Government press statement for the South East - 2008 Budget

The Government's economic objective is to build a strong economy and a fair society, where there is opportunity and security for all.

The long-term decisions the Government has taken - independence for the Bank of England, new fiscal rules and a reduction in debt - have created a strong platform of economic stability. With low and stable inflation, interest rates set by the Monetary Policy Committee to meet the Government's symmetric inflation target, and fiscal policy supporting monetary policy over the cycle, the economy has grown continuously for 62 consecutive quarters.

The world economy is now facing a more challenging environment than was apparent at the time of the 2007 Pre-Budget Report, with continued disruption in global financial markets. While the UK and other economies have benefited significantly from globalisation, recent events have shown how interconnected capital markets mean shocks in one region can easily be transmitted elsewhere.

This Budget sets out the action the Government is taking to support the economy in the short term, to ensure the resilience of the past decade continues, combined with action to make further progress against its long-term goals of:

* maintaining macroeconomic stability, ensuring the fiscal rules are met and that inflation remains low;
* sustainable growth and prosperity, through reforms that promote enterprise and business growth, simplify the tax system, enhance flexibility and promote science, innovation and skills;
* ensuring fairness and opportunity for all, tackling child and pensioner poverty, providing opportunity for all children and young people, delivering security for all in retirement, and ensuring a modern and fair tax system where everyone pays their fair share of tax;
* creating stronger communities and effective public services, and improving long-term housing supply and affordability; and
* ensuring an environmentally sustainable world, with action to address the global challenge of climate change.

This press notice sets out measures of particular relevance to the South East and the Government's regional policy agenda. The Budget takes steps to stimulate growth in the London, strengthen regional institutions and increase regional input into national policy.

The South East England Development Agency, along with the other Regional Development Agencies (RDAs), was asked to provide advice to contribute to the development of Budget. At the time of the 2007 Pre-Budget Report, Government wrote to the RDAs, inviting their input to Budget 2008 in a number of areas:

* responding more effectively to business priorities;
* effective delegation of funding to sub-regions and localities;
* simplifying and increasing the flexibility of skills provision;
* responding to the long-term challenges of globalisation; and
* ensuring that all the English regions benefit from the Olympics 2012 legacy.

These questions were intended to gather RDA expertise in these areas, and draw in feedback from regional and local networks with a view to finding innovative and targeted policy solutions to these key challenges. This advice, and a response from Government, is annexed below.

Announcements of particular interest to businesses and individuals in the South East include:

Access to finance
Budget 2008 introduces a package of measures to support small businesses access the finance and resources they need to start up and grow, responding to business needs in the short term:

* a temporary increase of 20% in the amount of finance available through the Small Firms Loan Guarantee scheme, and relaxation of the restrictions on firm age to allow access to the scheme for a wider range of small firms;
* the Government will work with the banks to explore mechanisms to ensure small firms are able to access the most appropriate forms of finance, including mezzanine products. It will also provide additional Enterprise Capital Funds of £30 million to support this type of provision;
* a new capital fund primarily focused on businesses run by women;

* an increase in the Enterprise Investment Scheme's investor limit from £400,000 to £500,000 in any one tax year (subject to EU State Aid approval), and a consultation on how best to simplify operation of the scheme; and
* an increase in the value of share options an individual can hold under the Enterprise Management Incentive scheme from £100,000 to £120,000.

Enterprise Education
Building on existing provision, a strategy is set out for developing seamless enterprise education, from primary schools to higher education, underpinned by £210 million announced at the 2007 Comprehensive Spending Review. This will include:
* establishment of a National Enterprise Academy to equip 16-19 year olds with enterprise skills;
* creation of University Enterprise Networks to further develop relevant skills during higher education; and
* funding intended for Enterprise Education will benefit around 505 secondary schools in the South East.

Enterprise Strategy
Building on the announcements above, the Enterprise Strategy, published today, sets out how Government will further encourage business start up and growth. Focused on small and medium sized businesses, the strategy sets out a new framework for Government action, structured around the enablers of Enterprise - culture, knowledge and skills, access to finance, regulatory framework, and business innovation.

Tax simplification
The Government today announces the next stage in its rolling programme of tax simplification to further enhance UK productivity and competitiveness. Following discussions with business and tax professionals, the Government today announces the initial outcomes on the three tax simplification reviews launched at the 2007 Pre-Budget Report. Building on the significant reforms to the business tax system announced in Budget 2007, due to take effect from April 2008, and responding to representations from business, the Budget further simplifies Corporation Tax. The Government also announces over 20 further tax simplification measures, which will help sectors across the UK economy, including further modernising the tax system for financial services and the charitable sector.

Science and Innovation
The Science and Innovation White Paper will be published on 13 March and will outline significant progress in implementing the Sainsbury Review's recommendations. The White Paper will also set out DIUS' forward strategy for promoting innovation. The Budget today outlines key commitments including: proposals on how to ensure Government procurement promotes innovation; the development of an independent innovation index to measure innovation throughout the economy; the piloting of a Further Education Specialisation and Innovation Fund; and a doubling of the number of Knowledge Transfer Partnerships supported by the Technology Strategy Board. The Budget also announces that the Government will invest £10 million over five years in "Project Enthuse" to support the professional development of science teachers in all secondary schools, working in partnership with business and the Wellcome Trust. The South East Development Agency, together with the other Regional Development Agencies, has committed up to £180 million from the RDA network over the three years starting in 2008, subject to appropriate projects being identified that benefit the regions.

