quiz Search


ref date:12 May 1997 (ECON)
Towards a new welfare state?

LABOUR's much-heralded Welfare to Work programme, unveiled in outline yesterday, will absorb 3500m of the 5200m Windfall Tax take to be deployed to get 250,000 unemployed youngsters aged 18-25 into jobs.

The chancellor said this represented the 1st steps towatrds a 21st century welfare state. Parallels have been been drawn with teh 'New Deal' ideas from slump 30's USA. This time job training or a job will be offered to those under the age of 25 who have been unemployed for a long time.

The scheme is to be headed by Prudential chief executive Sir Peter Davies.

Education and Employment Secretary David Blunkett said this would give hope to ppeople unlike the schemes run by the Tory government.

The New Deal offers a job with an employer who will be offered 60 a week for six months to take them on or a job with a voluntary sector organisation for six months or full basic skills education or training; or work with an environmental task force.

Long term unemployed will have bonuses payable to employers who take them on and you will not be able to sit at home on full benefit forever, this parallels the Clinto schemes in the USA.

200m is set aside to help single parents break out of the poverty trap with assisted childcare placement.

Fears have been aired about forcing people to work for unscrupulous employers who will take on long term unemployed just to get the subsidy and even may fire current employees to milk the system.

Health campaigners welcome rise in price of tobacco

STEEP rises in the price of tobacco were last night welcomed by health campaigners but strongly condemned by the pro-smoking lobby.

Chancellor Gordon Brown said the cost of a packet of 20 cigarettes would rise by 19p, or 8.2%, from December 1. Cigars and pipe tobacco will increase by a similar percentage, though the price of rolling tobacco was frozen.

Under Conservative tax measures, the price of cigarettes had been due to rise by 14p this year.

Mr Brown also promised a review of tobacco excise duties to counter fraud, smuggling, and cross-border shopping.

Action on Smoking and Health (ASH) estimated the price increase would save 3500 lives a year, lead to a reduction in the smoking of 2200 million cigarettes, and add 690m to Treasury revenues.

ASH Scotland chief executive Maureen Moore welcomed the move, adding that, in Scotland, 11,000 people died from smoking-related diseases every year: one in six of all deaths.

The Scottish Health Service spends more than 70m a year on in-patient treatment for smoking-related illnesses

Ms Moore said: "Tobacco taxation is one of the most effective ways of reducing the numbers of people who smoke."

The British Medical Association Chairman, Dr Sandy Macara, said: "The tobacco price rise will save lives by encouraging people to give up smoking and we see no reason why this rise should not take place immediately."

The BMA said money raised from the increase should be spent on improving the NHS.

Mr Sam Galbraith, Minister for Health at The Scottish Office, said: "No-one likes paying extra taxes but, in this case, it is a small price to pay to reduce smoking and improve the health of the people of Scotland."

But the Scottish spokesman for the smokers' lobby group, Forest, described it as a "cheap shot at a soft target".

Mr Brian Monteith added: "Smokers already pay in duty far more than the costs of smoking-related illnesses treated by the NHS, indeed smokers actually help to subsidise the NHS."

However, he welcomed a pledge to review tobacco duties as an acknowledgement that "high taxes cause smuggling".

The Fair Cigarette Tax Campaign said the hike meant tax on cigarettes was now 80% on a typical pack of 2.63. Spokesman Eddie Cassidy said: "This will simply add to the misery of pensioners and smokers on lower incomes."

The Tobacco Alliance, representing 26,000 independent cigarette retailers, said the hike was "like winning Wimbledon" for smugglers, inviting contraband which would damage their lawful trade.

The Tobacco Manufacturers' Association said the "savage" price rise was discriminatory and greedy.

Rural areas hit again by fuel increase

MOTORISTS, particularly those in rural areas, have been hit by swingeing fuel increases by the Treasury for the second time in seven months.

Chancellor Gordon Brown's increase of 4p a litre on petrol and diesel -- 18p a gallon -- is estimated at a 6% rise in petrol duty.

With an inflation-rate rise on the current 145 annual vehicle excise car tax disc from November, the increase for the average motorist, according to the AA and RAC, will be between 50 and 60 a year.

However, for the rural dweller, that increased cost will be doubled to 120.

