two thirds of the petrol market. I want to go further in this Budget for green purposes or, to put it more sensibly, to attack pollution in cities and to improve air quality by effective steps to reduce particulate emissions – the smoke produced by diesel engines.

    In recent years, new evidence has come to light strengthening the health arguments for reducing particulates. This pollution is being reduced, but we all want to see it being reduced further and faster.

    Ultra-low sulphur diesel is cleaner than ordinary diesel and it is slightly more expensive to produce, so I want to create the conditions where ultra-low sulphur diesel can cost the same at the pump as ordinary diesel. I have just said that I am increasing the tax on diesel by the same amount as petrol. I plan to reduce the duty on ultra-low sulphur diesel by 1p per litre relative to ordinary diesel, when I get the necessary international agreement.

    I also want to encourage high-mileage vehicles in our towns and cities to switch to cleaner gas power. Last year’s Budget changes broadly equalised the pump prices of liquid gas and petrol. From 6 o’clock tonight, I am reducing the duty on road fuel gases by a further 25 per cent.

    I also intend to reduce vehicle excise duty by up to £500 for lorries meeting very stringent emissions standards from early 1998. That will give an incentive for lorry owners to fit particulate traps or to convert to gas power. We will be consulting on the practical details of those changes.

    I believe that this air quality package will significantly speed up the reduction of urban emissions of particulates, helping us to meet our air quality targets for 2005 and beyond. We intend to ensure that the economic growth that we are achieving faster than others in this country is consistent with a healthy environment and with sustainable development as we become one of the most successful economies in the western world.

    In my 1993 Budget, I gave a commitment to raise duty on tobacco by more than inflation each year. I believe and accept that that is a fair and effective way to hammer home the message that smoking can seriously damage one’s health. So far as I am concerned, this announcement is necessary masochism in the wider public interest.

    From 6 o’clock this evening, the tax on a packet of 20 cigarettes will increase by about 15p, on a packet of small cigars by about 7p and on a packet of pipe tobacco by about 8p, but I am limiting the increase in the duty on hand-rolling tobacco to the rate of inflation. Hand-rolling tobacco is proving to be by far the easiest tobacco product to smuggle, although it represents a very small part of the tobacco market.

    Mr. Terry Lewis (Worsley): What time do the shops close?

    Mr. Clarke: Not yet.

    Alcohol

    I am aware of the serious problem that cross-border shopping and smuggling of alcohol causes our drinks industry in Britain. I have already announced that customs is further stepping up its efforts to catch smugglers.

    Last year, I was able to freeze the duty rate on beer and wine. This year, it will remain frozen. The proportion of tax on the price of a pint in the pub is now at its lowest level for 30 years. For some of us, that helps to keep our small cigars affordable – [Laughter.]

    Last year’s cut in the duty on spirits was the first cut that any Chancellor had made for 100 years, and I was tempted to maintain a striking rate of once every 100 years. But I am sure that the industry will be glad to know that it will not have to wait so long this time. From 6pm tonight, the tax on whisky, gin and other spirits will fall by another 4 per cent., which is worth 26p. The reduction in the rate on spirits boosts an important industry in the United Kingdom, and it will also reinforce last year’s signal to overseas authorities not to discriminate against our products. Only smugglers will regret that we are slowly moving our duty on spirits nearer to the continental level.

    From 1 January, the tax on alcoholic soft drinks will be increased by over 40 per cent., which will put up the price by between 7p and 8p a bottle–for those who have not yet tried them. That increase will meet public concern about the attraction of the “alcopops” for under-age drinkers, but it will also attack a distortion of competition by bringing the tax broadly into line with that on beer. The House will notice that I have considered carefully the balance of my overall package on this matter, and I have not yet been converted to a bubble-gum flavoured “alcopop”–[Laughter.]

    Business

    Nothing matters more for business than a stable economic environment – low interest rates and low inflation – and businesses throughout Britain are benefiting from the healthy sustainable growth in the economy that I have described today.

    As I promised in my last Budget, there will be, from April 1997, a cut in the main rate of employers’ national insurance contributions, to 10 per cent. The cut will be paid for by the proceeds that we are receiving from the landfill tax. A tax on waste is cutting a tax on jobs, and it will benefit employers in Britain and make it even cheaper to create new jobs in our growing economy. Our overheads on jobs are already less than half those in Germany, France or Italy. I am determined that we must keep that advantage over our competitors on the continent, where the creation of new jobs, in the rest of the European Union, is over-regulated and over-priced. That fact is another practical reason for being confident that our unemployment will keep falling.

    In this Budget, I propose to keep the three intermediate thresholds for employers’ national insurance contributions where they are now. I propose to increase – by £10 and £1, respectively – the upper and lower earnings thresholds for employers’ and employees’ national insurance contributions.

    In this Budget, I also want to deal with a particular concern of our small businesses, upon which so much of our future economic prosperity depends. I think that small businesses are most concerned about the burden of non-domestic rates.

    The uniform business rate is a fixed cost which can rise each year beyond the control of the manager of any business, and it hits the small business hard. Since the last revaluation of business rates, I have repeatedly slowed down the increase of rates for those businesses whose rates have had to go up. No business property has seen its rates go up by more than 7.5 per cent. above inflation in any one year. But I want to do more than that; it is not good enough. I have decided to freeze next year’s rates bill for all small businesses whose rates would have gone up. Small properties whose rates are falling will have those reductions accelerated, which will benefit over 1 million small business properties, by up to £130 a year.

    I want to go further. A freeze is a significant step that I can make right away, this year. We have already reduced business rates for rural village shops. But I realise that the current system of business rates bears particularly hard on smaller businesses, for which it represents a much bigger proportion of total costs compared with their large competitors. We must therefore move on as soon as possible to make more changes in the system to recognise this and to redistribute the burden more sensibly between smaller and larger businesses. My Budget next year will be a convenient opportunity to proceed with that.

    Inheritance tax

    The Government are committed to reducing and then abolishing capital gains tax and inheritance tax. I repeat those commitments. But we have always said that we will cut these taxes only when we can afford to do so. This is a responsible Budget which is protecting future growth and prosperity by putting the public finances into a healthier state. We will not be able to make progress on both these taxes this year.

    Mr. John Prescott (Kingston upon Hull, East): Next year.

    Mr. Clarke: The right hon. Gentleman can come back next year and discover from the same seat that he is now occupying.

    I am pleased to announce that we can take a further significant step towards abolishing inheritance tax. Inheritance tax is nowadays a penalty on thrift, independence and enterprise. It is a growing anachronism.

    Lloyd George’s maxim that the “the most convenient time to tax the rich is when they are dead” no longer holds. Inheritance tax today is largely paid by people of modest means who either cannot or simply do not make careful plans to avoid it. [Hon. Members: “Modest!”] Modest means in the opinion of all those outside the hard core of the labour movement, that is.

    Last year I made significant progress towards our commitment. In this Budget I will build on that by raising the value of the inheritance tax threshold to £215,000.

    Mr. Dennis Skinner (Bolsover): I read that this morning.

    Mr. Clarke: The hon. Gentleman appears to know that from this morning. Is he also aware that the Government have raised that threshold by 40 per cent. in only two years?

    Tax rewrite

    In last year’s Budget I announced a project to rewrite Inland Revenue tax legislation in plain English. That is a tall order. The project is as ambitious as translating the whole of “War and Peace” into lucid Swahili. In fact, it is more ambitious. I am told that “War and Peace” is only 1,500 pages long. Inland Revenue tax law is 6,000 pages long and was not written by a Tolstoy. We have consulted extensively on how the project should be carried out, and I am glad to say that there is wide consensus. The Inland Revenue will publish the plans and arrangements shortly after the Budget.

    The aim is to prepare a series of rewrite Bills, the first of them to be ready for enactment in the 1997-98 Session. My noble and learned Friend Lord Howe has produced a thorough and helpful report on how Parliament might handle those Bills. We endorse his broad proposals, and invite the Procedure Committee to consider how the House is going to handle the Bills in a sensible fashion. I can announce that my noble and learned Friend Lord Howe has agreed to chair the steering committee that will oversee the rewrite project.

    The project will bring the benefits of clarity and certainty to businesses and ordinary taxpayers. It has been widely welcomed and deserves the continuing support that it has enjoyed in all parts of the House.

    Income Tax

    The Government have led Britain towards our clear goal of a low-tax economy in which private enterprise has the incentive to generate jobs, investment and wealth to make people and their families more prosperous. We are moving towards a low-tax economy in which individual living standards continue to rise and the Government can afford the excellent public services that people want.

    Low direct taxes are the most effective way to encourage enterprise and hard work – a message to which we have not converted Labour Members, but one that they no longer dare to deny. Under this Government, those who do an honest day’s work and those who take entrepreneurial risk will keep more of what they earn and save by their own efforts.

    This year, people have taken more heed of my speeches on the overriding priority of securing future prosperity and jobs and financing key public services. Sensible people already expected my cuts in direct taxation to be modest before they read the one leak and many guesses this morning. They know that their well-being depends on lasting growth and more jobs and that living standards rise from a combination of steadily rising incomes in a successful economy and steadily lowering taxes. Tax cuts matter a lot to low-paid people and to men and women in ordinary jobs.

    I announced my income tax cuts last year as a return to our tax cutting agenda and, for the second year in succession, as a result of all the steps that I have announced, I can afford to deliver an instalment of that agenda. The choice is how best to do so. It is the old dilemma between thresholds and rates. Today it is between The Guardian, the Daily Mirror, The Independent or The Sun.

    I want to ensure that tax does not start to be paid at too low a level of income and I want to improve work incentives. Therefore, I propose to raise the threshold below which no income tax is paid at all.

    In this Budget, I am making an increase in the basic personal allowance of £280. That is 3.5 times more than necessary to cover the rate of inflation. It will also ensure that each and every person who pays any income tax at all will get a direct benefit out of the Budget.

    I am also increasing the married couple’s and related allowances by £40, maintaining the extra tax allowance to all married couples. It will now be worth nearly £275 each year for married couples. The tax system does recognise marriage, contrary to popular belief.

    We also give a special tax allowance to blind people. This year, I am increasing that by the rate of inflation. I am also moving to put indexation of that allowance on to the same statutory basis as for the other income tax allowances. I also propose to raise the threshold above which people start to pay the 40p higher rate tax by £600.

    One of the Government’s most important pledges is that we will move to a basic rate of income tax of 20p as soon as we can. We are proving that we can move towards the delivery of that promise and still maintain healthy public finances. Every step that we take makes that more credible and makes it more affordable to reach the ultimate goal to which we are getting tantalisingly near and which a Conservative Government will achieve. As a further step towards that, I propose to widen the lower rate band of 20p tax by £200 – twice as much as is required to meet indexation.

    That will mean that the slice of income on which a 20p tax rate is paid will have more than doubled during the lifetime of this Parliament. More than one in four of all taxpayers will now pay a marginal rate of tax at 20p in the pound.

    They are wide thresholds, so were the newspapers wrong? Am I indeed going to cut a penny off the basic rate of income tax? What the newspapers did know was that my control of public spending and borrowing and the responsibility of my Budget means that I can raise thresholds, widen the 20p band and also responsibly afford to reduce income tax as well. If I had put it all on tax rates, I could have taken 2p off the basic rate of income tax, but I preferred instead to raise personal allowances and widen the 20p band for those at the bottom end of the scale. In addition, I am able to reduce the basic rate of income tax by one penny to 23p in the pound.

    The small companies rate of corporation tax will be reduced to 23p in line with that, helping 400,000 companies. The main rate of corporation tax of 33p is already lower than in any other major industrialised country. I look forward to hearing what the Labour party says about the basic rate of income tax.

    Seventeen years of steady progress – so far – means that the basic rate of income tax is now a full 10p lower than the rate that we inherited in 1979. The standard rate is now the lowest for nearly 60 years – since Stanley Baldwin was Prime Minister and Wally Hammond scored a double century at the Oval.

    Another penny off the basic rate is a significant further step towards this Government’s target of a 20p basic rate of tax. For more than 7 million people, our promise of a 20p basic rate is already a reality. I am bringing other income taxpayers ever closer to that reality. A basic rate of 20p is a realistic and attainable goal for the next Parliament. We shall not be content until we have completed the task of getting it down to 20p and every Budget that I have presented has shown step by step how we shall get there.

    With increases in real earnings and all the tax changes in the Budget, a family on average earnings will be another £370 better off next year over and above inflation. We said it last time and it happened. The same family will have more than £1,100 more to spend each year after tax and inflation than they did before they voted Conservative at the last general election. In 1992, the background was one of a worldwide slowdown, but now we are enjoying strong growth and rising living standards, and we shall enjoy more of the same.

    In November 1993, I promised that I would put Britain firmly on course for a sustained period of rising prosperity and falling unemployment, based on low inflation and healthy public finances. I have done what I clearly said I would have to do and I have delivered on those promises.

    The Budget cuts public spending next year by £2 billion, and it generates an extra £0.5 billion in revenue through “spend to save”. It contains a balanced tax package – it includes tax cuts of £2 billion while it secures the tax base by £1 billion. Taken together, the effect of the Budget is to tighten fiscal policy and so protect healthy lasting recovery – and still achieve our target of cutting the basic rate towards our 20p goal.

    I am a man of the world: I realise that virtue does not always brings its own rewards. I am probably not a particularly virtuous Chancellor, but this virtuous Budget will bring rich rewards the rewards of economic success to the hard-working men and women who are now in the best economic circumstances for years. It will also bring rewards to the Government. We should never forget that good economics is good politics.

  • Mr Major’s Speech to Businessmen in London – 10 January 1996

    Below is the text of Mr Major’s speech to businessmen in London on Wednesday 10th January 1996.


    PRIME MINISTER:

    Peter, Good Morning and thank you for taking the trouble to organise this event. It has been such a quiet and dull political period over Christmas that I have been looking forward to this morning with great anticipation.

    As you said a moment or so ago, Peter, we have gathered here in this room a very substantial number of the most senior businessmen representing the largest corporations and newspapers throughout the United Kingdom. Here are many of the people who make many of the crucial decisions about where investment goes and what actually happens to the future prosperity of this country. And so I want to spend most of the time speaking to you this morning about matters economic in one form or another, and then leave as much time as possible for you to ask the questions that concern you.

    Let me just back-track for a few moments and look over the last years to perhaps put today and tomorrow in a slightly better context. No-one doubts how difficult the last few years have been, the recession was longer than it was expected, it was deeper than we expected, it had a more profound psychological effect upon thinking in this country than many people anticipated when it began or even as it continued and seemed at one stage to be going on almost forever.

    Not just of course a problem for the United Kingdom, it was a recession that spread throughout all of the Western world and some parts of the rest of the business world as well. But it is behind us now and what I want people to concentrate on at the moment are the circumstances that face us at the moment and to wipe away the mindset that we have had for so much of the past 3 or 4 years.

    There is a tendency in human nature generally that if things are difficult they are going to go on being difficult forever; if things are excellent they are going to go on being benevolent forever. Neither of those things are true. We did have, as a country, in company with the rest of Western Europe, a very difficult economic period. But we have actually been out of recession technically for over 2 years and in reality out of recession quite substantially for a very substantial period now.

    What we need to do is to look at where we are, uncluttered by the memories of what happened, and look at the prospects that lie immediately ahead of us at the present time. And I say that because if we don’t do that, if we, government and business, leave ourselves with the mindset of 1992 and 1993 then we will miss the opportunities of 1997 and the years that follow it.

    Let me try and break some of the distorting prism of opinion that occasionally entraps people when they think about our prospects. I suppose you might call it an alternative news summary, some of the things that get less publicity than they might unless they appear in a brown sealed envelope.

    You touched upon some of them, Peter. Inflation probably, I think certainly, under more secure lock and key than we have known certainly in my political lifetime, and I don’t just mean in Parliament, I mean since I first entered politics as a 16 year old. We are certainly going to be well within our inflation targets. I suspect if the election is when I anticipate it will be that we will have met our 2.5 percent target that we set ourselves for inflation by the time we reach the next election. It is no longer, almost for the first time in the memory of most of the people round this room, a material problem to future investment because there is an acceptance that inflation is now under proper control.

