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KENNETH CLARKE'S BUDGET SPEECH SECTION 10: INDIRECT TAXATION

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INDIRECT TAXATION ...
INDIRECT TAXATION

'Mr Deputy Speaker, the Government's clear policy has always been to shift the burden of taxation, over time, from income to spending. This reflects the Government's underlying political philosophy - that people should be allowed to keep as much of their own money as possible. Provided the less well-off are helped, it is fairer and less damaging to the economy to tax people on how much they consume than on the work they do.

In line with this policy, even in a very difficult year, I have been able to avoid any increase in income tax rates. But to do this I have had to raise further revenue from indirect taxation. Let me start with the excise duties. Road fuel duty and vehicle excise duty.

First, I propose a modest increase in the vehicle excise duty on cars - the tax disc - of £5 a year. The duty on lorries will be unaffected. Second, road fuel duties. With effect from 6.00 pm tonight, I propose to raise all the road fuel duties by 3 pence a litre. Even so, petrol will still cost less in the United Kingdom than in most countries in the European Union and it will be cheaper than it was in real terms in the early 80s. It is not good policy in these environmentally conscious days to keep road fuel costs so much cheaper than they used to be. Taken together, these increases will raise around £3/4 billion next year. Bus fuel duty rebate will be held at pre-Budget levels.

In March, my predecessor announced that fuel duties would increase on average by at least 3 per cent in real terms in future Budgets, in order to restrain carbon dioxide emissions. My RHF the Secretary of State for the Environment subsequently announced in July that the Government would be looking at further measures in this area to help to meet our Rio commitment. I have now decided to strengthen the March commitment by increasing road fuel duties on average by at least 5 per cent in real terms in future Budgets.

This will complete Britain's strategy for meeting our Rio commitment. We are the first country in Europe to do this; and we have done so in a way that minimises the additional costs to industry. Mr Deputy Speaker, others in this country and in Europe continue to canvas unrealistic blueprints for a new European Union-wide carbon tax, which would impose massive new burdens on British industry. Any critic of the Government's tax plans who claims also to support the international agreement to curb carbon dioxide emissions will be sailing dangerously near to hypocrisy.

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