The effect upon Scots living in more remote areas, where fuel prices are higher anyway and where people are dependent upon cars for transport, was widely criticised.

The Scottish Council Development and Industry (SCDI) in the Highlands and Islands warned that raising the price of petrol once again through tax rises and failure to offer concessions on air passenger duty in the Highlands and Islands would have far-reaching adverse effects on the area's economy.

SLD MP for Ross, Skye and Inverness West, Charles Kennedy, said: "Gordon Brown has put prices through the roof without any compensatory measures whatsoever for the rural areas.

"He has made no effort to vary vehicle excise duty in our local favour, neither did he make any mention of our proposal to seek a VAT derogation from the European Commission.

"The Liberal Democrats will now step up our campaign on the issue of petrol prices, clear in the knowledge that this government just doesn't even begin to understand the extra overheads being faced by our rural communities generally."

The leader of Aberdeenshire Council, Liberal-Democrat Councillor Audrey Findlay, added: "Raising fuel prices simply adds to living costs in rural areas. The Chancellor's savage price rise has created a rural hardship tax and put rural depopulation back on the agenda. Our concern now is to ensure that rural filling stations continue to exist to serve the areas of need."

Mr Brown's measures, when added to the long-term Conservative budget plan of 5% fuel duty, will leave motorists with a total increase of 20% in petrol and diesel in the last year, according to the British Roads Federation.

BRF director Richard Diment said: "For the many, many people in this country who have no choice but to use their car, this is a very, very significant increase in their weekly expenditure."

Wylie Cunningham, regional director of the Road Haulage Association, said:

"As far as Scottish hauliers are concerned, the new Chancellor has hit the ground -- stumbling.

"It may be New Labour, but it's the same old story ... twisting the tax knife in one of this country's vital industries.

"The increase will add between 2 1/2 and 3 per cent on average to operating costs of lorries.

"That's an extra cost which will have to be borne by every industry, every business, every shop and every consumer in the country.

"It is all very well for the Chancellor to talk about the environment, but he has to make a distinction between the essential road user such as commercial haulage and the non-essential road user."

The fuel duty increases will be: unleaded petrol to rise to 64.7p a litre (294.1p a gallon); 4-star petrol to cost 70.0p a litre (318.2p a gallon); and diesel 66.1p a litre (300.8p a gallon).

Roads lobbies estimated the Chancellor would be raising between 2bn and 3bn from the increase in VED and fuel duty.

"It would have been very nice to have seen some of that money going back into improving the transport system," said Mr Diment.

Environmental campaign group Transport 2000 welcomed the fuel tax increases.

Drink firms attack rise in cost of alcohol

THE Scotch Whisky Association last night attacked a 19p increase on a bottle of whisky as "immensely disappointing", given the Chancellor's pledge to review tax on alcoholic drinks.

This disappointment was mirrored by the Scottish Licensed Trade Association, which said the industry needed an increase on alcohol as much as it "needs a hole in the head".

The rise, in line with inflation, will add 19p to a bottle of spirits, 1p to a pint of beer, 4p to a bottle of table wine, and 1p to "higher strength alcohol", including alcopops, from January 1998.

The SWA said the increase on whisky would add 1p to a pub measure, and means that tax now accounts for more than 7 of the 10.50 average retail price of a bottle.

The last two Budgets, of Mr Brown's predecessor Kenneth Clarke, had cut whisky tax by a total of 52p a bottle, and the association branded yesterday's rise as a "complete reversal".

It also complained that Mr Brown was using "the old device" of an inflation-only increase to all drinks - which it claims hits Scotch adversely as it is unfairly taxed to begin with in relation to other drinks.

However, the president of the SLTA, Mr Paul Waterson, applauded the Chancellor's announcement to conduct a full review of alcohol duties.

"It will allow us to go forward to put the case that over a million pints a day are coming in from the continent, which is having a potentially detrimental affect on brewing and public house businesses in this country. A review is very important for us," he said.

The chief executive of Scottish & Newcastle, Mr Brian Stewart, said the company was "disappointed and surprised" at the increase of duty on alcohol, given that he was confident the Chancellor's review would reveal a compelling case for the reduction of this duty.