    If we have broken the inflationary psychology, and I pray that we have, then both in the short term and the long term I think that is one of the most remarkable and benevolent changes for British industry and commerce that we have seen literally for decades.

    Secondly, interest rates, not quite at an historic low, but certainly by comparison with most of the last quarter of a century low and no serious risk in the short term that they are going to be significantly higher and we hope, all things being well, that it may be possible to reduce them.

    Mortgages at their lowest level for 30 years. Unemployment now having fallen for 26 months in a row, down to 8 percent. Our nearest neighbours, perhaps the closest economy – France – with unemployment stuck at around 12.8 percent, no major European economy having either unemployment as low as us in the United Kingdom or, and perhaps this is a better measure, no other major European country with as high a proportion of its adult population in work as we have in the United Kingdom. We have now beaten Germany on both those counts for the first time that I can! ever remember. And of course tax at its lowest level we have seen for 50 years.

    Now that wasn’t easy to achieve. It didn’t happen by magic. It did happen because throughout the past 3 or 4 years, often when we were invited to take decisions that would have been popular in the short term but damaging in the long term, we didn’t take those damaging long term decisions, instead we took the short term unpopularity and as a result of that we have the economic opportunities that lie immediately ahead of us at present.

    They are opportunities, they are yet to be taken, but I believe they are opportunities that put us well on track for the doubling of living standards in 20 years that I set out as our objective 18 months or so ago.

    Let us look at some of the other indicators that are now becoming apparent. At last, much slower, much later than I would have hoped, we are beginning to see house prices having increased for each of the last 5 months. After having had to put up taxes because of the size of the fiscal deficit, and it was frankly a choice between taxes going up or interest rates going up, and think it was right to deal with it, taxes are reversible when the time is right and we now have personal taxation back I hope on a downward trend. Sales rising. And although it isn’t directly an economic matter, it affects many people in this room, for the first time in 40 years the clearest possible indication that crime is now on a downward trend. And for those cynics who say, and there are sadly cynics in public life, that the crime statistics are rubbish, it is simply that people are not reporting crime, I would refer them to the insurance companies and the statistics that they have released for theft of motor cars for example. Because I think it is very hard to argue that anyone who has had their motor car stolen would not actually report it to the insurance company in order to make a claim. And that shows a distinct downward trend as well and you can see that elsewhere across crime.

    If I may make some other points. We have, despite the criticism of privatisation, the best single method of giving people a personal stake in society I would have thought, a shareholding stake in society, despite the criticism there has been of the privatised industries, some of it justified, some of it not, the reality is that the price of utilities, crucial to the living standards of people right across this country, are more stable than we have known them at any stage before and in most of the cases, in real terms, the price is actually falling.

    And if I may make a political point for a moment. That has been achieved over the past 4 years with a tiny parliamentary majority, all of which, as we have occasionally seen, not absolutely steady on parade on every single occasion, it has been achieved in a hostile economic environment and with a totally opportunistic and destructive political opposition.

    We have immediately ahead of us some legislation that is crucial for the future. It is very fashionable to take the view that there is an empty legislative programme. I don’t regard a Finance Bill that cuts taxes as being empty; I don’t regard an Education Bill that extends opportunity and choice as being empty; I don’t regard a Broadcasting Bill that begins to prepare us better than we have been prepared for, for the IT revolution that is taking place as being empty; neither do I regard the rest of the parliamentary programme as being anything other than absolutely necessary.

    We are now within 16 months or so of a general election. And if the principal opposition party can force it, of course they would like that election a good deal earlier. And I will tell you why. They would like the election earlier because like me they know they know that the economy is improving, they know that that is beginning to become apparent to people, they know that there is now going to be a rising level of net disposable income and people will feel noticeably better than they have done in the past and they would like to have the election early before that becomes increasingly apparent to people up and down the country.

    But there is at this election a great deal at stake, not just the protection of the remarkable changes that have been made throughout the last 16 years, not just the protection of those for they have made to our competitiveness a dramatic difference over that period, but much else besides. And I would say to those people who may be tempted by an alternative, it is a very dangerous proposition to play Russian roulette with all the barrels loaded, and no-one should assume that the advances that we have made would be safe with any alternative government. So people, not just business, but people up and down this country have a great deal to lose if they decide upon a reckless gamble of that sort.

    Let me touch upon some of those points and then I want to come to something which is very current at the present time. Benign circumstances, certainly; huge opportunities for the future, beyond a doubt, but they won’t necessarily be there with the wrong policies or with the wrong government. Does one really accept, do the people out there in the country really believe that Gordon Brown would have the same rigorous control over inflation that we have accepted, with great political unpopularity? Do people really believe that Robin Cook would defend our position in Europe with the same vigour that we have done over recent years? Are there people present who believe that Margaret Beckett is so concerned about competitiveness that she would ditch her personal wish to return much of the old trade union legislation that existed in the past? Is there anyone present, or indeed in the country, who seriously believes that Jack Straw would take a tougher line on crime than Michael Howard?

    Well I don’t think that there are. I could go on, I have overlooked John Prescott. Now I come to think of it, this is one of the things Tony Blair and I have in common because we both overlook John Prescott, I don’t invite him to meetings either and I appreciate why Tony doesn’t.

    It is worth concentrating on the fact that a government requires 18 Members in the House of Commons and something up to 30 in the House of Lords. And the mindset of most of our opponents, there may be a leader with one view but where is the heart of the party elsewhere? While the majority of the Labour Party still sings the red flag, the Leader may be humming Mandelson rather than the red flag, but the instinct of the party is where the instinct of the party has been in the past.

    Over the last few months it has been interesting to try and see the way in which political programmes for the future have been set out and I will return to our plans for making the United Kingdom the enterprise centre of Europe in a few moments. But just a few days ago, in Japan, the Leader of the Labour Party set out his plans for what he called a stakeholder society. It is not entirely clear what he meant by that. As with his reversal of Clause 4, there was a hint in his speech and his spin-doctors then explained what it was that he might have meant by what it was that he almost said.

    But a stakeholder society is either a soundbite too many or alternatively it is the beginnings of the return to some form of corporate society. And I will set out for you why I believe that is so. Perhaps it is meaningless, who can tell? We certainly in the past have frequently seen spin-doctors elaborating on what has been said, that is the style of the Labour Party. But if it is old-style corporatism then I think we had better flush that out before people just overlook it and we skim on. Because what that potentially is is very damaging for the United Kingdom.

    Who are the stakeholders to be? Are the stakeholders to be 30-odd million adults? And if they are to be the stakeholders, why are they not to be stakeholders in the form we have built up over the last 16 years, with their own personal pensions, with their own homes, with the lowest level of taxation, with shareholdings, more shareholders now than there are trade unionists in this country? That is a genuine stake. People have a real interest, literally a share in this nation that is personally theirs and not determined by some other body on their behalf telling them that they, the body, are looking after their interests for them.

    But if the stakeholders, as I suspect from what we hear, are quite different bodies then we are in a different ballgame. And I rather suspect, as so often, that Margaret Beckett was revealing the truth of what is planned when she said just the other day, and I quote: “There is growing concern that the many interest groups, in particular the general public, consumers and so on”, she wanted to soften it of course, “are excluded from some of the thinking in industry in the past and there is a general exploration of how we can create more common ground, how we can make sure that all interests are taken into account when we look at stakeholders.”

    Well I will tell you who they really mean. They mean the special interest groups, they mean the trade unions, they mean the people that so often are covered by so much of the social chapter type of thinking in this country. That is what I suspect they mean when they actually talk about stakeholders.

    What I believe we are seeing is the tip of a plan which is nothing better than a fancy packaging for new burdens on business of one sort or another. And although some of those burdens that have already been apparent that sound benign, they are not. A minimum wage does sound benign, particularly to those who are very poorly paid, but it is not benign because it often means that those who are poorly paid would not be paid in a job at all if you had a minimum wage legislation. A training levy, which I think would be a great mistake to introduce. The social chapter – the problem with the social chapter is twofold, it is not just what is in the social chapter at the moment, damaging enough though that is, the real danger were the United Kingdom to sign up to the social chapter in Europe and leave it free across the whole of Europe is not so much what is in it now but what would then be brought into the social chapter because that is the ambition of nearly all the rest of our European partners to bring much of their domestic social legislation, under the social chapter heading, in order to remove their competitive disadvantage against the United Kingdom in particular and other countries in general.

    And I will not sign up to that, and I will not sign up to that for a moral reason and I will tell you the moral reason. When our political opponents talk of the social chapter they talk of it in very benign terms from the point of view of someone who is in work getting greater protection. Well I gloss over the fact that few of them would be in work. But I would put this question to you.

    If you make it more expensive to employ people who are in work, the employer will firstly employ less and it will be correspondingly more difficult for those not in work ever to get themselves into work. It is politicians across Europe, using employers’ money to buy popularity for themselves and the losers are the people not in work who, as a result of that, might never get into work or certainly would have their chance of getting into work greatly reduced.

    And I have to tell you, I don’t just think that is economically wrong, I think that is plain immoral when you actually look at what the practical effect would be. Right the way across the European Union there is too much unemployment. 20 million or so adults in the European Union are unemployed. And if you look at the trend from 1950 onwards, it doesn’t matter whether it is good days or bad days, boom or bust, you have had that underlying growth in unemployment. And why, when the rest of the world has been creating jobs? Because we have become relatively less competitive. It does not matter a tuppenny damn within the European Union if there are minor changes in competitiveness.

    What does matter is if throughout the whole of the European Union we become less competitive to Japan, to the United States, to Latin America, to the Pacific Basin countries, and that over 30 years is what has been happening. And that is the matter, the principal matter, that so many people in the European Union ought to be turning their mind to rather than so many of the narrow and institutional questions that have bothered people so much over the last few years.

    Now let me turn to the ambitions that I would wish to see this country achieve. Let me firstly put our position in context. The government, on behalf of the public, spends at the moment about 42 percent of the national income. I compare that 42 percent to the average of 52 percent elsewhere in the European Union – 52 percent elsewhere, 42 percent here. But that 42 percent also needs to be compared with our other competitors around the world, and it is too high, and the expenditure plans that we have will bring it down below 40 percent and then I believe there is scope to reduce it a little further, though precisely how far I wouldn’t care to judge at this moment, but certainly we will get it down below 40 percent and then lower still if we can to open up the prospects of greater competitiveness and lower tax burden on both industry and on individuals. And I believe that is eminently achievable providing we keep a proper grip on inflation and the sort of economic policies that we have followed over the past few years.

    Where are the priorities? When? And I make no promise about the date, nobody say I am making distinct tax promises, but let me set out the objectives that we will reach when it is affordable.

    Certainly we retain the objective of a 20 pence basic rate of tax. I can offer you no promises of changing the 40 pence, I don’t think that is a priority and I don’t wish to pretend to you that it is. But to get a 20 pence basic rate of tax does seem to me to be a very attractive priority.

    I think in terms of enterprise taxes, and I will have a lot to say about enterprise over the next few months so I won’t concentrate on too much of that this morning. But in terms of enterprise, as it becomes affordable, let me repeat what I have said in the past. I believe it is in the country’s interest, economic, socially and certainly in terms of competitiveness, to over time abolish both inheritance tax and capital gains tax. I believe that the impact that the change in those taxes will have on the flow of investment will be of great benefit to many of the people who will wish for themselves and their children to have secure and growing employment prospects. I know it will be criticised as being aid to fat cats, of course that is always the politics of envy argument that can be used. But the best aid to people is to make sure that they actually have the opportunity of a decent job with decent prospects for the future, and that doesn’t magically appear without using the private sector to generate the investment that is necessary. And if people themselves earn success and rewards for that investment, I am not going to object to that. I would prefer to look not at the gains that they may get but at the opportunities that that investment by then will provide for many other people to be in proper and gainful employment. So I see those changes.

    Clearly there is a great deal more to be done on deregulation. It is, I have to tell you frankly, like wrestling with a greasy pig, every time you deregulate here there is a new regulation that pops up elsewhere that is often gold plated because the people determining the regulations say well if I don’t gold plate it and something happens to go wrong, when the inevitable inquiry occurs I will be blamed. And so there is a great deal of gold plating of regulation and I think business is right to be critical of that fact over the years and we must look further to see how we can deregulate.

    I just want to indicate one other point about the social chapter. I said how damaging it could become, but let me just illustrate in terms of social on-costs what it might mean. You employers, many of you round here in the United Kingdom, for every 100 pounds in wages that you pay out you would pay out an extra 18 pounds in on-costs of one sort or another. In Germany it wouldn’t be 18 pounds, it would be 32 pounds. In Spain it would be 34 pounds. In France it would be 41 pounds. And in Italy it would be 44 pounds. Is it any surprise when you begin to hear those figures and see the reality of what it means, that we are the principal centre for inward investment across the whole of Europe and that it is this country that is creating new jobs and seeing unemployment fall, and our European partners who are losing jobs and seeing unemployment remain at a stubbornly high level?

    We have immediately ahead of us, and because I wish to leave questions for it I will not enlarge on it in any detail, some crucially important decisions for this country. Just because we have an economy that is benign doesn’t mean there aren’t very big decisions to be taken. There will be important decisions on European matters on a number of fronts – the Intergovernmental Conference, the single currency in due course, difficult questions on defence and the way in which NATO evolves and also its relationship with the Western European Union and conceivably the European Union itself. And most crucial of all in many respects, the way in which enlargement of the European Union is itself handled, something that I regard of critical importance. Again, while so much of the debate and discussion has been about institutional matters within the existing Europe, the opportunity for this generation of politicians to fundamentally improve our security in the future by extending the borders of the European Union, of the free market and embracing in the democratic embrace of Western Europe lots of countries of Central and Eastern Europe, the opportunity for doing that is greater than we have known in the past, and if this generation of politicians misses that opportunity the time may come in the future when people would curse us for our short-sightedness in not having ensured democracy in those countries that only escaped from a communist embrace within the period of the last few years.

    They are big questions, apart from the domestic questions of continually expanding and unfolding the entrance into what was once the secret garden of education so that parents have proper choice and opportunity. These are matters of crucial importance to our future, they are matters where the choice between the parties is very great.

    You asked me, Peter, at the beginning, was this election there to be won, and the answer is yes it is. I have not a shred of doubt in my mind that the opinion poll figures are wholly illusory, neither do I have a shred of doubt in my mind that we can and that we will win that general election. Of course it is going to be a fight. I recall what I think it was John Paul Jones said when faced with a particularly difficult naval battle: “Fight”, he said, “I have not yet begun to fight”. And there is up to 16 months before the general election with a growing difference between the parties. The stakeholder speech the other day may well open red water between the two parties because I believe, if it means the corporatism I think it means, it is a fundamental political error that the Labour Party have just made.

    So yes we are going to fight for this election, not just because we want another period of power, we have had 16 years of power, but we are going to fight for this election because we have built up in the last 16 years a greater stock of improvement in the life standards of the average Briton than we have seen in any 16 years of government by any political party at any stage in this century.

    And I don’t wish to see that thrown away, I do wish to see it built on over the next few years, and I intend to see that it is and I intend to be there to do it.

     

    QUESTIONS AND ANSWERS

    QUESTION (Peter Jay):

    Prime Minister, do you believe the Chancellor’s forecasts for growth over the next 18 months can be achieved with interest rates at their present level and if you do, why?

    QUESTION (Geoffrey):

    Prime Minister, taking that you want to get people under control on parade, do you think you’ll be able to achieve that from now on?

    QUESTION (Nigel Wright):

    The Prime Minister talked about an enterprise society and his wish to abolish capital gains tax. As the First Lord of the Treasury do you think you could actually approach them to find a way of doing this sooner rather than later?