Further progress towards implementing the Leitch review and improving workforce skills
Through Skills Accounts the Government will ensure that every adult can access investment in their skills. To expand this investment, Budget 2008 announces £60m of additional funding for adult skills, focused on Level 3, which will support increased opportunity and progression. This will provide new opportunities for people to realise their talents, offer adults a second chance to retrain and will be used to test new ways of delivering training. It will also enable leading employers to take on more adult apprentices. These measures will potentially benefit up to 1,380,000 adults with low qualifications in the South East.

Child Poverty
The Government is firmly committed to tackling child poverty and since 1997 has made considerable progress against its objectives. The Budget sets out the next steps, including measures to make significant further progress towards the target of halving child poverty by 2010, which are expected to lift up to 250,000 children out of poverty. The Budget announces:
* an increase in the first child rate of Child Benefit to £20 a week from April 2009, reinforcing the Government's commitment to Child Benefit as the foundation of financial support for all families. This will benefit around 980,000 families in the South East;
* an increase in the child element of the Child Tax Credit by £50 a year above indexation from April 2009 to further help low to middle income families, benefiting 381,000 families who claim this benefit in the South East; and
* Child Benefit will be disregarded in calculating income for Housing and Council Tax Benefit from October 2009, improving work incentives for many of the lowest paid families and boosting their incomes. A working family with one child on the lowest incomes will gain up to £17 a week from this change.

Support for pensioners
Building on the Government's substantial commitment to help pensioners, Budget 2008 announces an additional one-off payment of £100 to households with someone aged 80 or over and £50 to households with someone aged 60 or over, to be paid alongside the Winter Fuel Payment in 2008-09.This will benefit around 1,230,000 households in the South East.

Incapacity Benefit Reform
From late 2008, an integrated and simplified Employment and Support Allowance (ESA) will replace the current system of incapacity benefits for new claimants and will have a clearer balance of rights and responsibilities. The introduction of ESA will be accompanied by a new Work Capability Assessment (WCA), which will apply to new claimants from October 2008. To ensure that the increased focus on a person's capability to work has an impact for current as well as future claimants, the Budget announces that all existing incapacity benefits claimants will be required to take the Work Capability Assessment from April 2010. This will replace the existing system for 236,580 incapacity benefits claimants in the South East.

The Saving Gateway - introduction of a national scheme
Following the success of pilots in promoting saving and financial inclusion, the Saving Gateway will be introduced nationally, with the first accounts available to savers in 2010. The Saving Gateway is a cash saving scheme for those on lower incomes. Individuals in receipt of the following benefits and tax credits will be entitled to open an account in the national scheme: Working Tax Credits; Child Tax Credits paid at the maximum rate; Income Support; Jobseeker's Allowance; Incapacity Benefit; Employment and Support Allowance and Severe Disablement Allowance. Approximately 730,000 individuals in the South East would be eligible for the scheme.

Bringing forward schools' target:
Budget 2008 announces that the Department for Children, Schools and Families (DCSF) will take forward a £200 million package over the next three years, to raise the level of support and challenge for low-attaining schools, bringing forward by a year to 2011 the Government's ambition that there should be no schools with fewer than 30 per cent of pupils attaining 5 A* to C at GCSE, including English and Maths. By 2011, the Government will expect all schools to have achieved this benchmark or to be subject to formal intervention. This should benefit 90 low-attaining schools in the South East. The package will provide additional support on top of previous Government commitments, including the 20 academies projected to be opened in the South East by 2011.

Promoting giving through Gift Aid
Budget 2008 announces a comprehensive package of measures in response to the Gift Aid consultation, including major reform to the auditing process; a programme for bringing additional smaller charities into Gift Aid; redesign of guidance; and the launch of targeted marketing tools. This Budget also announces that although the basic rate of tax will be 20%, Gift Aid will be paid at a transitional rate of 22% from 2008-09 to 2010-11; providing charities with additional Gift Aid worth around £300 million over three years.

A more secure, fair and environmentally sustainable world
Tackling climate change is the most serious and pressing global environmental challenge the world faces. Budget 2008 sets out new policies to reduce emissions across all major sectors of the economy and ensure the UK continues to lead the climate change agenda internationally. The Government is also acting to protect the UK's natural environment. Budget 2008 announces:
* preparation work for the introduction of five-year carbon budgets, and that the first of these carbon budgets will be set alongside the Budget 2009;
* reform of car Vehicle Excise Duty rates and bandings, introducing new bands from 2009 to reward drivers of the cleanest cars, and
higher first year rates in 2010-11 to influence purchasing choices. As a result of these changes the majority of drivers will be better or no worse off;
* the planned fuel duty increase of 2 pence per litre in April 2008 will be delayed until 1 October 2008. Main road fuel duty rates will rise by 1.84 pence per litre on 1 April 2009, and will increase by 0.5 pence per litre above inflation on 1 April 2010;
* auctioning 100 per cent of allowances for large electricity producers in Phase III of the EU Emissions Trading Scheme;
* funding for the Green Homes Service to advise consumers on how to reduce carbon emissions, waste and water consumption;
* strengthening the environmental incentives for taxation of business cars, along with simplifying measures;
* incentivising only the most sustainable biofuels, by shifting support away from the duty differential to the Renewable Transport Fuel Obligation in future years;
* increasing climate change levy rates in line with inflation, in order to maintain the environmental incentive effect;
* the new per plane duty to replace air passenger duty on 1 November 2009 will increase by 10 percent in the second full year of operation;
* an ambition for all new non-domestic buildings to be zero carbon from 2019 and for all new public sector buildings to be zero carbon from 2018 , with consultation on the timeline and its feasibility;
* extending the Stamp Duty Land Tax exemption from zero carbon homes to new flats, retrospectively from 1 October 2007;
* that to eliminate single-use carrier bags, the Government will legislate and impose a charge if retailers do not take voluntary action; and
* increasing the aggregates levy from 1 April 2009 to maintain its environmental impact.


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