The prediction that alcopops, which have sparked concerns that they are being targeted at under-age drinkers, would be heavily penalised with a much higher duty did not come about in this Budget.

Although Alcohol Concern expressed surprise that the controversial flavoured drinks did not receive a hefty duty increase, the group said it was not disappointed.

A spokesman said: "The Chancellor has announced that there will be a review on the whole structure of excise duty, and we will obviously be keen to put our point of view across.

"We will be saying that health and social problems should be taken into account, not least because of underage drinking and alcopops."

Miras cut will increase mortgages by 10 a month


THE widely expected cut in mortgage tax relief received a muted response in Scotland, with lingering fears that it may inflict some damage on the housing market.

By contrast, increases in stamp duty on properties at the upper end of the market are more likely to have an impact in London and the South-east of England.

The Chancellor announced that Mortgage Interest Relief at Source would be cut from 15% to 10% with effect from April next year. The reduction will add around 10 to monthly mortgage payments.

Stamp Duty will rise immediately from 1% to 1.5% on property sales above 250,000 and to 2% for sales over 500,000. The duty previously stood at 1% on purchases over 60,000.

The move is designed to dampen the housing market and an "overheating" economy. Mr Gordon Brown said he was determined not to return to the instabilities of the past.

He said: "I will not allow house prices to get out of control. I believe that these measures will help ensure what we all want: a more balanced recovery."

Tory leader William Hague said changes to Miras amounted to tax rises "which Labour denied they would introduce before the election".

The Scottish National Party claimed house prices in London had risen by eight times the rate in Scotland.

A spokesman said: "Gordon Brown is raising taxes on Scotland to pay the price of booming London."

Miras allows income tax relief to the borrower on the first 30,000 of a mortgage loan. Its complete abolition would have saved the exchequer 2700m a year.

Banks, building societies, estate agents, and builders' organisations agreed that the reduction in Miras was preferable to its rumoured abolition.

Mr Ian Rogers, commercial development manager of the Scottish Building Employers' Federation, said: "It is not as bad as we expected; the Chancellor has obviously listened to what we said and not been as vicious as he could have been."

He said the increases in stamp duty were more in line with European standards, adding that he did not expect the changes to have a significant impact on house sales.

The Council of Mortgage Lenders warned that the withdrawal of mortgage relief would have the greatest effect on those with the lowest incomes. That includes almost every first time buyer, 61% of whom earn less than 20,000 a year.

Mr David Smith, chair of the joint Scottish committee for the Building Society Association and the Council of Mortgage Lenders, said he was "not delighted but could have been more disappointed".

He said the abolition of Miras and significant increases in stamp duty would have been "potentially disastrous" for Scotland.

Mr Smith, who is also chief executive of the Dunfermline Building Society, said low income buyers in Scotland would be disproportionately affected.

He said: "The greatest proportion of the benefits of Miras come to Scotland, so the greatest proportion of disadvantages will fall on Scotland."

A spokeswoman for the Royal Institute of Chartered Surveyors in Scotland said the chancellor's new measures on Miras were "not as bad as we feared" and would have a minimal impact on the housing market.

OAPS back ending of medical tax breaks

PENSIONERS' organisations in Scotland last night welcomed the ending of the tax breaks on private medical insurance in favour of cuts in VAT on fuel.

Take-up of private health insurance schemes has traditionally been lower in Scotland than in the south east of England where the independent sector is strongest. Market research suggests the figure is much less than the 60,000 indicated by a simple one-tenth of the UK total.

Mrs Thatcher's drive to encourage an increase in private medicine as an alternative to the NHS led to the introduction of the tax breaks for pensioners.

However, Mr Brown in his Budget statement said the scheme had failed to achieve its objective of increasing the take-up of such insurance.

Couples currently paying 1000 a year for comprehensive cover will now have to find an additional 300.

Bupa, Britain's largest health insurer, said it would be consulting customers individually to allay their concerns and offer alternative options. Almost 10% of its 2.5 million members qualify for tax relief.

"A lot of our customers have been with us for 50 years. Many took out their own cover after leaving occupational schemes. Some of them say they value their health cover more than holidays," a spokesman said.

However, Ms Lucie McKenzie, spokeswoman for Age Concern Scotland, said the reduction in VAT on fuel was far more significant for Scotland's 900,000 pensioners, of whom just one third paid tax.

