I have completed the annual review under section 141 of the Social Security Administration Act 1992. I propose the following changes to take effect from 6 April 2007. These rates and limits will also apply to national insurance contributions in Northern Ireland.

Employers and Employees

In line with the Social Security Contributions and Benefits Act 1992, the lower earnings limit for primary class 1 contributions is to be raised to £87 a week. It is set at the level of the basic state pension for a single person from April 2007 and rounded down to the nearest pound.

The primary and secondary thresholds for class 1 contributions will continue to be aligned with the weekly amount of the income tax personal allowance, which will be increased to £5,225 from April 2007. The primary and secondary thresholds will therefore be increased to £100 a week. This means that no tax or class 1 contributions will be paid on earnings below this level.

The upper earnings limit for primary class 1 contributions will be raised to £670.

The self-employed

The rate of class 2 contributions will increase in line with prices by 10p to £2.20 a week.

Self-employed people with earnings below the annual small earnings exception can apply to be exempted from paying class 2 contributions. This limit will be raised by £170 to £4,635 in line with prices.

The annual lower profits limit for liability to class 4 contributions will increase to £5,225 a year (in line with the income tax personal allowance). The upper profits limit will increase by £1,300 to £34,840 to maintain the link with employees’ earnings liable to class 1 contributions.

Class 3

The rate of class 3 voluntary contributions will be increased by 25p to £7.80 a week.

Share fishermen

The special rate of class 2 contributions for share fishermen, which allows them to build entitlement to contributory Jobseeker’s Allowance in addition to the other contributory benefits available to the self-employed, will increase in line with prices to £2.85 a week.

Volunteer Development Workers

The special rate of class 2 contributions for volunteer development workers, which entitles them to the full range of contributory benefits, will be increased by 15p to £4.35 in line with the statutory formula of 5 per cent. of the primary class 1 lower earnings limit.

Treasury Grant

To ensure that the Fund can maintain a prudent working balance throughout the coming year, and in accordance with section 2 (2) of the Social Security Act 1993, I propose to prescribe that the maximum Treasury grant which may be made available to the fund in 2007-08 shall not exceed 2 per cent. of the estimated benefit expenditure for that year. Similar provision will be made in respect of the Northern Ireland National Insurance Fund.

I shall be laying a draft re-rating order before Parliament in due course. This will accompany a report by the Government Actuary to myself and my right hon. Friend the Secretary of State for Work and Pensions which we shall jointly present to Parliament.

The following table sets out the rates, earnings limits and thresholds for National Insurance Contributions proposed for 2007-08.

In the 2005 pre-Budget report, the Government announced a series of reforms to improve the tax credit system by increasing certainty for claimants. One of these changes was automatic limits on the rates of recovery where awards are adjusted in-year following a reported change.

From February 2006, HMRC has widened the availability of additional payments to claimants experiencing hardship following an in-year adjustment to their tax credit payments. Making this process automatic has proved to involve significant changes to the IT system and, after extensive testing, HMRC has concluded that it is not possible to make a risk-free introduction of these automatic limits to the original timetable. Introducing fully automatic limits remains a key priority, and from April 2007 I have instructed HMRC to introduce an IT solution to ensure that claimants will benefit from reduced rates of recovery without them having to ask for this service.

Meanwhile HMRC will do more to ensure that claimants can get access to the reduced rates now and anyone who qualifies and contacts HMRC concerning their end of year adjustment will be given payments to ensure the reduced rates of recovery apply. HMRC have already taken steps to ensure that this facility is brought to claimants' attention. Furthermore, starting in January, HMRC will introduce an enhanced manual process to identify cases where a restriction is appropriate and apply a restricted rate of recovery without the claimant having to ask for this. In the majority of cases the restriction will take effect at the same time as their payments are adjusted to take account of the reduced entitlement, thus achieving the same effect as the automatic restrictions.

The Government will continue to make improvements to the tax credit system, including those announced in the 2005 pre-Budget report, while minimising the risk of disruption to claimants. To minimise those risks and ensure that some of the most vulnerable families are protected, the Government will not begin migration of the remaining IS/JSA recipients with children to the child tax credit in 2007. In addition, HMRC is putting in place special arrangements for a small proportion of claimants who may experience disruption in their payments following the processing of changes in their circumstances, and will update the IT system in April 2007 to prevent this.

Delivering a good service to tax credit claimants is of course, the key priority for HMRC. They are committed to implementing the package of measures announced in the 2005 pre-Budget report, and to delivering a high quality service to claimants.

The provision for the Government indemnity scheme is made by the National Heritage Act 1980. The scheme facilitates public access to loans of works of art and other objects for public display made to museums, galleries and other such institutions by private owners and non-national institutions. It does this by indemnifying lenders against loss or damage to their loan. Loans covered by the scheme must be for public benefit. The scheme also covers loans of such objects for study purposes within borrowing institutions where this would contribute materially to the public's understanding or appreciation of the loan. Examples of this are enhancing interpretation or explanation to the public of objects or bringing into the public domain, the conclusions of any study.