    PRIME MINISTER:

    Let me start with Peter’s question, do I think the growth forecast is going to be reached? Yes, I do. What you are inviting me to do is to offer you a suggestion as to what is going to happen with interest rates and I am pleased to see you nod in agreement that is what you’re inviting me to do and you will know, as a very distinguished journalist, that I’m not going to do that but yes, I do think the growth forecast is going to be reached and I admire the way in which you approached the question.

    Geoffrey’s question, whether we can keep people on parade: I made the point perfectly clearly when I spoke to David Frost on television on Sunday morning. I know you will all have been up early watching so it is barely worth repeating but I will repeat it in any event.

    People in this country don’t like parties that are divided and squabble amongst themselves. I said this election is there to be won and I said it is there to be lost. I think we can win it. If the Conservative Party divides and squabbles, then it will lose it and that is a fact of life and all of my colleagues in the House of Commons had better recognise that and the things that most of them don’t wish to come about would almost certainly come about if we lost the election and our opponent was there. I think the only conclusion from that is self-evident: they had better be on parade because then we will win the election.

    On Nigel’s point about capital gains tax, it is the first tax plea I have had for 1996, it certainly won’t be the last. I said earlier I am not going to give you a time-scale for this, the Chancellor will announce his budgets in due course. What I set out was the ambition and the reason for the ambition.

    The reason for the ambition is that I think it would have a beneficial effect on investment domestically, investment externally into the United Kingdom and the creation of wealth, the creation of jobs and the dispersal of wealth so we will do it as soon as possible but I think your question was in the Peter Jay class and I am not going to tell you when.

    QUESTION (Peter Stothard):

    The message that you set out of the economic advantages are very similar to the ones that appeared in a set of advertisements in June in the press. It can be very expensive I think to get that message across via direct advertisements. Do you feel like taking the opportunity of talking to all these wealthy chaps to ask them to support your attempt to get that across?

    PRIME MINISTER:

    There is more than one way of getting a message across.

    Certainly advertising is one and it is a very important one and I hope we advertised in “The Times” amongst others on this particular occasion in order to do so.

    If that was an offer of a contribution, Peter, I accept it. I am happy to stay behind and take the cheque personally and hand it over to the party treasurer. I am sure others will have heard your plea on behalf of the Conservative Party.

    I will try and get the message over by repeating time after time the practical opportunities that lie ahead. I will just digress for one second because the point Peter makes is a very important one.

    When I said there are huge opportunities, we are also in a world where change is moving more rapidly than we have ever seen it before, it is very bewildering for people. I am not surprised that out there many people are bewildered and unsettled in a world that is changing faster than anything we have ever experienced before.

    I saw a presentation just a few days ago of the IT revolution that is coming upon us. I thought I was pretty up-to-date on what was happening but I have to say I was astonished at the speed at which that revolution was moving and of what it will actually mean for life standards, living styles and opportunities not just in the distant future but over the period of the next five years or so and I believe if we don’t take those opportunities here in IT, in broadcasting or elsewhere, we can be certain that our competitors around the world will take them to our disadvantage so that is why I think it is so crucial to maintain that stable economic situation because only in that stable economic situation will we have the right investment and the right confidence to take those particular developments into the future and so that is a further reason that Peter reminds me of, that I think it is so crucial we maintain present economic policies and build on them.

    QUESTION (Michael Cassidy):

    Prime Minister, in spite of your very novel but nonetheless welcome article in the “Evening Standard” on issues to do with the capital city and the sound of Whitehall gunfire now reaching us on the question of is there going to be a London or non-London solution for the millennium site, I wonder if you would care to comment on what appears to be a change of policy on the part of the Leader of the Opposition towards embracing an elected-mayor solution for our capital city and perhaps for other parts of the country.

    QUESTION (Alan Shepherd):

    You mentioned enterprise, Prime Minister. Could you say a word about what was said by you and Malcolm Rifkind at the Party Conference about getting closer working of the European Union and NAFTA as part of that enterprise?

    QUESTION (Sir Michael Jenkins):

    A little bit the same question, Prime Minister. Two years ago addressing this group, you invited business “to put its head above the parapet” I think was the phrase you used about Europe. I wondered whether you would be issuing the same invitation to us today and if so, what kind of message about the parapet you would like to see coming from the business community on Europe.

    PRIME MINISTER:

    Let me deal with Michael Cassidy’s point about elected mayors. I am not very attracted to elected mayors. We flirted with the same idea ourselves three or four years ago. We looked at it, we examined it, it had some attractions – not everything suggested by our political opponents is completely loopy! It does have some attractions and we examined it for some time but I think the downside of it is greater than the attraction. It is not an instinctive part of the way in which we have governed ourselves in the past.

    If elected mayors were to have the sort of credibility that is supposed, they would have to be elected in much the same way that the Mayor of New York, for example, is elected and I think that would have very significant ramifications for the way in which local government operates and the way in which local government raises its money and the relationship between local government and central government and when you examine the details of that, I think on balance the arguments fall against it rather than for it. I don’t object at all to the matter being examined. We examined it ourselves quite carefully before we rejected it three or four years ago.

    On Alan Shepherd’s point about the European Union and NAFTA, we do feel strongly feel about this. What has brought the matter forward is a combination of two factors:

    Firstly, the sheer difficulty there was in agreeing the GATT round and I mention GATT with some deference with Peter Sutherland sitting next to me, without him we wouldn’t have had the GATT round. The sheer difficulty there was of reaching agreement between Europe and the United States very nearly at one stage, because of the tensions, drove the GATT round into the sidings, we wouldn’t have had it and I think that would have been economically disastrous for us and I remember meeting after meeting – most of which remained entirely private even to this day – where there were some very harsh arguments indeed inside the European Union at Heads of Government level over the desirability of the GATT round and the need to ensure that an agreement was reached.

    I very much favour free trade. That is one of the two principal arguments, the first being security, that I want to see the European Union spread further across central Europe and further towards the east but if we believe in free trade, we need to extend it as far as possible and that is why I see great attractions in trying to extend it to North America as well, North America and western Europe.

    It won’t be easy. The principal difficulty, as so often it has been in the past, will be agriculture. We have horrendous difficulties in terms of changing the agricultural situation in Western Europe and to be strictly fair, the Americans have huge trouble with their own agricultural lobby in the United States as well, but we should certainly move towards that objective.

    Free trade is an idea that has developed wings in an astonishing way in the last decade or so when one considers the general atmosphere about it ten years ago and I think we should build on that while the opportunity is there and we will certainly continue to do so.

    On business speaking about Europe, Michael, yes, I do think business should make their views known about Europe. What distresses me so much about the European debate is that it often seems to be principally conducted upon the fringes of opinion about Europe – those people who are very very hostile to it and those people who can see absolutely nothing wrong with it. The truth, I believe, in this as in so many other areas, lies down the middle and if I may make the point, you don’t have to be on the extremes of an argument to have convictions about the matter under discussion. There are lots of people in the centre of the European argument who have convictions about Europe as well and I do and my convictions about Europe haven’t changed, you can see them in the speeches I made before I became Prime Minister in 1990 and earlier.

    We must be in the European Union. Of course, we could survive outside it but we would be far less well-off were we to do so economically and in terms of political authority so we should remain within Europe but that does not mean that because we remain within Europe that it is our role simply to go with the majority opinion that happens to exist within Europe at any particular moment. That would not be a proper role for the United Kingdom.

    I believe that some of the policies that Europe are following at the moment are just plain wrong and potentially damaging and I think it is perfectly proper for us to argue for pragmatic changes to European policy where we think they are wrong and I will continue to do so. I hope I can do so in company, I will do so without company if I have to but if we want the argument to be sensible and informed, then I think undoubtedly it will benefit from those people who have a material, commercial and trading interest with Europe making their views known as well; they are speaking from experience with a practical stake in European trade and I hope that they will make their voice felt.

  • Mr Major’s Lincoln Breakfast Speech on the Economy – 1 June 1995

    Below is the text of Mr Major’s speech to business people in Lincoln before breakfast on Thursday 1st June 1995.


    PRIME MINISTER:

    [parts of original recording were of poor quality]

    What I would like to do over the next hour and a half or so is just talk a little about where we are in terms of economic recovery, what is happening in terms of industrial, commercial and economic policy and the prospects that lie immediately ahead of us in the next two or three years and perhaps a bit longer.

    Let me firstly just trace back over some of the difficulties that we have had and try and explain to you where we are and why we are precisely where we are at the moment.

    I don’t think that anyone would dispute the fact that the recession lasted longer across the whole of western Europe than we thought it would and was sharper and harsher than we thought it would be and it was a different sort of recession than many people had seen before. We have long been accustomed in western Europe to recessions extending particularly to the manufacturing industry. This recession was a “white collar recession” in a way we had not seen before and it was for that reason in many ways more difficult to understand and more difficult to deal with.

    Essentially, the problem arose on the back of so many people investing so much in the housing market. I recall the rather crazy situation that existed in the housing market towards the end of the 1980s [indistinct] house prices went spiralling upwards and it was always likely that that was going to stop at some stage [indistinct] by the time it stopped an awful lot of people had committed themselves [indistinct] with mortgages that were a good deal bigger than ideally they would have had but inflation began to take hold, interest rates began to rise, mortgage costs began to rise, house prices stopped rising and fell and the negative equity trap which has done so much to damage confidence [indistinct] began to hit them. Because of our very high levels of owner-occupation and our particular affinity for home ownership in the United Kingdom, it hit many people rather hard at first.

    What about the economy generally? We came out of recession technically and the economy began growing again almost three years ago. As we have seen in recessions in the past, when you come out of recession it isn’t immediately apparent and people will say two or three years after the recession, technical as it is, that they don’t think it is finished and it is still going on. But yet for three successive years we have had growth. We had growth of over 4% last year, we will have growth probably of over 3% this year and if the forecasts are correct, growth of over 3% next year so for three successive years we will have had growth well above the trend average in the United Kingdom, well above that of any of our European partners probably and for the first time probably in the lifetime of most of the people sitting round the table we will have had a three-year period in which the growth of the economy has exceeded inflation. That isn’t typical if one looks at the performance of the British economy since the Second World War.

    So we have certain factors which for our economy are unusual at the moment. We have growth significantly above trend, we have inflation well below the European average, we have unemployment well below the European average, indeed, only one western European country has unemployment below us, only one country of any significant size and all the others have unemployment higher than ours. No other country in western Europe is seeing unemployment falling as regularly as we have and no other country in western Europe has also seen such a growth in exports or such an increase in investment.

    If you put those things together, it does begin to produce an economic scenario, provided we can build on it, that we haven’t seen for a very long time. I will tick the points off:

    Inflation: very low, below the average.

    Unemployment: falling.

    Investment: still continuing steadily

    Exports: growing at record levels; nine times in the last fourteen months we have hit new export levels.

    Competitiveness: growing.

    Those are a combination of circumstances we haven’t seen for a very long time. We are still attracting in the United Kingdom around 14% of all the external investment that comes into the whole of western Europe and we are doing so for the sort of reasons that were evident in the OECD report just the other day that our supply side and economic measures are more effective and more efficient than elsewhere in Europe, that we have fewer employment on-costs than most of our European partners and that don’t find ourselves tied to many of the social and other employment costs that so many of our European partners do.

    Those are great advantages. It is for those reasons that Jacques Delors I recall said something of great wisdom on this particular occasion when he said that without the Social Chapter we would become a paradise for investors and he was speaking relatively on western Europe and on this occasion I think he was correct and I think increasingly that [indistinct].

    Those are the economic circumstances that we have. They are as clement as we have had for a very long time. We look as though we are heading for a classic economic recovery. When we came out of recession in the early 1980s, we immediately had a great boom in wages, indeed right the way through the 1980/82 recession wage increases never fell below 7.5% even in the depths of the recession when unemployment was rising, the pound was at extraordinary levels and all sorts of other major [indistinct] happened and that has always led to an uncompetitive [indistinct].

    Three years after this recession technically ended, we have wage rises running at about 3.5%. That may not mean a great deal of what people these days loosely call the “feel good factor” – and indeed it means [indistinct] — than they otherwise would have been – but it does mean that our industry and commerce are infinitely more efficient, effective and competitive than otherwise they would have been.

    When people say to me: “Where is the feel good factor?”, I think I would see it this way: The feel good factor in the last two years has been wrapped up in increased competitiveness and increased jobs and the people who are benefiting from it are 600,000 people who were on the unemployment register two years ago and who are now in work. It hasn’t been dissipated across the country at large with great increases to everybody; it has wrapped up in fresh interests, fresh jobs and 600,000 have benefited from that and are back in work whereas elsewhere in Europe they are either increasingly becoming unemployed or staying unemployed.

    So that is the background about which I thought we might talk over breakfast. I thought we might talk about future policy, particularly for small and medium-sized firms and what the prospects might be for us in the years ahead.

    In simple summary: unless we throw away the gains that have been so far made, the prospects for continued growth with low inflation and the sort of stable environment that you need as businessmen and employers are extremely good unless we are silly and throw it away and I have no intention of doing that.

  • PMQT – 2 May 1995

    Below is the text of Prime Minister’s Question Time from 2nd May 1995.


    PRIME MINISTER:

     

    Engagements

    Q1. Mr. Flynn: To ask the Prime Minister if he will list his official engagements for Tuesday 2 May.

    The Prime Minister (Mr. John Major): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

    Mr. Flynn: Does not the letter from my constituent, Mr. W. D. Knight, express the opinions of millions of people in this country when he says that he will never again buy a national lottery ticket? How, he asks, can the nation– [Interruption.] –gain £14 million of value by buying papers without copyright, many of which papers we already own? Will the Prime Minister guarantee today that, in future, in that instance and all others, national lottery moneys will go to genuine good causes of health, education and crime prevention, not to the rich and the greedy?

    The Prime Minister: I am sorry that the hon. Gentleman’s constituent feels like that, because the proceeds of lottery money do go to very good causes, and I think that the hon. Gentleman knows that. He is, of course, wrong in the assertion that the lottery money was used to purchase papers already owned by the state. That is not the case. What were purchased were the non-state papers, as I told the House last week.

    Mr. Thomason: Does my right hon. Friend, in determining Government policy, sometimes receive advice from advisers who one year suggest one thing and another year suggest something else? If they do that, does he take much notice of them, and does he consider that that is what the Labour party is doing?

    The Prime Minister: Yes, it is. I can confirm to my hon. Friend that we receive advice from many sources, some of which I take, much of which I do not. When advisers behave as my hon. Friend proposes, I tend to give less credence to their advice.

    Mr. Blair: On the Government’s policy, revealed this morning, to tax the mortgage insurance payments of sick and unemployed people, will the Prime Minister confirm that, at 10 o’clock this morning, the chairman of the Tory party said that there was no such policy; at 11 o’clock this morning, Downing Street said that there was a policy but they were reviewing it; at 12.3 pm, the hon. Member for Macclesfield (Mr. Winterton) described the policy as lunacy; and at 12.42 pm the Chancellor issued a statement, saying that he had now completed the review and was ditching the policy? [Interruption.] Does not that show the utterly chaotic shambles that is his Government?

    The Prime Minister: I must say that that is extremely amusing and I can see that the right hon. Gentleman enjoyed it, as did everyone else. The reality is that he is wrong. I can certainly confirm that my right hon. and learned Friend has been reviewing the tax treatment of mortgage protection policies for some months. In light of the misguided reports that appeared this morning, he has removed the uncertainty that would otherwise have been removed in the Finance Bill.

    Mr. Blair: It is strange that the chairman of the Conservative party did not know about that–or perhaps it is not so strange. Has not the situation arisen because the Government are cutting mortgage help to the unemployed and therefore forcing all new home owners from 1 October to pay for mortgage insurance, as well as the new insurance tax? Rather than climbing down from the consequences of a mistaken policy, would it not be better to drop the policy that is penalising home owners?

    The Prime Minister: Finance Bill matters are generally withheld by the Treasury for reasons that even the right hon. Gentleman should understand. We give very generous help to people who are unemployed and in receipt of mortgages. We have provided such help for a long time and no one can question the growth in home ownership that has occurred under this Government. There is only one party in this country that truly supports home ownership and it is sitting on the Government Benches.

