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KENNETH CLARKE'S BUDGET SPEECH SECTION 7: PUBLIC SPENDING SUMMARY

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'To speed the process up, I have already announced the establishment of a Working Group chaired by Sir Alastair Mor...
'To speed the process up, I have already announced the establishment of a Working Group chaired by Sir Alastair Morton, who I am sure can be expected to work alongside me as a veritable warrior in this cause. In the meantime the Government is today giving the go ahead to three substantial new transport projects.

First, the extension of the Docklands Light Railway to Lewisham. Second, a new air traffic control centre for Scotland. Third, the refurbishment of the West Coast Main Line, one of our most important routes, linking some of the biggest cities in the country - London, Birmingham, Manchester, Liverpool and Glasgow.

The private finance initiative also offers major opportunities- for improved services in the NHS. There are almost 40 NHS projects where private finance is already involved or being considered, ranging from cardiac units to hospital car parks. At Aintree in Liverpool, a scheme involving the construction of a 100-bed patient hotel, four operating theatres and other facilities is going ahead - a model for other private finance projects.

In addition, my RH and LF the Home Secretary will be taking forward proposals to finance and build six new prisons using private finance. He has already announced that he also intends to involve the private sector in the provision of secure training centres.

Finally, I have always made clear my view that roads provide a major opportunity for private finance. My RHF the Secretary of State for Transport will be informing the House shortly about the Government's plans for taking forward motorway charging in the light of responses to his Green Paper. But I can announce today that when the technology is ready, we intend to introduce a system of electronic motorway charging in this country. This will be a massive high-technology project in its own right. In the meantime, the Government plans to introduce new contracts under which the private sector will design, build, finance and operate roads. My RHF will hold discussions with the construction industry and others to identify the best road schemes to start with. Bringing private finance and management into the roads programme offers the prospect of substantial benefits for the construction industry, the motorist and the taxpayer alike. I am sure this will be warmly welcomed.

RESOURCE ACCOUNTING I have one other announcement to make to improve the way the taxpayer's money and public sector capital is used and accounted for. Government accounting for public spending has become archaic In my view, the time has come to move to a system of accounting which identifies more clearly the cost of resources. This will put departments onto a similar accounting basis to commercial organisations and many other parts of the public sector. I shall be publishing a paper in the first half of next year on the introduction of accruals-based resource accounting by departments, and its implications for the way expenditure is planned and controlled and money is sought from Parliament.

PUBLIC SPENDING SUMMARY Mr Deputy Speaker, the new spending plans reflect the carefully chosen priorities of an enlightened and responsible government. We have taken strong measures to keep public sector pay and administration costs under tight control. We have taken a number of crucial steps to restrain the growth in social security spending, while fully meeting our commitments to the poorest members of society.

We have increased resources to support the Government's priorities, particularly health, education and training and science. We have protected spending on law and order. We have injected new momentum into the private finance initiative. And we have honoured all our Manifesto commitments. But most important of all, we have managed this substantial re-allocation of resources without breaching the spending ceilings agreed by Cabinet last June.

This significant achievement owes a great deal to the new arrangements for the public expenditure survey introduced last year by my RHF, the member for Kingston. But a great deal of credit is also due to my colleagues on the Cabinet's EDX Committee, and particularly to my RHF the Chief Secretary, to whose skill and tenacity I should like to pay the warmest possible tribute.

TAXATION Mr Deputy Speaker, I now turn to my proposals for taxation. My task is simple. I need to raise revenue, but to do so in a way which does least damage to the economy. Loopholes At a time when taxes are having to go up, it is particularly important to collect all the tax which is properly due. So let me begin with my proposals to counter tax avoidance.

Suggesting that Budgets should close tax loopholes is stating the obvious. Every Budget over the last fourteen years has closed tax loopholes. This is not a big new idea. The tax avoidance industry is always ingenious, but it is one industry which this Government has never helped. My Budget today contains a particularly good crop of new proposals to combat tax avoidance, starting with an end to the ploy under which salaries are paid in gold bars, coffee beans, cowrie shells, or other exotic payments in kind, simply to avoid national insurance contributions and delay paying tax.

I also intend to counter the abuse of the tax relief for profit related pay; tackle the avoidance of stamp duty on property transactions; halt the use of shell companies to avoid payment of tax; and end the use of indexation to create or increase capital gains tax losses. These measures will yield about £2 billion in the next three years. Claims that more might be found in this way are, I regret to say, much exaggerated.

EXTENDING THE TAX BASE Next, I propose to broaden the tax base. I have never disguised my personal view that the coverage of Value Added Tax in this country is too narrow. Under the EC's Sixth VAT Directive there are serious limits on the Government's ability to extend it to things which are exempt. But we do have the freedom to introduce separate taxes, and that iswhat other European countries do. I propose to follow their example - in two particular areas, which I believe are well-suited to this country.

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