Mr Speaker, it is my
With many of our international trading partners facing economic problems and the unsettling political events of the past year we cannot see sufficient growth in exports (or other forms of economic activity) to mend the present impasse. We have relied for too long on future hoped for growth and it is now time to address the problems of today with solutions we can control.
We understand there is no money left. We have an enormous debt, and the deficit still persists. Interest rates remain low and any return to normal rates will likely destroy many households and businesses. With rates so low we can of course continue to borrow at low cost - but this will hand the problem to our children and to our children's children.
The solution is to reduce government expenditure - benefits, services (incl NHS) military, etc etc and still maintain in the wider economy sufficient demand to keep normal life functioning. The option of increasing tax income is not on.
My proposals are as follows:
Simplify income tax -
The tax free allowance of £10,000 has been a big step taking many people out of paying tax completely. However, it does mean that the tax burden is now shared by fewer and fewer people. To adopt the concept of the BIG SOCIETY we believe that all people in work or in receipt of income should share part of the tax burden and this will now be achieved by abolishing the tax free band and introducing a low rate of 5% for all earnings over £100 per week up to £15000pa
National Insurance will be abolished immediately and adjusted for as follows:
The standard rate of income tax will be increased to 25% and this will be applied to earnings between £15001 and £60000 per annum
The higher rate allowance will be increased to £60,000 and this will also be indexed in line with CPI for future years
Savings from abolition of National Insurance across all payroll systems is estimated at £500 million per year which can be re-invested by businesses into measures to improve productivity as they see fit
VAT will be reduced by 1% and a special reduced rate of 10% will be introduced for accommodation providers. This will bring the UK into line with our continental neighbours and help hotels and camp sites etc compete with foreign holidays and with small businesses unregistered for VAT. This measure will be self-financing as the extra jobs created will off-set any lost revenue from the reduced VAT rate.
Capital allowances. First year 100% capital allowances will be retained for the next five year for all capital investments in plant and machinery up to £500,000. The longer time span will allow proper business planning to adjust to this regime.
Road tax is to be abolished from April 2017 and any balances will be refunded in full. An additional 2.5% will be added to fuel duty to maintain government income from road going vehicles. Swansea will have a special grant of £100m for retraining redundant DVLA staff.
Capital Gains Tax will be charged on houses sold over £1m where the gain exceeds CPI 3% pa over the period of ownership. Stamp duty will be reduced to 2% on all property sales over £100,000. These measures will unlock unnecessary blockages in the property market caused by excessive stamp duty rates and address the problem of external investors skewing the market in higher value properties
Our duty is to reduce government spending and to this end we will link the basic state pension benefit to the change in CPI until the annual deficit has been eliminated. A thriving country with a budget surplus can afford to be more generous with its pensioner population
Each department of state will be required to close down 5% of its present QUANGOs in each of the next four years.
1p on beer, 1p on fags, 2 p on petrol
For the future my team at the Treasury has a working party investigating the design of a tax on ill considered content published on the World Wide Web
I commend it to the house
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