    Mr. David Nicholson: My right hon. Friend will recall, I hope with pleasure, the very successful visit that he paid to Taunton last month. Is he aware that the local Liberal Democrats have produced, as an estimate of the policing costs for that visit, the wholly spurious and fantastic figure of £500,000; whereas the Avon and Somerset constabulary has said that it cost £2,000? Does not my right hon. Friend agree that this is typical of the dishonesty and the bogus statistics being used by both Opposition parties in the local election campaign?

    The Prime Minister: There does seem to be some slight difference between the two estimates of the cost of my visit to Taunton. As to the substantive underlying point that my hon. Friend raises, it is the case–and it has been so for many years–that public figures, particularly those who are answerable to the public, must and do travel around the country. If the Liberal party is suggesting that public figures should not travel around the country because public disorder results from such visits from time to time, I do not think that the people of this country would accept that proposition.

    Mr. Ashdown: When it comes to bogus statistics I suspect that the people of this country know very well where they are coming from. I welcome the very clear statement that the Secretary of State for Defence made just a few moments ago that, whatever action Britain might take in Bosnia, we would not act unilaterally. Does the Prime Minister agree that the situation now developing in Bosnia and Croatia must give cause for grave concern and that, if the conflict is not to spread disastrously, it is vital and urgent that the international community makes every effort to ensure that the second front of confrontation that has now opened in Croatia is closed as soon as possible?

    The Prime Minister: I hoped for a second that the right hon. Gentleman was about to clear up the dispute about the cost of my visit to Taunton. Perhaps he will do that on another occasion. As to the main part of the right hon. Gentleman’s question about Croatia, there is no doubt that yesterday’s Croatian attack, in which some United Nations peacekeepers were wounded, and the retaliation today by the Serbs, have created a very serious situation, as has the Bosnian parties’ decision not to extend the cessation of hostilities agreement. As the right hon. Gentleman may know, the UN Security Council has called on the Croatians to halt their offensive in west Slavonia and I hope that the Serbs will also stop retaliating against Croatian towns and cities. It is a serious and a grave situation; no one can have any doubt about that. Over many months the United Nations forces, both in Croatia and in Bosnia, have helped to limit the scale and the extent of the conflict. That has been the case for two years. I warned more than a month ago that returning to all-out war could make the position of the United Nations protection forces absolutely untenable. I repeat that warning today. Neither in Croatia nor in Bosnia will renewed fighting produce a satisfactory settlement–or a settlement of any sort.

     

    Deregulation

    Q2. Mr. Steen: To ask the Prime Minister if he will set up a seminar about expediting his deregulation plans for the Ministers he has appointed with responsibility for deregulation in all Departments.

    The Prime Minister: From time to time I hold meetings with colleagues to take stock of progress on deregulation. My right hon. Friend the President of the Board of Trade most recently met the appropriate Ministers on 27 April and discussed progress on deregulation measures and steps to improve enforcement procedures.

    Mr. Steen: The Prime Minister’s personal crusade to rid the country of red tape is greatly welcomed by Conservative Members, but is not the real problem at operational level, where officials are more zealous in enforcing regulations than in trying to reduce the impact of regulations that affect our industries’ competitiveness with European countries which do not have all those rules? Will the Prime Minister, therefore, take a fresh initiative that will get to the root of the problem?

    The Prime Minister: We are looking at the over-zealous enforcement of regulations. My hon. Friend is right. At national and local levels, over-zealous enforcement of regulations, particularly those affecting small businesses, causes a great deal of distress and worry. He is equally right that deregulation is central to our economic policy. He may be reassured to know that we now have a programme whereby more than 1,000 regulations are earmarked for amendment or repeal and we expect to have dealt with about half of them by the end of the year.

     

    Engagements

    Q3. Mrs. Ewing: To ask the Prime Minister if he will list his official engagements for Tuesday 2 May.

    The Prime Minister: I refer the hon. Lady to the answer I gave some moments ago.

    Mrs. Ewing: Now that the Prime Minister has finally plucked up the courage to allow the voters of Perth and Kinross to take their democratic decision, is it his intention to endorse the views of the Secretary of State for Scotland that any reference to Scotland as a region is merely a matter of geographical error, or will he state clearly that Scotland is indeed a nation and not a region, and, therefore, we should have the right to self-determination? When he is in Scotland this weekend, will he launch an educational project to tell his Back Benchers the difference between a region and a nation?

    The Prime Minister: There are four nations within the United Kingdom. Scotland is one of them. I look to see it remaining in the United Kingdom and I very much regret that the hon. Lady and her parliamentary colleagues seek to make it independent and outside the United Kingdom.

    Sir Peter Fry: Will my right hon. Friend find time today to compare his current gas and electricity bills with the size of those bills only a few years ago? Will he reflect on the success of the Government’s policy in producing real reductions in the charge for energy? Will he join me in wondering how local government candidates representing the new, clean Labour party can produce leaflets which say that the Government are bleeding us dry through privatised gas and electricity companies? Does he agree that the new, clean Labour party is using the same dirty tactics of the old, discredited Labour party?

    The Prime Minister: My hon. Friend puts the matter exceedingly clearly and well and I entirely agree with him. There is no doubt that in general prices have fallen in the privatised industries, though that is not remotely what Opposition Members expected. The right hon. Gentleman, now the leader of the Labour party, once said of electricity privatisation:

    “it is barely an issue that prices will rise because of privatisation.”– [ Official Report , 12 December 1988; Vol. 143, c. 684.]

    He was wrong then and he is wrong now.

     

    Q4. Dr. Lynne Jones: To ask the Prime Minister if he will list his official engagements for Tuesday 2 May.

    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.

    Dr. Jones: The Prime Minister will be aware from the latest economic figures that a large proportion of the 0.8 per cent. growth in the first quarter was attributed not to manufacturing but to sales of national lottery tickets. Is not the Prime Minister concerned that using the proceeds of the lottery to enrich one or perhaps two Tory Members will put the faltering recovery in further jeopardy? Will the right hon. Gentleman have a word with the hon. Member for Davyhulme (Mr. Churchill) and ask him to pay the money back?

    The Prime Minister: I am inclined to say to the hon. Lady, come off it. The growth in the economy was 4 per cent. last year, and is estimated at 3 per cent. this year and 3 per cent. next year. When did the Labour party in government ever produce such growth figures? The answer is that it never did. The hon. Lady knows that growth has primarily been built on exports. When was there an export record similar to that which British industry has enjoyed over the past 14 months? Nine or 10 months out of the last 13 or 14 months, there has been a new record in exports as our competitiveness and capacity to penetrate markets in Europe and the rest of the world increase. That is what is happening with economic growth at the moment, and it has never been matched by the Labour party.

  • PMQT – 23 March 1995

    Below is the text of Prime Minister’s Question Time from 23rd March 1995.


    PRIME MINISTER:

     

    Border Controls

    Q1. Sir Teddy Taylor: To ask the Prime Minister if he will raise at the next meeting of the European Council the issue of the declaration attached to the Single Act on border controls.

    The Prime Minister (Mr. John Major): I see no need to do so. I do not regard our frontier controls as something to bargain over. I will continue to take whatever steps are necessary to maintain them. I will, of course, look at what needs to be done if the circumstances make it necessary or desirable.

    Sir Teddy Taylor: I congratulate the Prime Minister on his recent statement that he will take whatever steps are necessary to retain our border controls, in the face of what appears to me to be an obsession in Europe with getting rid of them. Will he consider the possibility of, at the 1996 IGC, seeking to resolve a legislative inadequacy created by a previous Administration by having the declaration changed into a treaty clause, which would stand firm in our courts and in the European Court?

    The Prime Minister: I think that my hon. Friend and I agree that any change to our frontier controls is unacceptable. Our European partners know that that is the position. If, at some stage, they were to come under risk, and if it became necessary to seek a treaty amendment, of course I would do so.

     

    Engagements

    Q2. Mr. Austin Mitchell: To ask the Prime Minister if he will list his official engagements for Thursday 23 March.

    The Prime Minister: This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today.

    Mr. Mitchell: In the course of the right hon. Gentleman’s day, will he take time to consider whether the economic recovery that Mr. George Soros and others forced on him is still proceeding to his satisfaction, or has it been so badly clobbered by unnecessary interest rate and tax increases that the best is already over?

    The Prime Minister: No, I can assure the hon. Gentleman that that is not the case. I am grateful to him for drawing attention to the economic recovery, which is proceeding more effectively in this country than in any other European nation. He will rejoice with me at the 4 per cent. growth last year; the anticipated growth of more than 3 per cent. for this year and for next year; the fact that exports are running at record levels; the fact that employment is rising and unemployment is falling; and, above all, that we have now become one of the most competitive nations in industrial matters in the world. I know that the hon. Gentleman will welcome all that and I am grateful to him for letting me draw attention to it.

    Mrs. Peacock: Is my right hon. Friend aware of the massive support in the United Kingdom for the reintroduction of corporal punishment for mindless violence– [Interruption.]

    Madam Speaker: Order. This House must come to order right away.

    Mrs. Peacock: Will my right hon. Friend encourage our right hon. and learned Friend the Home Secretary to look very carefully at what people in the United Kingdom are now demanding as punishment?

    The Prime Minister: I think that many measures could be taken to deal with crime, especially juvenile crime. I know that my right hon. and learned Friend the Home Secretary will have heard what my hon. Friend has said, and that my hon. Friend will give strong support to his measures.

    Mr. Blair: Will the Prime Minister confirm that, according to the Government’s own parliamentary answers, the costs of rail privatisation just for British Rail, the Department of Transport and the new regulatory bodies, leaving aside all the other costs, are estimated at more than £300 million?

    The Prime Minister: I saw the right hon. Gentleman this morning and his hon. Friend the Member for Oldham, West (Mr. Meacher) publishing their report on rail privatisation.

    Mr. Donohoe: It is excellent.

    The Prime Minister: That is not quite how I would have described it. As the hon. Member for Cunninghame, South (Mr. Donohoe) inquires, I would have described it as one of the shoddiest pieces of work that I have seen for a long time. The figures that are shown in that report are pure fantasy. They include a whole range of operational costs for the railways, not in preparation for privatisation but to provide a modern railway service across this country, which is what we seek to do.

    Mr. Blair: I asked the Prime Minister a specific factual question. Is it true– [Interruption.] Let us just get the facts. Is it true, according to the parliamentary answers that have been given, that the costs just for those bodies, leaving aside other matters, is more than £300 million? Will he confirm that British Rail has estimated that it will spend an extra £100 million in the next two years directly as a result of privatisation–yes or no?

    The Prime Minister: The right hon. Gentleman cannot get away with that, or with dealing with one aspect of privatisation. [Interruption.]

    Madam Speaker: Order.

    Hon. Members: Who was it?

    Madam Speaker: George Foulkes. This is such a waste of time during 15 precious minutes.

    The Prime Minister: The reality is that the true costs of privatisation are but one fraction of those claimed by the Labour party. They are a fraction of the costs of the industry, and a very small price to pay for a modern railway serving the nation in the way we wish to see it served.

    Mr. Blair: People will notice that the Prime Minister has not disputed the figures that have been put. Will he confirm that when we add to those figures the metropolitan railway grant, recognised by the Department of Transport as costing £200 million this year and £200 million next year, and when we take even a fraction of the redundancy cost, the cost is more than £1 billion? Let us have a detailed refutation. Would not it be better if that £1,000 million were spent not on a privatisation that nobody wants but on delivering the modern railway network that the nation needs?

    The Prime Minister: No, I have to repeat to the right hon. Gentleman that the figures that he quotes, which were used earlier this morning by his hon. Friend the Member for Oldham, West, are fantasy figures–they are not real figures. I shall tell the right hon. Gentleman some real figures. Investment will be sustained at around £1 billion, of which £250 million will come from the private sector. He cannot lecture us about private railways. He cannot begin to tell us what his own policy is or whether he would renationalise or not: he can tell us now if he wishes. The Labour party is more interested in appeasing the rail unions than in building for the 20th century an efficient railway that serves the needs of passengers and that does not serve the needs of Labour’s friends in the rail unions.

    Mr. Jessel: In view of the tremendous success of the Queen’s visit to South Africa and of her impressive arrival in HMS Britannia, does my right hon. Friend agree that Britain should continue to have a royal yacht?

    The Prime Minister: It certainly has been a remarkably successful visit thus far to South Africa and I have every expectation that it will continue to be a successful visit. The question of the royal yacht is under consideration.

    Mr. Ashdown: In the context of European immigration, will the Prime Minister confirm that he is aware of the seriousness of the deteriorating situation in Algeria and the implications that it has for Europe as a whole? Given Britain’s residual interests in Algeria and Europe’s failures in Bosnia, is not it an issue that should be tackled on the basis of the closest co-ordination among the European countries in which Britain plays a full and constructive role?

    The Prime Minister: I agree that this is an important matter. I think that it illustrates the kind of areas where the common foreign and security policy can exercise more influence than any country individually.

    Mr. Molyneaux: As loyalist paramilitary bodies only yesterday undertook to dismantle their terrorist apparatus, is it still the Government’s policy that the same must apply to the IRA before it can be admitted to any further talks or discussions on any other issues?

    The Prime Minister: Yes, the same conditions apply to Sinn Fein in terms of exploratory talks with a Minister, which is the matter under consideration at the present time. It will need to make the same commitments before entering into exploratory talks with my hon. Friend the Minister of State as were made by the Progressive Unionist party and the Ulster Democratic party. That is the case.

    On the secondary matter of entering the political talks, which is often confused–but not, I know, by the right hon. Gentleman–that is some way down the road after the discussions on modalities have been agreed and after there has been substantial progress on decommissioning itself. That is some way away.

     

    Q3. Mr. Campbell-Savours: To ask the Prime Minister if he will list his official engagements for Thursday 23 March.

    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.

    Mr. Campbell-Savours: The Prime Minister will know that the rules of the House prevent me from raising aspects of the trading activities of Lord Archer, his friend, and I do not intend to do so. However, in the light of the fact that the prosecuting authorities have repeatedly failed successfully to prosecute people who have committed the offence of insider dealing–we know who we are talking about–is not it time that there was a full review of the law? Will the Prime Minister give an assurance to the country that that review will be undertaken?

    The Prime Minister: I am happy to confirm that Lord Archer is my friend, has been my friend and will remain my friend in the future. On the hon. Gentleman’s substantive point, the questions of prosecution are for the prosecuting authorities. If my right hon. Friends the Law Officers feel that something is going amiss, they will approach me and the necessary action will be taken.

     

    Q4. Dr. Goodson-Wickes: To ask the Prime Minister if he will list his official engagements for Thursday 23 March.

    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.

    Dr. Goodson-Wickes: Does my hon. Friend agree that it is wholly wrong for Labour councils such as mine in Merton to use council writing paper to write to Labour governors urging them to carry out a misconceived and misleading campaign against education budgets? Is not it about time that education authorities stopped alarming parents with political propaganda and got on with the job of providing the best possible education for our children?

    The Prime Minister: I agree with my hon. Friend, and neither is this an isolated incident in Merton.

    On the substantive question of education funding, I see no reason why every council should not be able, with good maintenance and good management, to look after the standards of the education service within the funds available. Before people accept many of the claims being made by the education authorities, I hope that they will look to see whether those education authorities have sought to make savings elsewhere before directing savings to teachers in the classroom.

    Mr. Clapham: Is the Prime Minister aware that some observers of the sale of British Coal’s non-operational property estimate that it will raise more than £100 million? Will he assure the House that that money will be used for two major purposes: first to help to clean up residual pollution in mining communities, such as mine water pollution, and, secondly, to widen the pneumoconiosis compensation scheme, which the Government introduced in 1974 to make available payments for men awarded disabled assessments for chronic bronchitis and emphysema, thereby ending the illogical discrimination between sufferers of two diseases which are caused by the same dust?