"The question of keeping warm in winter is one of the things they worry about much more than paying for private health insurance," she added.

Ms Phyllis Herriot, vice chairman of the Scottish Pensioners' Forum, said: "Most pensioners rely on the health service to look after them and I am glad that they are putting more money into the NHS.

"We will be pressing the Government to restore the link between pensions and earnings that the previous Government abolished in 1981 which has left pensioners very badly off," she added.

Childcare promise for lone parents

BRITAIN'S one million lone parents were given a triple boost yesterday, by the Chancellor's announcement that childcare would be made more affordable and that he was offering them more help through benefits, as well as allocating cash to get them back to work.

Mr Brown claimed his measures were the first step to a national childcare strategy, as he announced that 200m would be allocated from the windfall tax for "the most innovative programme any government has introduced for advice, training, and day and after-school childcare to support lone parents".

He also revealed that, from next summer, every lone parent with more than one child who qualifies for family credit, housing benefit, or council tax benefit would have the first 100 of weekly childcare costs disregarded in calculating their in-work benefits.

In addition, every lone parent with children of 12 years or younger will, from now on, be able to receive help.

Other measures he announced included: the replacement of the Tories' nursery voucher system with a nursery place for every four-year-old in Britain; the creation of an extra 50,000 childcare assistants in five years; and the allocation of National Lottery money to after-school clubs.

However, it was confirmed later by Social Security Secretary Harriet Harman that plans by the previous government to abolish the lone parent family premium and one parent benefit - which are vitally important to many of the country's poorest lone parents - had not been reversed.

Lone parents' organisations, which welcomed the Chancellor's announcements, had hoped that the Government would scrap the abolition plans and said the move would undermine the confidence of the very people Mr Brown wants to climb his "ladder of opportunity".

Mr Brown told the Commons: "There are now one million lone parents bringing up two million children on benefit.

"Any welfare to work programme that seriously tackles poverty in our country must put new employment opportunities in the hands of lone parents."

He went on: "Currently, lone parents receive little encouragement to seek work before their youngest child is 16. Under the programme I am announcing today, when the youngest child is in the second term of full-time schooling, lone parents will be invited for job search interviews and offered help in finding work that suits their circumstances."

The Chancellor added that, as a final part of the Government's Welfare to Work strategy, it would also bring forward proposals to help those who are disabled or on incapacity benefit who want training or work, and has set aside 200m from the windfall fund for the programme and other measures.

"Taken together, these comprehensive and ambitious initiatives mean that, from now on, no section of society should suffer permanent exclusion," he said.

Outlining the key changes in her department's spending plans, Ms Harman said later: "Withdrawal of entitlement to lone parent family premium in income support for new claimants will take effect in April 1998. Withdrawal of the lone parent rate of child benefit is subject to necessary legislation, and is now expected to come into effect from June 1998.

"These measures are necessary to ensure that social security expenditure remains within the previously announced ceilings."

The Chancellor's announcements were welcomed by lone parent groups such as Gingerbread and the Scottish organisations, One Plus and One Parent Families Scotland.

Ms Liz Sewell, chief executive of Gingerbread, said: "At last a recognition that lone parents want to work and the guts to put money upfront to ensure that they have the chance to do so. Advice, training, and childcare are key measures, but we also need jobs. Employers must now recognise the value of lone parents as employees."

Mr John Findlay, director of One Plus, said he welcomed the "change in tone" towards lone parents from the new Government, and particularly the back-to-work initiative and the national childcare strategy, for which organisations such as his had been campaigning for many years.

He added: "These are all very welcome but we are disappointed that two key benefits for lone parents are to be abolished. These are so important to many of Britain's poorest lone parents."

Mr Ian Maxwell, information officer with One Parent Families Scotland, also reminded Mr Brown that lone parents will remain dependent on benefit.

"Failure to reverse the Tory cuts to lone parent benefits will further undermine the confidence of the very people he wants to climb his ladder of opportunity.

"Every lone parent already has one job - bringing up children. The employment and training programme needs to take this into account."

He added it would will require far more than 200m to provide adequate support for these parents, and said he hoped the 100 disregard would be extended to parents in training or education.