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We expect emissions of most pollutants from vehicles to fall over the next few years. But emissions of some pollut...
We expect emissions of most pollutants from vehicles to fall over the next few years. But emissions of some pollutants may remain at high levels. So the Government intends to look into ways of using vehicle excise duty to encourage low emission vehicles.

This year, the tax disc for cars will rise by £5. But I am freezing the rates for lorries for the sixth consecutive year. 96. Honest motorists are irritated by tax disc evaders. The secretary of state for transport and I are publishing today a revised proposal on continuous licensing which will make it easier to enforce the collection of vehicle excise duty.

But we will not be requiring licenses for vehicles when they are kept off the road. To make sure that the new system does not penalise vintage and classic car enthusiasts, many of whom only run their cars on the road occasionally, we will be exempting from duty all cars and motorcycles over 25 years old, taking 150,000 historic vehicles out of tax.


The National Lottery has been an outstanding success. Over £1 billion has been raised for good causes over the past year. But its success has affected other parts of the gambling industry in Britain.

I am satisfied that the industry's concerns are genuine and I propose to cut general betting duty by one per cent. The benefits should be spread between the betting industry and horse and greyhound racing. If satisfactory agreement can be reached quickly the duty cut can take effect from 1 March.

The pools companies have also been affected by the success of the National Lottery. I propose to reduce pool betting duty by a further five per cent from 3 December on top of a similar cut I made last year. I am willing to reduce pool betting duty by a another one per cent from 5 May, if the pools companies will agree to pass on that extra one per cent equally to the Football Trust and the Foundation for Sport and the Arts.

This reduction would help the Trust and the Foundation to continue their valuable work and I am sure that would be welcomed on all sides of the House.


In my 1993 Budget, I gave a commitment to raise duty on tobacco by at least three per cent per year in real terms in future Budgets. I thought that was the most fair and effective way of backing up health warnings on smoking and I remain convinced of that today.

From 6. 00 pm this evening the tax on a packet of 20 cigarettes will increase by 15p, on a packet of small cigars by about 6p and on a 25 gram packet of pipe tobacco by about 8p. I intend to freeze duty on hand-rolling tobacco this year because it is proving to be far the easiest product to smuggle.


Next, alcohol. Cross-border shopping and smuggling of alcohol is a serious problem for the retail drinks industry in Britain and it affects government revenue, although total revenue is still rising.

Shopping abroad is one of the greater freedoms gained for consumers in the European single market. But smuggling is a crime which we will continue tofight.

Our duty levels are higher than those of our continental neighbours. Each member state must retain its freedom to set its own tax levels and we accept the downward competitive pressures on tax in a single market. We therefore have to address the legitimate concerns of the British drinks industry but at the same time minimise losses of revenue that would otherwise have to be raised by other taxes.

This year I propose to freeze duty on beer and wine. Tax as a share of the cost of a pint of beer is now the lowest for over 20 years.

There are two changes I propose to make to other duty rates here at home. Very strong cider is presently under-taxed compared with other drinks and I intend to raise its duty by 8p a pint from next October, without disturbing the rate for ordinary ciders.

High rates of duty at home have made it difficult for the Scotch whisky industry to press their excellent case for lower duty rates in other countries. Scotch is one of our most important exports. Spirits duty will therefore be reduced by 4 per cent from 6.00pm today. This is equivalent to 27p off a bottle of whisky.


Windfall tax

I have considered carefully the case for a windfall tax on the utilities. I have been told that it has many splendid qualities. A one-off tax, it is often described as if it hurts nobody. It is claimed that it has no impact on the economy and can be used to pay for up to ten public spending proposals which cost far in excess of the amount of tax it actually raises. What a potential pot of gold, what an elixir to cure all ills.

Of course, it is nothing of the kind. A windfall tax would damage investment and threaten the quality of customer service. It is an illusion that a windfall tax is paid by the company. It is paid by its shareholders, including many small shareholders and pension funds. And it would mean higher future prices for customers.

The whole point of privatisation is to benefit consumers, not simply the Exchequer. I do not intend to introduce such a tax.

Redundancy payments

Let me turn to some other proposals I do not intend to make. I have no plans and I never did have any plans to change the rules which allow the first £30,000 of redundancy payments to be received free of tax. I also never contemplated any increase in insurance premium tax nor air passenger duty. Those ideas were inventions of the newspapers.