    The Prime Minister: The hon. Gentleman raises two important points that are worthy of consideration. I do not agree with him that the proceeds of that sale should be necessarily allocated specifically to those purposes, but the two purposes to which he refers are well worth examining.

     

    Q5. Sir Anthony Durant: To ask the Prime Minister if he will list his official engagements for Thursday 23 March.

    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.

    Sir Anthony Durant: Does my right hon. Friend recall that the Criminal Justice and Public Order Act 1994, which was widely welcomed by the police and which deals with joyriders, tearaways and bail bandits, was fought tooth and nail by the Opposition and the then shadow Home Secretary, who is now the Leader of the Opposition? Does my right hon. Friend agree that it is by their deeds, not their words, that we shall judge them?

    The Prime Minister: I share the view that we should judge right hon. and hon. Opposition Members by the way in which they vote and act, rather than by what they say. I share with them the wish to prevent more crime, yet they opposed all our changes on bail. They say that they want to ensure that the guilty are convicted, yet they opposed our changes to the right of silence. There are a range of areas where they have talked tough on crime, but when it has come to being in this House and being in the right Lobby to provide the right laws to bat against crime, we have found them in the wrong Lobby and not the right one.

  • Mr Major’s Comments on the Economy – 9 January 1994

    Below is the text of Mr Major’s comments on the economy during an interview given in London on Sunday 9th January 1994.


    QUESTION:

    [Mr Major was asked if inflation had been beaten].

    PRIME MINISTER:

    I do not think you can ever say inflation is beaten, I certainly would not say that. But if you look over the last 30 or 40 years, time and time again we have had a wave of inflation leading to stop/go policies and great damage to the British economy. What concerned me first and foremost, not just when I became Prime Minister but from the moment I became Chancellor, hence in many ways my enthusiasm for the Exchange Rate Mechanism at the time, was the need to get inflation down to the same level or lower than our principal international competitors and then make sure we can keep it there.

    QUESTION:

    [Mr Major was asked if inflation could be kept in the 1%-4% band for the rest of the Parliament].

    PRIME MINISTER:

    That is certainly our expectation and our ambition. One can never be certain because a certain element of inflationary impulse comes from abroad, but it will certainly be our intentions to keep it within those parameters. Provided we can do that we have the most solid and secure base for not just medium but long term sustainable growth both in employment in prosperity over the years immediately ahead and that I think is the central issue.

    QUESTION:

    [Mr Major was asked for his economic predictions for the year ahead].

    PRIME MINISTER:

    I made a number of predictions last year, one was unemployment, I said that it would fall and it did; I said that we would get a significant amount of growth, it looks as though we have got growth; I said that exports would increase, they have increased; and I said we would carry our legislation, which we did do. So I think last year’s predictions worked out, upon reflection, rather well. This year I would certainly expect the trend in unemployment to go down, that does not mean there will not be a single month when it goes not go up, I cannot say that, but I think across the year there is no doubt that the trend in unemployment is now downwards, so certainly I expect that, I am reluctant to put a figure on it, but I think there will be quite a reduction in unemployment in the next twelve months. We will certainly see more growth, I think we will see a continuing growth in exports and we will see quite a reduction in the fiscal deficit. So I think many of our prospects are looking sharply better at the beginning of 1994 than they were at the beginning 1993.

    QUESTION:

    [Mr Major was asked whether he thought the economy would grow by 3% in the year ahead].

    PRIME MINISTER:

    I think it will be in the 2.5 – 3 percent bracket, it is a fairly inexact science forecasting, there are too many intangibles, but it will be in that sort of bracket and I would certainly expect growth at that level or a little higher the year after.

  • Press Release – Prime Minister’s Comments on Labour’s Tax Policy – 20 March 1992

    Below is the text of the Conservative Party Press Release on Mr Major’s comments on Labour’s tax policy. It was issued on Friday 20th March 1992, reference 504/92.


    BRITAIN CAN’T AFFORD LABOUR

    “Living standards always go up faster under the Conservatives”, the Rt Hon John Major, Prime Minister and Leader of the Conservative Party, said at a press conference at Conservative Central Office, today.

    “That’s been true ever since the war. For all of Mr Kinnock’s lifetime. And the difference is just as stark today.

    Because, yet again, we will bring inflation down – and cut taxes.

    Yet again, Labour would put inflation up – and raise taxes.

    I loathe inflation. I want stable prices. Pay packets and pensions that keep their value.

    Labour only know how to put inflation up. That’s what independent forecasters agree would happen. And why businessmen, day after day, say Britain needs a Conservative government.

    Industry has to compete with the rest of Europe. We’ve cut inflation below the European average. Now we need to beat the best in Europe.

    Low inflation countries like Germany.

    We can do just as well as Germany. And better.

    But look at the Labour record last time. Prices doubled in five years. Suppose that happened again? If Labour got in for another term, that means you’d end up paying £4 for a gallon of petrol, nearly 50 pence for a first-class stamp – and £24 to go to a football match.

    As if that wasn’t bad enough, Labour taxes would make it worse. That’s the way the money always goes under Labour.

    Let me tell you what a tax increase means. It means a pay cut. A pay cut for millions of people who keep this country going. Skilled workers.

    Experienced teachers. Police officers. Doctors. Dentists. Businessmen creating jobs.

    What a way to reward their efforts. Thank you for doing so well. Here is a huge tax increase as an incentive to do better in future.

    What a way to encourage young people to make the same efforts. I want young people to make these efforts. And I want them to do it in this country.

    They can’t afford Labour. No-one can afford Labour. Britain can’t afford Labour.

    And now Norman’s going to tell you precisely where Labour’s tax raid would begin. No-one yet can know where it will end.”

  • Mr Major’s 1992 Conservative Central Council Speech – 14 March 1992

    Below is the text of Mr Major’s speech to the 1992 Conservative Central Council meeting, held at Torquay on March 14th 1992.


    PRIME MINISTER:

    The phoney war is over. The Battle of Britain has begun.

    That battle is a battle we’re going to win.

    Win on our record.

    Win on our policies.

    Win on our values.

    Win on merit – because we have the vision, the ideas, and the team to build Britain in the ‘90s. To make the future of our country as great as its past.

    I’m not interested in standing still. I want to lead this country forward. To build on what we’ve achieved. To continue to change the face of Britain. And enhance still further its reputation and influence abroad.

    Be proud of what we achieved in the ‘80s. The work, the growth, and the success of those years is the foundation of an even better future. So that when, in generations to come, people look back, they will say: ‘This was when the battle was won. This was when the British people came truly into their own. This was when socialism crumbled away and was seen off forever.’

    After 16 months as Prime Minister, the immediate tasks I set myself and my colleagues have been completed – winning the Gulf War, bringing inflation down, putting the council tax safely in place, giving a new face to public service with the Citizen’s Charter, safeguarding the interests of Britain at Maastricht, and setting out in Tuesday’s Budget our strategy for recovery and growth.

    That is now done. Britain is poised to come out of recession. All that is needed now is the confidence that will come from a clear Conservative victory.

    And so now is the time to seek a new mandate from the British people. I believe they will share my vision, my ambitions for our future.

    Let me tell you how I see that future.

    I want to bring into being a different kind of country. Bury for ever old divisions in Britain – between North and South, blue collar and white collar, polytechnic and university. They’re old style. Old hat. And we need to be rid of these prejudices. We want a country in which people get on because of what they are, not who they are. If you are good enough, you can’t be too young and you can’t be too old.

    For most of my lifetime, before I came into Parliament, before Margaret Thatcher changed Britain infinitely for the better, people were expected to be dependent – never, however hard they worked, never independent, never in control of their own lives or their family’s future.

    It was a world in which we were told that Governments knew best. They knew best how to spend our money. How to make our choices. They knew best who should own homes, and run businesses. They always knew better than us.

    And what happened? Town centres were bulldozed. Homes ripped down. Good schools closed. Taxes soared. Trade union barons carved out huge fiefdoms and marshalled their militants at the factory gate. Our very history was rewritten; our traditions despised. Through all that time, the time we were told that the man in Whitehall knew best, the people of Britain knew better.

    And now, all over Europe, one after the other, the Socialist dominoes have gone down. Who believes that the answer to Britain’s problems is to go back to what everyone else has cast into oblivion? Socialism was the crowning folly of our time, which at this coming Election we Conservatives will finish for good.

    A century ago Lord Randolph Churchill said ‘Trust the people.’ It is one of the oldest truths of Conservatism. That people know better than governments.

    We trusted the people. We gave them the chance. And the British people led the world – in a movement that has swept every continent.

    Would they be privatising in Latin America today, if we hadn’t first done it here?

    Would they be cutting high tax rates in India today, if we hadn’t first done it here?

    Would they be planning to bring Eastern Europe into the Community today if we hadn’t first suggested it here?

    How astounding that now in Latin America, in India, in Bulgaria, and Moscow they understand more about free markets than they do in Walworth Road.

    The Labour Party see the British people as pawns. We see them as partners. Partners in the building of Britain. With their values, through their values, commonsense everyday Conservative values, Britain’s future will be assured.

    That is why our programme for the ‘90s will be a partnership with the people. With a Government that trusts the people. A decade of trust given and trust returned.

    I promise you this.

    Wherever freedom can be extended, there we will be.

    Wherever choice can be widened, there we will be.

    Wherever wealth can be created, there we will be.

    Wherever care must be given, there we will be.

    That’s the Conservative philosophy: wealth and welfare, hand in hand.

    Our partnership with the people is already touching every aspect of our daily lives. And it is those lives that will be touched by the result of this Election – whether in city tower blocks, in lonely villages, or along quiet suburban roads.

    This crucial election is not a faraway battle fought between warring factions at Westminster. It is a battle of ideas, of ideals – about our future. It is a battle about how we live – all of us. It’s about our schools. Our workplace. Our standard of living. Our security. It’s about who controls how we live – us or the State.

    Our partnership with the people has come a long way. And we’re going to take it further.

    In education we will go back to basics and make sure they’re properly taught. Where parents want them we’ll open the way to grant-maintained schools, free of Council control. We’ll extend parental influence and choice, everywhere – because we trust the people.

    In health we’ll extend the reforms which have led to more patients being treated than ever before. Don’t be misled by Labour’s shoddy, shabby propaganda about our National Health Service. There will be more of those successful trust hospitals. More GP fundholders with power for doctors to decide on their patients’ needs. We’re giving more weight to local decisions, everywhere – because we trust the people.

    In local government we’ll open up to the public how their councils are doing, allow tenants new rights and shake up arrogant bureaucracy. And, something else, there’s a lasting affection throughout the land for many of our historic and familiar counties and cities. That’s why we’re asking the public’s views on how local government should be structured, everywhere.

    All these policies have something in common – that choices will be there wherever people want them. We’re giving power to the people, because we trust them. We’re pushing choice back to the people, because we want all of them – every single person in Britain – to have greater control over their lives and their families’ future. To be the masters, not the servants, of their personal world. That’s my Conservatism.

    To our fellow citizens I give this pledge: when the next Conservative Government has completed its work, you will feel, more than you’ve ever felt before, that Britain belongs to you, and that you have a secure place within it.

    But there is one area above all in which we trust the people. To do what they wish with the money they earn, to have and to hold – for themselves and their children – a growing piece of their country which they can call their own.

    Last Tuesday’s Budget underlined the giant gulf between the Conservatives on the one hand and Labour or Liberal on the other.

    We want low tax and personal choice; they want high tax and State choice.

    What the country decides on that great divide will affect the future of every family in Britain.

    When I became Prime Minister I said I wanted a nation at ease with itself. That means a Government that people believe is fair. To be fair, isn’t it right that those most in need should be helped most? That’s the British instinct. That’s what I believe in. And that’s what the Budget does. It has cut tax in a novel way – to help most those who earn least.

    The new 20p tax band does three things. It cuts tax for everybody. It confirms our intention, as soon as we can, to lower the basic rate to 20 per cent. But, it also gives that benefit now to four million taxpayers with the lowest incomes. In future, they’ll only pay 20 per cent, not 25 per cent.

    These are people on modest incomes. Men receiving low pay. Many married women, who perhaps work part-time. Disabled workers who are often low paid. Pensioners with modest savings. Young people starting out on their career. We’ve given them a helping hand, by cutting their tax by a fifth. Labour have voted to put it right back up to 25 per cent. They’re no longer content with taxing the rich; now they’re even after the poor.

    We knew Labour wanted massive taxes on the better-off. We knew they plotted new burdens on middle incomes. Now we know they want high tax on low pay. Unbelievable. But that’s Labour policy for you.

    John Smith said it himself. There would be no tax cuts under Labour – ever. However hard you worked, however well the country performed, the fruits of your labour would be Labour’s, not yours.

    So how would Labour support schools? By taxing teachers. Help hospitals? By taxing nurses. Beat crime? By an assault on the pay packets of the police. It’s a lunatic strategy -by prejudice out of ignorance. All founded on the bogus claim that in order to build tomorrow you need to rob today. Just remember yesterday – when Labour taxed and taxed and cut and cut – cut, let me remind you, hospital building and nurses’ pay. Labour cut the National Health Service.

    Does anyone want to go back to those days? When every Budget was a day to dread. When tax took 35p in the £ from the wages of every worker. When you even had to ask permission to take £50 abroad. But that’s the philosophy of the people who now want to be brought back to run this country. The nerve of it.

    Labour’s higher tax commitment is a mean-spirited manoeuvre. It would break the backs of businesses, hit every family and drive people out of their jobs. You will never create the permanent jobs we need by punitive taxes. High taxes mean high unemployment – permanently.

    The British people can now see clearly what we have warned them of for ages – Labour have a fatal addiction. Tax. They are high on tax. We must make sure that it’s Labour, not Britain, that this high tax habit drags down and destroys.

    Even after all this some commentators still ask – does it really matter who wins this election? Let me say this to them. The result of this Election matters as much as any we’ve known. Labour talk of time for a change. There would be change, all right. Short change.

    Short change for workers as pay packets shrank.

    Short change for pensioners as inflation surged.

    Short change for savers as taxes rose.

    Short change for homeowners as interest rates soared.

    Yes, Labour would change Britain. Short-change Britain. They would stop the revival of Britain dead in its tracks. It’s not going to happen. We’re going to stop them dead in their tracks.

    Somersault Socialism, Labour’s game of ‘look at us, no hands, we’re different now’ won’t fool anyone. Whatever mask they put on we’ll take it off and show the people it’s the same old face underneath.

    Next week we will publish the programme for the next Conservative Government. It will be a full, modern, positive programme for an independent people in an independent Britain.

    But of all the issues in this Election there are three that I want to share with you at the outset of the campaign.

    The place of Britain in the world.

    The cohesion of our country.

    And the future of the battle against inflation.

    Let me take inflation first.

    I don’t want a little bit of inflation. I don’t want a modicum of inflation. I want an end to inflation. I want to take this country back to stable prices. What a prize that would be. We all know what it means to walk into the supermarket and see that the price of a pint of milk or a loaf of bread has gone up. I want to see prices stay down. Nothing would give greater security to those on fixed incomes.

    I know the fear, the despair that inflation brings to everyday lives – the raw misery when the bills at the end of the week are bigger than the pay packet, or when the value of savings melts like snow in spring.

    Inflation is a curse. We’ve got to beat it. We’ve got to get prices stable – and do everything we can to keep them there.

    No other Party will do that but us. No other Party would even try. And that’s one giant reason why Britain needs Conservative Government.

    Next, the cohesion of Britain. That, too, is something I feel passionately about. I said in Scotland that the unity of the United Kingdom transcends the Election – and I meant it. I admire the pride of Wales. I understand the national aspirations of Scotland. I’ve been there. I’ve felt it.

    But I know this. It would be hugely damaging to go down a route that, in short term or long, could lead to the break-up of our country. I hope that everyone throughout the United Kingdom appreciates the scale of this issue.

    This is more than a Scottish concern. It matters in Gloucester as it matters in Glasgow.

