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ref date:3 Jul 1997 (ECON)
3rd July 1997 minibudget

The Chancellor of the Exchequer announced many things in his budget, the best of which an extra 3500m to be spent on schools and the health service in his maiden budget speech yesterday.

No chnage to basic rate or top rate of income tax,but rises in the cost of motoring, smoking and drinking.

Extra cash for NHS and schools from the windfall tax and reserves. Windfall tax on privatised utilities ought to raise 4.8bn, will be used to fund the USA lookalike welfare-to-work programme for the long-term unemployed.

The Chancellor said the measures would bring "stability, investment, employment and opportunity for all" and "advanced the long-term interests of the many".

  • 20% tax credit was abolished and it affects pension schemes and dividend declarations of small companies The National Association of Pension Funds said this would hurt emploers to the tune of 50bn .
  • House owners face an average 10 hike in monthly mortgage repayments as mortgage tax relief fell from from 15% to 10%,
  • The Tories said that Labour had given a tax raising budget and accused them of betraying promises.

  • The pound soared on foreign exchange markets last night to a five-year high as finance house in the City decided there was still a consumer boom in place.

  • main points of the Budget are :

    TAX

    No changes to basic or top rate. 10p rate of income tax "as soon as prudent". Corporation tax cut by 2% to 31% - to apply from April 1997. Corporation tax for small firms cut from 23% to 21% backdated to April. Tax credits paid to pension funds and companies abolished immediately.

    Charities to have special provision.

    WINDFALL TAX

    Tax to raise 4.8 billion.

    Utilities to be able to pay windfall tax in two instalments -- December 1 this year and December 1 1998.

    WELFARE

    New welfare state to be created for the 21st Century

    From next year people aged 18 to 25 unemployed for more than six months will be given step on jobs ladders in measures to be announced today. Benefits will be cut if opportunities are not taken.

    75 a week subsidy to firms to employ long-term jobless.

    3.5 billion for Welfare to Work.

    200 million from windfall tax to help support lone parents.

    Lone parents to be offered job search aid after their children are at school. Help for single parents on benefits with child care costs. Lottery money for after school clubs.

    200 million help for training the disabled.

    5 million from Welfare to Work budget to start up University for Industry.

    MOTORING

    Road fuel tax to increase - 4p a litre on all fuels from 6pm yesterday evening.

    Car tax rises in line with inflation from November 17 - up to 150 a year.

    To reduce pollution, cut in vehicle tax for green lorries.

    TOBACCO

    19p on packet of 20 cigarettes from December 1.

    ALCOHOL

    Duty to rise in line with inflation. From January 1998, bottle of spirits up 19p, pint of beer by 1p, bottle of table wine 4p, higher strength alcohol 1p.

    HEATING AND LIGHTING

    VAT cut on fuel and power from 8% to 5% from September.

    Gas levy reduced to zero from April 1998, cutting gas bills by 2% on average. With other measures, next year's fuel bills to fall by 90 compared with last year's.

    HEALTH

    NHS spending up 2.25% over the next year. Tax relief on health insurance for over 60s abolished. New hospital building programme to be announced soon. Extra 1.2 billion to go to NHS during 1998-99.

    Insurance companies to pay for treatment of road accident victims.

    HOUSING

    Mortgage tax relief to fall from 15% to 10% from April 1998.

    Stamp duty up immediately by 1% to 1.5% on property sales above 250,000 and to 2% for sales over 500,000.

    EDUCATION

    Extra 2.3 billion - including 1.3 billion over the course of the parliament from Windfall Tax to be used for investment in schools - 150 for every pupil.