Tax law has become too long and complicated. Some experts have described it as incomprehensible. The Inland Revenue will shortly be publishing a report on tax simplification. We will propose that the Revenue tax code is rewritten in plain English - a major task. The House has a duty to set out clear legislation. We in the House will need to look at our procedures to see how this tax rewrite can be sensibly handled.


This government's commitment to home ownership remains as strong as ever. Today there are 16 million homes in the UK occupied by their owners, fortyper cent more than in 1979. All surveys show the vast majority of people still want to own their own homes.

We therefore have a target in our Housing White Paper of a further 1 1/2 million home owners over the next 10 years. I reaffirm that mortgage interest relief will remain unchanged for the lifetime of this Parliament.

We have already introduced measures for mortgage lenders to make it easier for people with negative equity to move home.

The Finance Bill will pave the way for Housing Investment Trusts which will encourage investment in private rented housing.

I have considered carefully the case urged upon me for special measures to revive the housing market. Many housing experts sadly are forced to the same conclusion as me that none of the affordable proposals would actually make any difference. The problem is not the cost of house purchase. There have never been such bargains on the market. An average mortgage costs only around £180 per month, far less than renting an equivalent property, and houses are more affordable than they have been for years.

I remain convinced that what the housing market needs above all is steady growth and low inflation. That is what this Budget delivers. This Budget will reinforce my ability to keep interest rates and mortgage costs down.

That matters most of all to the housing market. All the major lenders expect prices to start to rise next year and, as confidence grows, I expect the market to start to move soon.


I now turn to my proposals for direct taxation. I want to do four things this year. 116. I want to give people more security by ensuring that their needs will be met in old age.

I want to help people have a greater personal share in the prosperity and success of the businesses for which they work.

I want to encourage enterprise, particularly small businesses. And I want to allow people to keep more of the money they earn or save to spend as they choose, not as the State chooses. This is essential in a modern, dynamic economy.

Long-term care

In this Budget I will be helping people who are earning and people who are saving. But I also want to help those who have worked and saved all their lives. Some of these people may be unfortunate enough to need care in residential or nursing homes in their old age.

If they do, they may find their savings eaten away quickly to pay for that care. Of course, this is one of the rainy days for which people save. But the balance between the state paying and the family paying must be right. If it is not many prudent people will complain that they are being treated unfairly compared with those who were unable or unwilling to save at all.

To help people who have already put money aside it was recently decided to exempt from VAT some forms of care provided in someone's own home. I now have two important further proposals.

First, I intend to exempt from tax the benefits from a range of insurance policies which provide long-term care benefits. We should encourage, not penalise, people who decide to take responsibility for themselves.

Second, at present, only people with assets worth less than £3,000 are not asked to make any contribution from their capital. People with assets worth more than £8,000 receive no financial support from the government. When applied to care in residential and nursing homes, these limits are far too low.

From April, and sooner if practicable, we will more than treble the lower threshold from £3,000 to £10,000 and double the upper threshold from £8,000 to £16,000. That means that people in residential care who have worked hard and saved will now keep more of their own money.

This will give many elderly people and their families more financial security and greater peace of mind.

But we also want to find more ways of helping people who are now in work or recently retired and want to plan ahead to prepare for their old age.

We will be consulting shortly on an innovative range of proposals to encourage people to make provision for long-term care. We are studying in particular the concept of so-called partnership schemes. The essence of these will be that individuals who plan ahead to meet a proportion of long-term care costs themselves will be able to retain more of their assets above the £16,000 capital threshold.

State funded care will, of course, still be there for all those who need it, but those who have provided for themselves will be able to keep more of their savings.

The partnership approach combines state provision for the needy with reward for the thrifty who make provision for themselves.

n addition, I have asked the Inland Revenue to consult on the possibility of extending to members of occupational pension schemes the option to take a variable pension. This could provide a larger pension in later years, when people are more likely to need long-term care, in exchange for a smaller pension earlier on.

For future generations long-term care will be a growing problem for the finances of many families. The government has put in a lot of work to put together a package to meet their concerns. We will now go out and consult and explain our ideas in detail.

For all retired people living on their savings, Pensioners Bonds have proved a very popular National Savings product since I introduced them two years ago. I am today announcing that we are reducing the qualifying age for purchases of these bonds from 65 to 60.

Taken together, these measures are the mark of a government that cares about our elderly, their families and their sense of security. It also shows yet again that we are a government that looks to the long-term in all these difficult areas of social policy.

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