    Whatever they intended, the devolution proposals put forward by Liberals and Labour alike could put us on the road to a Disunited Kingdom. They haven’t faced up to the truth – that, if devolution for Scotland came, it must inevitably call into question the whole relationship between the different parts of our Kingdom.

    Devolution is not – as some may fondly imagine – a safe option that wouldn’t, or couldn’t, lead on to separation. It would raise tax levels in Scotland and freeze out investment. It could also lead to calls in England for a fresh look at levels of finance, and demands for reduced Scottish representation at Westminster, leaving Scotland’s members with a second-tier status in the Union Parliament. If that were to happen, bitterness and conflict would be the certain result.

    And where would that bitterness and conflict end? What began as a dalliance with devolution could end as the disaster of separation. Three hundred years of achievement together. The most influential voice for good in the dangerous world of today. Undone in a single careless moment. The Conservative Party must point out the dangers of that disastrous road. We have a responsibility to history. We must stand for the union. Fight for the union. And win for the union. For if we don’t the whole of the United Kingdom – every part of it – would be the loser, and our future the poorer.

    And let me be crystal clear about another constitutional matter. Our voting system has served us well over the years. It has given us strong Government, capable of difficult decisions at difficult times. I have no intention of changing it. There is no need. Those who call for such changes should examine their motives. There will be no deals with those opportunists who stand for nothing except their own political self- interest. Who would sign up for anything, if it meant a seat at the Cabinet table. The flavour-of-the-minute politicians who’d be for night if it suited them and day if it didn’t.

    We’re not playing their game. We’re going to show up their PR campaign for the sham that it is. The Government of smoke-filled rooms. No longer the MP of your choice, but a Party appointee. Not proportional representation, but permanent representation – for a minority party in control of our affairs. ‘PR’ is no principle. ‘PR’? What does it stand for? It’s Paddy’s Roundabout. Well, we won’t be joining him for the ride.

    We stand on the threshold of a new era. Years which will be decisive not only for Britain, but the world. We have seen momentous changes in our continent.

    It is nearly 80 years since Sir Edward Grey said the lamps were going out all over Europe. That they would not be lit again in his lifetime. Well, over the last two astonishing years we’ve seen those lamps coming on once again.

    Historic nations reborn. Historic freedoms regained. Poland, Hungary, Czechoslovakia, Bulgaria, the Baltics. All free again. It is the end of the age of empires. The last imperial power is gone. We have a chance in our lifetime that no previous generation has had. To unite our continent. To spread ever wider the free market principles on which the prosperity of the West is based. It is a time for vision. To lift our eyes beyond our domestic concerns. A time to open Europe up, not shut its other half out.

    That’s what we were arguing for at Maastricht. For a wider Europe, not a United States of Europe; a Europe looking outwards, not in on itself. We want progress in the European Community; but we want progress outside it as well. We were told that the Summit at Maastricht would be high noon for Britain in Europe, a big shoot-out, certain defeat. They said we couldn’t do it, we wouldn’t do it. We did it. We won the right deal for Britain. And the right deal for Europe. All of Europe. Does anyone seriously believe that would have happened if Messrs Kinnock and Kaufman had been speaking for Britain? Not on your Douglas Hurd, it wouldn’t.

    The greatest virtue of the European Community is not economic. Twice in the lifetime of our most venerable fellow citizens, conflict in Western Europe has brought the whole world to war. Now the peoples of Western Europe are bound together by the mutual self-interest of their economies and trade.

    Those bonds make it inconceivable that war between them should ever again bring the world to ruin. That is a prize more valuable even than the greater prosperity those trade links have brought.

    But we need to extend that security further. We must open the borders of the community to bring the new democratic states in the East. To extend the community until it reaches Russia itself. It may not happen in our political lifetime – but it will happen. And when it does we will have created a more secure future for our continent than it’s ever known before.

    We in Britain are in a special position to make it a reality. We have a special place in the world. We’re leaders in Europe; members of the Commonwealth; allies and friends of the United States. And, as Boris Yeltsin has said, especially trusted by the government of Russia. And with good reason. We stood by them in their hour of need during the coup last summer. And we’ll stand by them still, as they take their place once more in the family of nations.

    Does anyone think that a free Russia that has just ditched socialism would turn to a socialist Britain? The thought’s absurd. Socialism is what Eastern Europe has fought for generations to get rid of.

    In the great decisions on the future of our continent, only a Conservative Government can carry the weight that is Britain’s due.

    But there is another reason why the security of our country depends upon a Conservative Government. And that is defence.

    Whatever is needed to defend our country the next Conservative Government will do. There will be no escape clauses. No fudges. No ifs. And no buts. Just a cool-headed judgment of the resources that Britain will need. There are still great dangers. We would be naive to imagine that we could for a moment lower our guard. Keeping the peace is a full-time challenge. And it means a full-time commitment. The first duty of Government is the defence of the realm. This Conservative Government, which I am privileged to lead, will discharge that duty, whatever the pressures may prove to be.

    I give you this promise. We will stick to our principles. There will be no chopping and changing to catch the prevailing political tide. While others retain nuclear weapons, we will do so. And while the man who currently rules Iraq and his kind are plotting new capabilities, we will modernise our own. That includes building the fourth Trident submarine. We will order it. We will build it. We will arm it. And we will deploy it. Let the British people have no doubt where we stand.

    What of Labour? What is their stance? What are their plans? Mr Gerald Kaufman tells us that Labour have nothing to do with CND. Nothing? Really? That’s odd. Late last year 100 Labour Members of Parliament were still members of CND. Have they all followed their leader, and let their membership – what was the word? – ‘lapse’? Their attitude to our nuclear deterrent can be summed up in four words – ‘can’t say, won’t say’. But they must say.

    So let them tell the British public – just where do they stand on the fourth Trident that Britain’s security needs? They’ve said they would order it; they’ve said they wouldn’t order it; they’ve even said they would order it and send it to sea without any weapons. A toothless Trident. A ghost ship. A sort of underwater Flying Dutchman. Going round and round in circles for ever and never getting back to base. You never know where you are with Labour on defence.

    It’s time for them to stop the ducking and the weaving. So let’s hear it from Labour. Will you, won’t you, will you, won’t you, will you build the boat?

    The defence of Britain takes commitment. Caution. Coherence. Conviction. And none of those words begins with a K.

    These last 16 months have been an immense privilege. Much has been done.

    Reversing the invasion of Kuwait along with our allies. Throwing the barbarous dictator out. Leading the world in the safe havens initiative for the Kurds.

    We in Britain were the first to denounce the coup in Moscow, the first to recognise Russia, and the first to call for her to be admitted to the IMF.

    We were the first with a Commonwealth declaration on human rights. The first to propose a debt write-off for the poorest countries. And the first to propose the register of conventional arms sales that has now been adopted by the United Nations.

    Why does this Election matter so much? Yes, it matters because of health, education, Europe, inflation, tax, and defence. All these things.

    But more than anything it matters because it will determine the kind of country we will build for our children.

    I want ours to be a country that is confident. A country in which we can look people in the eye and know we’ve treated them fairly. A country that others will look to with renewed respect.

    I want our nation to stand proud in the world – quiet in voice, firm in action, united in resolve.

    I want Britain to be a byword in every language – for decency, for leadership, for trust, and for hope.

    I want Britain to be seen as the best – not only in our eyes, but in the eyes of others.

    First and first again – a world leader – that’s where I want us to be, and to stay. And that’s where Britain will stay – under the next Conservative Government.

  • Text of the 1992 Budget – 10 March 1992

    Below is the text of the 1992 Budget, held on 10th March 1992 and presented in the House of Commons by the Chancellor of the Exchequer, Norman Lamont.


    Budget Statement

    Mr. Deputy Speaker (Mr. Harold Walker) : Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that, at the end of the Chancellor’s speech, copies of the Budget resolutions will be available to hon. Members in the Vote Office.

    The Chancellor of the Exchequer (Mr. Norman Lamont) : I want to begin by announcing a far-reaching reform that will affect our entire system of public finance. Each year, the Budget for this country is presented in two parts. In the autumn, the Chancellor announces the Government’s spending plans for the coming financial year; and in March, he sets out the revenue measures necessary to pay for them. Many criticised this uniquely British institution. Elsewhere in the world, and indeed everywhere in the private sector, the meaning of the word “budget” is crystal clear : it is a schedule showing where the money is coming from, and where it is going to.

    In my view, the current system is not only illogical, it has also had a number of highly undesirable consequences. Over the years, the separation of public expenditure from taxation and the announcement of tax proposals in isolation has intensified the pressure for special reliefs and contributed to the excessively complex tax system that we have now. The time has come for reform.

    I therefore intend that next year’s Budget will be the last spring Budget. From then on the annual Budget will be in December, and it will cover not just taxation but also public expenditure. The Budget in December 1993 will contain the Government’s proposals for both revenues and expenditure in 1994-95. It will also include spending plans for the subsequent two years. The 1994 Finance Bill will be presented to the House in January rather than April.

    I am publishing today a White Paper on the mechanics of this change. I believe that it will lead to better decisions about both taxation and spending. It will enable spending plans to be considered alongside the tax plans needed to pay for them. Above all, it will enable Government and Parliament to make more informed and rational choices between spending measures and tax changes. I hope that it will be warmly welcomed by the House.

    ECONOMIC SITUATION AND PROSPECTS

    This year’s Budget is a Budget for the recovery. As usual, I shall begin with the current economic situation and prospects. I shall then deal with monetary policy and public finances. Finally, I will present my tax proposals. The Financial Statement and Budget Report, together with a number of press releases filling out the details of my proposals, will be available from the Vote Office as soon as I have sat down.

    WORLD DEVELOPMENTS AND PROSPECTS

    I turn first to international developments. Nineteen ninety one saw the weakest growth in the major seven economies in a decade, while industrial production in the G7 actually fell. This brought a sharp slowdown in the growth of world trade, which was exacerbated by the dramatic events in the former Soviet Union.

    In the United States recovery was generally expected in the second half of last year. But, despite low interest rates, the upturn failed to appear towards the end of 1991. High levels of debt have made firms and households very cautious about spending, while banks have been reluctant to increase their lending.

    In Japan there have been similar problems, and growth has slowed sharply. In the year to January, industrial production actually fell by 4 per cent.

    The slowdown in world growth has been accompanied by lower inflation in nearly all the major economies. G7 inflation fell from over 5 per cent. at the beginning of last year to about 3 per cent. now. But economic developments in continental Europe have been dominated by events in Germany. Over-rapid expansion of domestic demand, following reunification, led to a rise in German inflation. The German authorities responded by increasing interest rates and Germany has now moved into recession. As a consequence, other European economies are experiencing high real interest rates and weak domestic demand.

    But falling inflation, and the cuts in interest rates that have already taken place in north America and Japan, will in time lead to a pick-up in confidence and demand. And as the underlying level of German inflation abates, I expect to see reductions in European interest rates.

    Gross domestic product in the seven major economies is projected to grow by about 1 per cent. in 1992, and world trade by about 4 per cent. We can expect more rapid growth in later years as the recovery gains momentum.

    Some have argued that delayed recovery in the United States, and the slowdowns in Japan and Europe, are not just a cyclical phenomenon of the kind we have seen before, but herald something much more serious. It would be irresponsible for anyone in my position simply to ignore such claims. But I do not believe that they are well founded. I believe that Governments have learned the lessons of the past. Above all, they recognise that nothing could be more damaging to the world economy than a relapse into protectionism of the sort that we saw in the 1930s.

    Indeed, a crucial challenge for Governments is not merely to preserve the world trading order, but to extend it. Unfortunately, not all our Community partners see this as clearly as we in Britain do. But narrow sectional interests must not be allowed to prevent the current GATT negotiations from reaching a rapid and successful conclusion. The prosperity of the world in the decades ahead rests squarely on the freedom to trade.

    UNITED KINGDOM : RECENT DEVELOPMENTS

    The most significant development in the British economy over the past year has been the sharp and sustained reduction in inflation. Retail price inflation has fallen to around 4 per cent., close to the German level, while underlying producer price inflation is at its lowest level for a generation.

    Average earnings, too, are rising at the lowest rate for 25 years, suggesting that, after a decade of supply-side reform, the British labour market is operating far more effectively than before. This augurs well for employment prospects in the longer term. But, as elsewhere in the world, activity and demand in Britain have been weak. The rapid increase in demand in the late 1980s, fuelled by a sharp fall in saving and large increases in indebtedness, made a period of adjustment inevitable. Companies and households that borrowed extensively have reined in spending and repaid debt in response to higher interest rates.

    Following a substantial reduction in interest rates, there were clear signs of renewed growth in the late summer and early autumn of last year – not just in confidence surveys, but also in the figures for retail sales and economic activity more generally. But, as in the United States, the recovery here was not sustained.

    The effect on the British economy of recent world developments, and particularly those in the United States, cannot simply be measured by the adverse consequences for British exports. British firms have factories and offices abroad – indeed, our investment in the United States is higher than that of any other country. Conditions in one country can and do affect business confidence elsewhere. So unexpected weakness in the rest of the world has taken its toll on confidence in Britain, discouraging investment and stock-building. Over the year as a whole, GDP fell by nearly 2 per cent., per cent. more than my forecast of a year ago.

    THE OUTLOOK FOR 1992 AND 1993

    Most independent forecasters agree that 1992 will see the resumption of economic growth. The recovery is expected to start slowly, but to gather pace. I expect growth in the year to the second half of 1992 to be almost 2 per cent. The level of GDP for this year as a whole should be about 1 per cent. higher than last.

    As inflation in Britain has fallen, so too have interest rates ; and that has put money in the pockets of mortgage payers. Indeed, a typical family with a £30,000 mortgage is now more than 15 per cent. better off in real terms than in October 1990 – nearly £30 a week. That represents a considerable stock of pent-up spending power, which will in time feed through to stronger consumer spending.

    Output will also be boosted by stronger export growth as the world economy recovers. Our share of world trade in manufactures rose in 1991 for the third successive year, despite the world slowdown, and I expect further gains in the future as lower inflation leads to improved competitiveness.

    The current account deficit for last year was about £4 billion, per cent. of GDP. As domestic demand recovers, the deficit is likely to widen a little this year. At 1 per cent. of GDP for the year as a whole, it will be easily financeable.

    Even with a resumption of growth, unemployment is likely to go on rising for some time. But while the increase will moderate over the months ahead, a sustained reduction in unemployment over the longer term will depend crucially on our success in keeping inflation down, and the prospects for that are better than at any time in recent economic history.

    I expect retail price inflation to fall decisively below 4 per cent. by the end of the year and to be close to 3 per cent. by the middle of 1993. Producer price inflation will be even lower, down to 2 per cent. by the end of this year and to 1 per cent. by the middle of 1993.

    THE LONGER TERM PROSPECT

    A whole generation has grown up to accept inflation as an unalterable fact of life. But we are now making steady progress towards price stability – an environment in which the decisions of businesses and consumers are no longer distorted by the expectation of a general upward movement in prices. Inflation has been the scourge of our economy for decades, and its defeat, not just here but elsewhere in Europe, will represent a tremendous achievement, bringing enormous benefits to British businesses and families. There are those who would put this at risk by seeking to pump up demand, but I am not prepared to take steps which would call into question the Government’s determination to match or better the inflation performance of our Community partners.

    And even if it were thought desirable, it is not remotely feasible for Governments to try to target the level of demand month by month or quarter by quarter. Having made such progress in getting inflation down, it would be tragic now to throw it all away with an ill-judged or ill-timed attempt to kick-start demand.

    The challenge before us is not to provide some artificial short-term stimulus to the economy. It is to continue the supply-side reforms of the 1980s. Low tax and light government have produced an economic environment which spurs competition and rewards enterprise. Our job now is to build on them to help people and businesses make the most of recovery. And that will be the theme of my Budget today. Between 1979 and the end of 1990, the number of businesses rose by almost a third. Even during the recession capital spending on plant and machinery has remained higher as a proportion of GDP than at any point in the 1970s. As a result we have seen exceptional growth in manufacturing productivity – faster than in any other G7 country in the 1980s. Industrial relations have been transformed. Fewer days were lost to industrial action in 1991 than in any year since records began a century ago.

