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Pre-Budget Report
HM Treasur
25 November 1997
Chancellor Gordon Brown today launched a national debate on the major economic issues facing Britain. For the first time ever, the Government's detailed thinking on economic policy is being opened up to comment and scrutiny before final Budget decisions are taken.
The Pre-Budget report published today invites open discussion of the economic policies necessary to deliver the Government's objectives of high and stable levels of growth and employment. The Government will set the economic framework which underpins stability, and removes barriers to growth and employment. Responsible pay settlements from the boardroom to the shop floor will help to achieve lower inflation, higher growth and more jobs.
The Report sets out the challenges the nation must address and the solutions that are open to securing a successful long-term economic future. The debate will help build the foundations of a shared understanding and sense of national economic purpose between Government, business and individuals. This is essential if the economy is to succeed in the global marketplace and if Britain is to share in higher standards of living.
In the past, instability has hindered the long-term growth and development of the economy. Britain's productivity is significantly behind its major competitors and in nearly 20 per cent of households with people of working age, no one is in work. This Government will put an end to stop-go policies. Stable public finances and low inflation are the building blocks for high levels of growth and employment. This requires a responsible approach from Government to monetary and fiscal policy, and from business and individuals to earnings throughout the economy.
To complement the reform of the Bank of England and the rules for monetary policy, the Government proposes to legislate for a Code for Fiscal Stability. This will ensure that fiscal policy is set to promote long-term economic stability (see HM Treasury 2).
Economic stability underpins growth. But the growth itself depends on productive investment. Changes to the tax system, which the Government is considering, will create the environment for long-term investment. In the Spring Budget:
This will allow companies time to plan ahead. Alongside the reform of corporation tax, there will be:
To share in the benefits of economic growth, everyone must have the chance to unlock their potential. The Government is pledged to achieve high and stable levels of employment - the modern definition of full employment for the 21st century - and modernising the welfare state to help people from welfare to work. Building on the New Deal, announced in the July Budget, there will be a co-ordinated strategy of reform in four areas to help the unemployed move into work and to ensure that work pays:
The Chancellor also set out today new ways in which the Welfare to Work programme would be developed including: a New Deal for the long-term sick and disabled; action on skill shortages; new help for lone parents and increased childcare provision to meet the challenges of the new labour market (see HM Treasury 6).
The Government is committed to developing the tax system to benefit the many and not just the few, and ensuring that it is fair and seen as fair. When it is prudent to introduce the 10p starting rate, changes will be made to ensure that its benefits go to the lower paid. Any changes resulting from the review of tax and benefits being led by Martin Taylor will play a key part in shaping a fairer system.
A fairer system also means providing everyone with the opportunity to save in a tax favoured environment. The Individual Savings Account (ISA), extending the principle of TESSAs and PEPs, will look to extend the benefits of saving more widely, particularly to those on more modest incomes. The Government will be launching a consultation document on 2 December.
The tax system must also be fair to future as well as present generations (see HM Treasury 4). The Government's objective is to secure growth that is environmentally sustainable. It is committed to exploring the scope for using the tax system to deliver environmental objectives. A consultation paper on options for dealing with water pollution is being issued on Thursday by the Department of the Environment, Transport and the Regions. The results of the review on ways of helping the less well-off to keep warm is published today, with the full report published tomorrow by HM Customs and Excise.
Today's announcement for this year and next of a 20 Pounds payment for pensioner households and a 50 Pounds payment for pensioner households receiving Income Support to help with winter fuel bills is an immediate step towards a fairer society (see HM Treasury 5).
The debate which begins today is a clear break with the past. Budgets will no longer be prepared in conditions of Budget "purdah". Instead, there will be open discussion and the Chancellor will listen carefully to all points of view.
The debate will culminate in the Spring Budget. During the coming weeks, the Treasury will make further contributions to the discussion.
On Thursday, it will publish a paper on the labour market - "The Modernisation of Britain's Tax and Benefits System: Employment Opportunity in a Changing Labour Market". On 2 December, a consultation exercise on Individual Savings Accounts will be launched. A further paper on fiscal policy will follow in early December. A number of regional conferences to discuss key economic policy issues will also be announced soon.
The Chancellor welcomes all contributions to this debate. All correspondence will be read carefully and fed into the policy process. We are inviting the public and business to write to the Chancellor at the following address:
The Chancellor of the Exchequer Pre-Budget 1998 HM Treasury Parliament Street London SW1P 3AG
or send an e-mail to budget@hm-treasury.gov.uk
Press enquiries to: 0207 270 5238
Non-media enquiries to: 0207 270 4860/4870/4880
Pre-Budget 1997 Press Notices index page