    The confidence of foreign investors in Britain’s renewed economic strength is demonstrated by our continued high share of inward investment. Almost half of the direct investment in the European Community from the United States and Japan comes to the United Kingdom. Those investors recognise that Britain, with its low taxes, good industrial relations and stable currency, is the right place to come to exploit the opportunities of the single European market.

    MONETARY AND EXCHANGE RATE POLICY

    Whether or not the United Kingdom decides to participate in a move to a single European currency, we will be among those who meet the strict conditions required for entry. The Government believe that these conditions provide a valuable framework for setting policy in the medium term. And that means that monetary policy is primarily directed at the maintenance of sterling’s parity within the exchange rate mechanism. In due course we shall move to the narrow band of the ERM, at the current central rate of 2.95 DM.

    Since ERM entry was announced in October 1990, sterling has remained within its permitted ERM bands, while interest rates have been reduced by 4 per cent. The differential between United Kingdom and German interest rates is now at its lowest for a decade.

    In common with all the major countries within the ERM, I shall set a domestic monetary target. M0, the narrow measure of money, has stayed comfortably within the range I set in the last Budget. For the year ahead I propose to continue the target range for narrow money of 0 to 4 per cent. This is consistent with a further fall in inflation combined with a recovery in output. I shall continue to watch closely other indicators of monetary conditions, including broad money and asset prices.

    PUBLIC FINANCE AND FISCAL POLICY

    I turn now to the public sector finances. The slowdown in the world economy over the last year has led to larger budget deficits in most industrial countries. Tax revenues and spending on some social security programmes largely depend upon the level of economic activity. So, in a recession, tax receipts are lower while social security spending rises.

    But, thanks to my predecessors, we in Britain have the great advantage of having a ratio of Government debt to GDP that is very low by both historical and international standards. Indeed, the general Government debt burden is lower in the United Kingdom than in any other European Community country bar Luxembourg. That means that a rise in borrowing in response to cyclical pressures will not jeopardise the Government’s firm commitment to sound finance. The objective of fiscal policy remains to balance the budget over the medium term. In a recession borrowing will tend to rise. But there is nothing wrong with that, providing that the underlying position is sound and the budget moves back towards balance as the economy recovers. Indeed, it makes good economic sense to allow the level of Government borrowing to vary in this way over the business cycle.

    For the year ending on 1 April, I expect a PSBR of a little under £14 billion, or 2 per cent. of GDP. The rise in the forecast since the autumn statement is due for the most part to the impact of weaker activity on revenues rather than to higher public spending. Indeed, planned public expenditure this year is likely to be a little below the level that I set in last year’s Budget.

    Since the full impact of the recession, on both tax revenues and public expenditure, feeds through only with a time lag, the PSBR will increase further in 1992-93. Taking account of the measures that I am announcing today, my forecast implies a PSBR next year of some 4 per cent. of GDP, about £28 billion.

    As I have said, the increased borrowing requirement reflects the delayed impact of weaker activity over the last year. Even so, I expect it to be rather lower than that of Germany, and less than half the level seen in Britain following the recession in the mid-1970s. The ratio of Government debt to GDP will rise slightly next year. But our debt burden will remain very low by international standards. As the economy recovers, and growth gathers pace, the PSBR will move back towards balance, and the debt burden will resume its downward trend.

    During 1991-92 the borrowing requirement has been fully funded, and that policy will continue over the year ahead. An increased amount will be funded through national savings. A new product, a guaranteed growth bond designed to appeal to taxpayers, will be launched in the summer.

    INVESTMENT

    The prosperity of this country does not stem from government but from the enterprise and initiative of the British people and of British business. A recurrent theme of the Budgets delivered by my distinguished predecessors has been the desire to create a framework in which economic decisions are taken on their own merits, and not in response to distortions created by the tax system. In continuing that tradition today, my Budget will ensure that recovery is not based on some short-term boost from Government but on the decisions taken by the private sector.

    The proposals that I shall be presenting today should be seen in the context of the benefits that business will receive from the measures I announced last year. In my last Budget, I cut the main rate of corporation tax by a full two percentage points, to 33 per cent., for profits earned in the 1991 financial year. That has given Britain a lower rate of corporation tax than any of our major competitors, and I propose to leave it unchanged for the year ahead. Because corporation tax is paid in arrears, companies will feel the full impact of last year’s cut only in the coming year. Combined with the other corporation tax measures that I announced last year, it will benefit businesses by some £1 billion in 1992-93.

    In my autumn statement I announced substantial increases in public sector investment. In the financial year beginning 1 April investment in roads and public transport will be £5 billion, and capital spending on the national health service will be more than £2 billion. Next year, public sector asset creation – in other words, total investment spending by the public sector – will amount to nearly £30 billion.

    Over the last decade, this Government have fully demonstrated their commitment to investment in our public infrastructure. It would be wholly wrong to allow the impact of the recession on the fiscal deficit to lead to cuts in our long-term investment programmes, as occurred in the 1970s. But it would be equally wrong to expect public investment or an ever-expanding public sector to lead the recovery. The recovery will be sustainable only if it is led by the private sector. Investment does not take place in a vacuum. Good quality private-sector investment will come not from artificial subsidies or incentives but in response to consumer demand.

    One suggestion that has been put to me is that I should raise first year capital allowances. I have considered this proposition very carefully. I would be as concerned as anyone if I thought that the corporation tax system introduced in 1984 was acting as a drag on profitable investment. But, on average, the current tax rules allow capital investment to be written off more quickly than economic depreciation would imply. In current circumstances, any general increase in capital allowances would primarily benefit large and profitable businesses. Moreover, given the way that the corporation tax system works, those benefits would not flow through into companies’ cash flow until the year after next.

    The evidence suggests that the cost of higher capital allowances to the Exchequer would be several times greater than the resulting increase in investment over the next few years. I have therefore concluded that, whatever its superficial attractions, an increase in capital allowances would not be a sensible use of the resources available.

    NATIONAL NON-DOMESTIC RATE

    There is a far better way to help business this year. I have decided to bring forward proposals that will be of early benefit to some 900,000 non-domestic properties, large and small, throughout the United Kingdom.

    Business in England and Wales has gained much from the introduction of the uniform business rate in 1990. During the 1980s, when business rates were set by local authorities, poundages in England rose on average by over 37 per cent. more than inflation. Under the new system, rate poundages are capped in real terms.

    In some cases, however, the changes in bills have been substantial, and many businesses have faced a difficult adjustment. That is why, when we introduced the uniform business rate, the Government eased the transition by phasing in the losses of those who faced large changes in their bills. But I am well aware that many of the businesses which face large increases next year have also been hard hit by the recession. I have therefore decided that their burdens should not be compounded by real increases in business rates. The Government propose to amend the transitional arrangements already enacted for next year’s business rates in England and Wales to ensure that no business property will face a real increase in rates next year. The bills for properties protected by the transitional arrangements will increase by no more than the rate of inflation, like those for other properties – 500,000 business properties in England and Wales will benefit at a cost to the Exchequer of £320 million in 1992-93. The present statutory limits on real annual increases in rate bills will apply again from 1993-94. Since such increases will be from a lower base, there will be a further cost of £220 million in that year.

    The present rules mean that new occupiers are not eligible for transitional relief. As the property market has weakened, this has made it more difficult for businesses to move. I therefore propose to allow businesses occupying new premises after midnight tonight to inherit the transitional protection available to the previous occupier, at a further cost of about £25 million. This should help to increase mobility and unlock the property market.

    But it would be wrong to concentrate help only on those businesses who lose from the new arrangements. While the transitional arrangements have postponed losses for some companies, they have also delayed the gains for those who did worst out of the old system. I believe that businesses should see the full benefits more rapidly. I therefore propose to accelerate their gains.

    From 1993-94 onwards, I propose that all businesses gaining from the 1990 reforms should be allowed to have their gains in full. So, by then, no business will be paying higher business rates than it should be doing under the new system.

    In the coming year, I propose that the maximum reductions in the rate bills of the gainers should be raised to 22 per cent. in real terms for large properties, and to 27 per cent. for small properties. Those limits are nine percentage points higher than in the current year : 150,000 business properties in England and Wales will benefit at a revenue cost of £85 million in 1992-93.

    These changes will not reduce the income of local authorities. Subject to Parliament’s approval, the Government will pay extra money into the non-domestic rates pool to make good the shortfall in business rates revenue. These payments will not add to public expenditure.

    The Government will introduce special legislation as soon as practicable to implement these proposals. In the meantime, local authorities should send out bills and collect business rates in accordance with the existing legislation and regulations. Business rate bills on properties in transition will be cut, and adjustment made for earlier higher levels of payment, when Parliament has approved the legislation and local authorities can send out new lower bills.

    The proposals that I have outlined will apply to business properties in England and Wales, reducing the total business rates bill next year by 3 per cent. Scotland and Northern Ireland each have different arrangements for business rates. The Government propose that their total rates bills next year should likewise be reduced by 3 per cent. My right hon. Friends the Secretaries of State for Scotland and for Northern Ireland will be announcing the details.

    These measures will bring significant and early benefit to many thousands of businesses throughout the United Kingdom. The revenue cost will be £480 million in 1992-93 and £590 million in 1993-94 but will fall away rapidly in subsequent years.

    SMALL BUSINESS

    My proposals on the UBR will be of particular benefit to small businesses – the lifeblood of a modern economy. Small businesses have been at the heart of the supply-side revolution in this country over the last decade. The result has been a new economic dynamism, with increased competition and a more flexible labour market.

    Inevitably, taxation and regulation bear most heavily on small firms, so I have considered carefully what measures I can take to ease that burden, and in particular to ease the cash flow of small businesses. Last year, I raised the VAT registration threshold by some 40 per cent. This year, I propose to increase the threshold in line with inflation, to £36,600. One hundred and thirty-five thousand traders – one third of all those eligible – now use the cash accounting scheme for VAT, which allows small firms to delay their VAT payments until they themselves have been paid. I can now announce that the rules will be relaxed to allow traders owing less than £5,000 to Customs to use cash accounting. I hope that this will encourage many more traders to take advantage of this excellent scheme.

    My decision last year to allow small employers to pay income tax and national insurance deducted at source on a quarterly rather than monthly basis was widely welcomed by small employers. I propose to raise the qualifying limit to £450 a month. That will mean that nearly million employers will be able to make payments quarterly rather than monthly.

    But one problem arouses more anger in the small business community than any other. I have every sympathy for small companies which find that their larger debtors are deliberately delaying payment to boost their own cash flow. Such practices are wholly deplorable ; and, while there is no easy solution, my right hon. Friends and I have looked hard at what the Government can do to help. I have a number of proposals to announce.

    First, the Government propose to require larger companies to state in their annual report and accounts how quickly they pay. Second, my noble and learned Friend the Lord Chancellor will be proposing simpler procedures in small claims and debt recovery cases. Third, I want to see the Government’s good record on the payment of bills extended to firms which win Government contracts. From next month, those successfully negotiating a contract with a Government Department will be required to include clauses in their own contracts with subcontractors which provide for the prompt payment of bills, ordinarily within 30 days of receiving a valid invoice. I believe that Government have set a good example, and I hope that large companies will follow.

    For businesses facing cash flow difficulties, value added tax penalties can be the last straw. It has been put to me on many occasions that the VAT penalty regime is too strict. The serious misdeclaration penalty is catching too many minor mistakes. This must stop. In future, Customs will not normally charge penalties on under-declarations of tax of up to £2,000. That will take over three quarters of cases out of the penalty regime, although the largest mistakes will still be penalised.

    Last year I reduced the rate of penalty from 30 per cent. to 20 per cent. I now propose to cut it further, to 15 per cent. But there are other aspects of the regime which require more consideration, and Customs are issuing today a further consultation document on the options for longer-term reform.

    I believe that the highest rates of default surcharge levied on traders who submit late VAT returns or payments cannot be justified. I therefore propose to reduce the maximum rate from 30 per cent. to 20 per cent. These measures, taken together, will reduce the penalties businesses might otherwise have had to pay Customs by £35 million next year.

    One of the other complaints I have heard most frequently over the years is that it is unjust that taxpayers cannot be awarded costs when they appeal before the special commissioners. I now propose to introduce a measure which would give the Lord Chancellor power to make new rules about the hearing of appeals, including the powers to award costs where either party has acted wholly unreasonably.

    INHERITANCE TAX

    I have one final change to announce which will be of substantial benefit, particularly to small family businesses. I propose to take most family businesses out of inheritance tax altogether. This will cost £10 million in 1992-93, and £25 million in 1993-94. Relief from inheritance tax for interests in unincorporated businesses, for shareholdings greater than 25 per cent. in unquoted companies, and for working farmers will be increased from 50 per cent. to 100 per cent.

    Shares dealt on the unlisted securities market, which are generally less liquid than shares with a full stock market quotation, will from today be treated like unquoted shares. That means that shareholdings of over 25 per cent. will also generally be free from inheritance tax.

    For shareholdings of 25 per cent. or less in unquoted companies, and for agricultural landlords, the rate of relief will rise from 30 per cent. to 50 per cent. The 50 per cent. relief will also extend to smaller shareholdings in USM companies and to controlling shareholdings in quoted companies.

    Inheritance and capital are no longer a privilege of the wealthy few. Ordinary families want to be able to pass on the wealth that they have built up over their lives to their children without an excessive proportion being taken by tax. Over the years to come I shall continue to look for ways of lightening the burden of inheritance tax. This year I propose to raise the threshold for inheritance tax by more than inflation, to £150,000. This will cost about £10 million in 1992-93. I intend to raise the threshold for capital gains tax in line with inflation, to £5,800.

    Taken together, the measures that I am proposing on business rates, on VAT and on inheritance tax will be of very substantial benefit to British business as a whole and to small business in particular in the year ahead.

    OTHER BUSINESS MEASURES

    Over the past year I have received many representations about surplus advance corporation tax. ACT is paid by companies when they pay dividends. It serves two purposes : first, to discharge the shareholders’ basic rate income tax liability; and, second, as a payment towards the company’s own corporation tax liability. But some companies paying dividends out of foreign profits taxed abroad find that they are now paying more ACT than they can set against United Kingdom tax.

    That is a significant problem for those affected. But it is also highly complex, and huge amounts of revenue are potentially at stake. A satisfactory and lasting solution will need to address the ways in which different national systems of corporation tax interact. This is currently the subject of a review sponsored by the European Commission, and it is clearly an issue to which the Government will have to return.

    Its importance is of course increased by the abolition, from 1 January 1993, of fiscal frontiers within the European Community. That will give British business access to the largest home market in the world. But it will also necessitate a number of technical changes to our VAT and excise systems. As I announced last October, one consequence of the single market is that businesses which import from other European Community countries will pay VAT on those imports later than they do now, giving some 90,000 businesses a welcome cash-flow benefit.

    This change will add substantially to the PSBR in 1992-93. I therefore announced last year that, from this autumn, the largest VAT payers – those who paid over £2 million in VAT in 1990-91 – would be required to submit VAT returns monthly rather than quarterly as now. It has been put very forcefully to me that the requirement for monthly returns would place an undue administrative burden on the businesses concerned. I have listened carefully to these representations, and I now intend to take steps to allay the concerns raised by those affected.

    I have asked Customs to implement a system of monthly payments on account for these large businesses, but I propose to allow them to continue to submit returns quarterly. This will avoid the requirement to fill in VAT returns every month, while still offsetting the cost to the Exchequer of postponed accounting for imports. Compared to my original proposal for monthly returns, payments on account will cost the Exchequer some £200 million in 1992-93, with a corresponding benefit again to the businesses concerned. I will introduce legislation to establish the basis for these new arrangements.

    I also propose to introduce legislation to prevent the business tax rules from being manipulated to secure an unjustifiable tax deferment when rent is paid between connected persons. The manipulation which has already occurred has involved tax of some hundreds of millions of pounds. This loophole will be closed immediately.

    I have one change to make to the business expansion scheme. It has been put to me that the BES could play a valuable part in helping to ease the problem of mortgage repossessions. At present companies can use the BES to acquire empty repossessed houses, but there are complications if the houses are still occupied. I propose to make it easier for the BES to be used for mortgage rescue schemes where owner-occupiers in difficulties wish to stay in their homes as assured tenants. This will add to the impact of the measures I announced in December to help the housing market.

    But I have also looked closely at the entire rationale behind the business expansion scheme, which is an exceptionally generous tax relief. When my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) introduced it in 1983, the venture capital industry was in its infancy, and there was concern that the investment needs of small firms were not well understood and provided for.

    The BES has been extremely successful. Over £2 billion has been raised and invested in qualifying schemes of all kinds. And Britain now has a venture capital industry the equal of that anywhere in the world, outside the United States. But the provisions of the business expansion scheme have become ever more complex ; and nowadays only a small part of the total invested goes to small businesses. As my right hon. Friend the Member for Blaby (Mr. Lawson) made clear when they were introduced, the BES provisions for assured tenancies were intended to expire at the end of 1993. I have decided that it is unnecessary to continue the business expansion scheme beyond that date, not only for assured tenancies, but for other investments as well. BES will therefore come to an end on 31 December 1993. As I have said, it has fulfilled a useful purpose. But its removal will significantly improve the neutrality of the tax system ; and some 45 pages of complex legislation will be removed from the statute book.

    As a result of my announcement today, there is likely to be some acceleration in investment, which will be welcome. In the long run there will be substantial savings, perhaps £130 million a year. Last year, I made it clear that I was concerned about the position of the British film industry and that I would consider carefully any further proposals that the industry brought forward. I have done so. Although a special tax regime already exists, the industry has long argued that the provisions for writing off expenditure do not fully take account of their special circumstances, and in particular of the cash flow problems that may be caused by the sometimes lengthy gap between the completion of a film and its release. I propose two measures to alleviate the position.

    First, relief for pre-production expenditure will be available as it is incurred; and, second, production expenditure will be available for write- off at a fixed rate of one third each year, on a straight-line basis, starting immediately on the completion of the film. This will have a cost of about £5 million in the first year, and around £15 million in 1993-94.

    CARS

    The motor industry is and will remain at the very heart of British manufacturing.

    Facing a sharp fall in domestic demand over the last year, the industry responded in exactly the right way, by switching production to exports, which rose by 20 per cent. in 1991. The fall in domestic sales should not be allowed to obscure this growing strength, which should make Britain a net exporter of cars by 1996 for the first time since 1974.

    None the less, I recognise that the last year has been a difficult one, and the measures I am proposing today will help the industry, while building on and continuing the reform of the taxation of cars that I and my predecessors have introduced.

    Before the 1988 Budget, the car scale charges – the income tax charge on those who have the benefit of a company car – were too low. Since then, we have moved much closer to realistic levels. I propose this year to increase the scale charges only in line with inflation. Otherwise, the real value of the tax payable would actually fall. But there are still aspects of the car scale charges which are both arbitrary and unfair. For most cars the tax payable is determined not by reference to the value of the car but rather by the car’s engine size. As the Monopolies and Mergers Commission has pointed out, this causes distortions. It also discriminates against diesel cars. The unfairness in the current system may have been acceptable when the tax charge was only a fraction of the true value to the user, but that is no longer the case.

    We need a system that better measures the value of the benefit. That means basing the tax charge on the price of the car, not its engine size. I therefore propose to introduce price-based scales as soon as practicable. The Inland Revenue will be publishing a consultative document in the summer on the details and timing of such a move.

    The car fuel scales, which measure the taxable benefit of free private fuel provided by the employer, have remained frozen since 1987. I propose to increase the scale for free petrol by 4.5 per cent. But at the moment we apply the same charge to diesel as to petrol, even though the cash value of free diesel is less. That means the fuel scales are too high for diesel cars, so I propose to introduce a new, and significantly lower, scale for diesel, bringing the tax charge closer into line with the value of the benefit received.

    While the income tax treatment of cars has until recent years been much too generous, in other ways cars have been the subject of discriminatory tax treatment. I have some changes to announce that will reduce that discrimination, and provide a boost for all businesses buying cars and for the car industry itself.

    First, companies that offered their employees the alternative of cash or a car have found themselves liable to pay VAT on the salary forgone by those who chose the car. That is clearly nonsensical. I shall be laying an order to make clear beyond doubt that, from 1 April, a VAT charge will no longer be imposed in these so-called salary sacrifice cases.

    Second, the capital allowances available for business cars are currently restricted for cars costing more than £8,000. That limit is now unrealistically low and I propose to increase it to £12,000, enabling full capital allowances to be given on most business cars. This measure will cost £50 million in 1993-94, building up to £220 million when the change has its maximum effect. But the revenue cost in the long term will be small.

    At present, most taxi and car hire firms and driving schools cannot recover the VAT they pay on their cars even though their cars are their business. I propose to end this anomaly from 1 August, at a cost of £50 million in 1992-93.

    Those measures will go some way towards improving the neutrality of the tax system as its affects cars purchased by businesses. But I have one further measure to announce, which will affect all those buying new cars.

    In 1973, car tax was introduced, to make up the difference between VAT and the former purchase tax. It has remained unchanged, at 10 per cent. of the wholesale price, ever since. This tax distorts consumer spending, and car manufacturers have long complained that our taxes on new cars are higher than those of other main European producers. This Government have always sought to reduce distortions in the tax system, and I therefore propose to reduce car tax by half, to 5 per cent., from midnight tonight. That will directly reduce the tax burden on all new cars. I trust that car dealers will respond by passing the full benefit of this reduction – about £400 on a typical family car – to the buyer. The halving of car tax will cost about £635 million in 1992-93, and £765 million in the following year.

    EXCISE DUTIES

    I turn now to excise duties. Last year I raised the duties on alcohol in line with inflation, and I propose to do the same this year. From 6pm tonight, this will mean an increase in the tax on a typical pint of beer of just over 1p, just under 5p on a bottle of wine and 28p on a bottle of spirits. I also propose to raise the duty on unleaded petrol and on diesel in line with inflation.

    On leaded petrol, I propose a rather larger increase, of 7 per cent., taking the tax differential between leaded and unleaded petrol to over 5p a litre. That will continue our long-standing and successful policy of encouraging motorists to move away from leaded petrol, which now represents little more than half the market. I propose to increase vehicle excise duty on cars, taxis and light vans by £10, and to freeze it again this year for lorries. I propose to raise the duty on tobacco by about 10 per cent. – roughly the same real increase as last year. That will add 13p to the price of a packet of 20 cigarettes. The duties on other tobacco products will also rise by about 10 per cent., apart from that on pipe tobacco, which will rise only in line with inflation. Benjamin Franklin once remarked that nothing was certain except death and taxes, but for some people the latter may help to delay the former. As for the irreconcilables – among whom I count myself – I have one minor compensation : I propose to abolish from 1 January 1993 the duty charged on matches and mechanical lighters.

    I also have a change to announce on betting duty, with consequences for the racing industry. I propose to cut the rate of betting duty by one quarter of 1 per cent., reducing the tax take by £15 million in 1992-93. My right hon. Friend the Secretary of State for the Home Department will be announcing later today his determination of the horse race betting levy, and he will be making proposals to ensure that the greater part of that reduction will be channelled to the horse racing industry. That is an important part of the measure, and I shall review the cut in betting duty next year.

    A proportion of the reduction, of course, will be attributable to betting on greyhound racing. I hope that voluntary arrangements can be found to direct some of that money to help the greyhound racing industry, and my right hon. Friend will be exploring the possibilities with interested parties.

    I should also tell right hon. and hon. Members quite clearly what I am not proposing. I know that there is particular concern about the European Commission’s proposals on the taxation of alcohol. But let me make it clear : I will not accept any deal in Brussels that would ride roughshod over the interests of the British cider industry. Nor will I accept a deal that would allow member states to continue to levy no excise duty on wine which they make but which forces them to put up duties on spirits which we make.

    CHARITIES

    Over the past 13 years, we have introduced a number of measures directed at encouraging charitable giving. We introduced the payroll giving scheme. We have extended and widened value added tax reliefs – and my right hon. Friend the Prime Minister, when he was Chancellor, introduced the gift aid scheme.

    Gift aid allows tax relief on one-off donations of £600 or more. It has been a considerable success. Charities have received nearly £200 million in income under the scheme. I propose that from 1 July 1992 the minimum gift should be reduced to £400 – the figure proposed by the Council for Charitable Support and the Charities Tax Reform Group. I shall not go further, because I know that some charities are concerned that to do so might reduce the attraction of regular giving through charitable covenants.

    But I propose some changes to the arrangements for tax relief on charitable covenants, intended to reduce administration costs for charities and to help them to maintain a steady and reliable flow of income. And I propose a number of minor improvements to the VAT reliefs available to charities and for aids to the disabled.

    SAVINGS

    Savings are a passport to personal independence and security ; the very foundation of a property-owning democracy. That is why, over the last decade, the Government have set out to lighten the burden of taxation on saving.

    We have reduced the basic and higher rates of income tax, and abolished the investment income surcharge. We have stopped taxing the savings of non-taxpayers. And we have extended savings incentives to the mass of ordinary tax-paying savers by introducing tax-exempt special savings accounts – TESSAs – which allow people to invest up to £9,000 over five years in a bank or building society account. We have also introduced new and popular incentives to invest in shares. In 1986 we introduced personal equity plans to enhance the attraction of investment in shares b making the income and capital gains from them free of tax. Today, I want to improve PEPs still further by removing the £3,000 limit on the amount that can be invested in unit or investment trusts. I propose that from April people should be able to invest up to the full £6,000 a year in qualifying investment and unit trusts. This new opportunity – which will cost £10 million in 1993-94 – will provide further encouragement to PEPs, and help to small savers.

    We do not see the returns to savings as “unearned income”, to be taxed more heavily than earned income. On the contrary, we will continue to lighten the burden of tax on savings, and to broaden the range of investments which receive savings incentives.

    PENSIONERS

    No one has benefited more from our encouragement of savings than pensioners. In the 1980s, most pensioners saw their real incomes rise sharply, as inflation fell and the value of occupational pensions rose. On average, pensioners’ real incomes increased by more than a third between 1979 and 1988. More than half of pensioners now have a second pension; and pensioners have seen their income from saving double since 1979.

    I propose that the income tax allowances for the over-65s–both the personal allowances and the married couple’s allowances – should increase in line with inflation. The income limit for the age-related allowances will also increase in line with inflation.

    Increases in the age allowances can, of course, benefit only those pensioners who pay tax. But this year I also want to help the less fortunate pensioners – those whose savings have been eroded over the years by inflation; those who have only modest occupational pensions; and those who retired too early to take advantage of the growth of SERPS.

    Last October, my right hon. Friend the Secretary of State for Social Security announced that the income support rates for pensioners would be increased this April by at least 7 per cent.; and there were extra increases for disabled pensioners and the over-80s.

    I now propose a further increase in income support rates, of £2 for single pensioners and £3 for pensioner couples. When this comes into effect, in October, all pensioners on income support will be at least £5.75 a week better off than they are now, and some will be as much as £10.70 a week better off. In total, some 5 million people will benefit. And it will bring the real increase in spending on benefits for poorer pensioners since 1989 to more than £700 million. The cost – some £145 million in 1992-93 and £305 million in the following year – will be financed from within the existing public expenditure plans.

    INCOME TAX

    Turning now to income tax more generally, I do not propose this year to increase the basic rate limit, the level of taxable income above which people begin to pay higher rate tax. Compared with indexation, this will save £180 million in 1992-93 and £290 million the following year.

    Nor do I propose any increase in the married couple’s allowance for couples under 65 or the allowances that are linked to it. But I do have one significant change to announce. The introduction of independent taxation in 1990 brought privacy and independence to married women by ending the rule that a wife’s income was assumed to be her husband’s. This change was widely welcomed. However, it did not eliminate completely the discriminatory features of the old system.

    At present, the husband receives the benefit of the married couple’s allowance unless his income is too low to make use of it. That means that the husband’s tax allowances are almost always greater than those of his wife. It also means that couples where the wife is a higher rate taxpayer and the husband is not pay more tax than couples where the husband is the higher rate taxpayer. That cannot be right. It is hardly surprising that the MCA has been described by some as the male chauvinist allowance.

    I propose to change this system. From 1993-94, couples will have a choice. If they take no action, the husband will continue to receive the MCA as now. They will be able to decide that the wife should receive the whole allowance, or that they should split it; or the wife will be able to claim half at her own request. This measure will have only a small effect on revenue – £10 million in 1993-94 – but it will make the tax system much fairer to married women.

    The Government have cut the basic rate of income tax by 8p since we took office in 1979, to 25p. And, as the House knows, we are committed to reducing the basic rate to 20p as and when it is prudent to do so. I reaffirm that commitment today.

    For the year ahead, I propose that the personal allowance should be uprated only in line with inflation. It will rise from £3,295 to £3, 445. But having reflected carefully on the priorities for this year’s Budget, I have decided that for the year ahead it is right to leave the basic rate at 25p in the pound.

    I believe that it is possible, desirable and, indeed, prudent to take a substantial step this year towards our goal of a 20p basic rate for all taxpayers. It is neither necessary nor desirable that anyone earning more than their personal allowances should start paying income tax at a rate of 25 per cent. With national insurance contributions on top, that means that the Government take a third of every extra £1 earned even from the low paid. In my view, that is simply too much; and I believe that we can and should reduce that burden.

    So I propose this year to cut the rate of income tax by 5p, to 20p, for the first £2,000 of taxable income. That will benefit every taxpayer in the country, but it will be of proportionately greater benefit to those on low incomes. It represents a decisive first step towards the Government’s objective of a 20p basic rate.

    In the next Parliament, we will gradually move closer to that goal. We will be able to do that in two possible ways : either by extending the width of the 20p band so that it covers increasing numbers of basic rate taxpayers, or by reducing the basic rate itself. Next year, nearly 4 million people on low incomes will already be paying tax only at the 20p rate. Their income tax bill will be cut by a fifth. That will improve their work incentives and make it more worth while for those not currently in work to take lower paid jobs. Nearly 25 million people – every taxpayer in the country – will see their starting rate of tax reduced to 20p. Combined with the indexation of the personal allowance, that will reduce taxes for the large majority of taxpayers by at least £2.64 a week.

    Mortgage interest tax relief at source will continue to be given at 25 per cent. for everybody, irrespective of whether they are a non-taxpayer, a 20p taxpayer, a basic rate taxpayer, or a higher rate taxpayer. But those in the 20p band will only be liable for tax at 20 per cent. on their savings.

    The new 20p band will cost £1.8 billion in 1992-93 and £2.3 billion in the following year, broadly equivalent to the cost of a penny off the basic rate. But, in comparison with a penny off the basic rate, the 20p band will be of particular benefit to those on the lowest incomes. Indeed, about three-quarters of the cost will go to taxpayers earning less than average male earnings.

    I now turn to the question of value added tax. I have a very important announcement to make, to which I hope the whole House will listen carefully. I have no need, no proposals and no plans either to raise or to extend the scope of VAT.

    The total impact of the taxation proposals I have put forward today, taken together with measures announced since my last Budget, will reduce the burden of taxation by around £1.5 billion, equivalent to per cent. of GDP, in the next financial year.

    PERORATION

    The Budget I have presented today is a Budget for the recovery. It maintains the policies that have slashed inflation and reduced interest rates. And it includes measures that will help businesses, large and small, up and down the country.

    But it is also a Budget that cuts taxes for every taxpayer in the country, a Budget which marks another significant step in our constant drive to leave individuals and families with more of what they earn. Over the past decade our belief in low taxation has brought unparalleled growth in the living standards of the British people. My Budget today continues that process, and I commend it to the House.