In the six month period ended 30 September 2006, a total of 1,374 undertakings were given to indemnify objects on loan to national and non-national institutions under section 16 by the relevant Departments. The Museums, Libraries and Archives Council (MLA), which manages the scheme on behalf of the Department for Culture, Media and Sport, issued a total of 1,129 undertakings to national museums and 218 undertakings to non-national museums in England, the Scottish Executive Education Department issued six undertakings and the National Assembly for Wales issued two. Finally, the Government Art Collection issued 19 in the same period.

The value of contingent liabilities in respect of undertakings given at any time under section 16 and which remained outstanding as at 30 September 2006 for national museums are £2,634,357,427 and are £1,291,128,448 for non-nationals in England. The value of section 16 contingent liabilities as at 30 September 2006 for the Scottish Executive Education Department are £23,322,208; £33,409,197 for the National Assembly for Wales, and £2,531,500 for the Government Art Collection.

The value of non-statutory undertakings given to Her Majesty in respect of loans from the Royal Collection and which remained outstanding as at 30 September 2006 are £588,211,857; £36,821,000 for non-national museums issued by the MLA, £25,000 for the Government art collections and £15,000 for the Scottish Executive Education Department.

In July this year I announced that I had asked the Natural England Board to come forward with its recommendations on coastal access to the Government before the end of December.

I met the chair and chief executive of Natural England last week and following the meeting I have asked the Natural England Board to do some further work in order to finalise its advice. I have now agreed that the board should come forward with its final advice and recommendations on coastal access by end February 2007. As a result I would expect that there will be a delay in the issue of the public consultation document from the previous date that I have announced of early 2007.

The General Affairs and External Relations Council (GAERC) will be held on 11-12 December in Brussels. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs and I will represent the UK.

The agenda items are as follows:

General Affairs Council’s 18-month Programme. January 2007 to June 2008

Germany will present the Council with a combined programme covering the German, Portuguese and Slovenian presidencies. This programme is divided into three parts: the strategic framework, specific priorities for each presidency and a comprehensive programme of issues expected to be covered during the 18-month period.

Preparation of the European Council on 14-15 December 2006

The Council will review the latest draft of the European Council Conclusions, including texts on climate security, energy, justice and home affairs issues and innovation.

Enlargement

The Council will discuss preparation of the accession conference with Croatia on 11 December.

Ministers are also expected to discuss the Commission's 29 November recommendations on Turkey's accession negotiations.

External Relations

Western Balkans

The Council will discuss the Commission's progress reports, published on 8 November. These review progress made by each of the Western Balkans countries in meeting the conditions of the stabilisation and association process.

Middle East Peace Process

We expect the Council to discuss a forward-leaning package of practical support which could be introduced if an acceptable national unity government emerges, such as building Palestinian institutional capacity.

Should Ministers discuss the situation in Lebanon, the Foreign Secretary may brief partners on her recent visit.

Iran

High Representative Solana will brief the Council on UNSC discussions in New York.

Afghanistan

The Council will discuss Afghanistan at a time of increasing EU activity. A European security and defence policy (ESDP) fact-finding mission is in Afghanistan examining the possibility for a full ESDP mission on policing and rule of law in 2007. This is intended to complement Italian and German efforts on justice sector reform and policing. The UK is a strong supporter of increased EU activity in Afghanistan and is working closely with partners to achieve this. We want the mission to take a strategic and coordinated approach, working closely with the Afghan Government and the other donors, and looking at links right across the justice sector, including counter-narcotic policing and justice institutions.

At the NATO summit in Riga, France proposed the establishment of an international contact group on Afghanistan. Heads of Government agreed at Riga that the NATO Secretary General should revert with a proposal for a contact group to the North Atlantic Council, but we expect this also to be raised at the GAERC.

China

The Council is expected to adopt Council conclusions on the EU-China strategic partnership. Ministers will also discuss the arms embargo.

Draft council common position defining common rules governing the control of exports of military technology and equipment

The council will discuss the common position which updates, and makes legally binding, the existing EU code of conduct on arms exports.

Following the Chancellor's pre-Budget statement, we will be publishing Partnership in Public Services: an Action Plan for Third Sector Involvement.

Third sector organisations play a number of roles in public life—from campaigning to building community cohesion and from delivering services to giving voice to their users. They have an enormous amount to contribute to our public services, both in the ways they are designed and delivered and in the ways they are improved and held to account.

The greater involvement of the third sector in delivery must not be about Government abdicating their responsibility to fund public services. Instead, it is about ensuring that, in the right circumstances, the sector can deliver services where it is best placed to do so. Many third sector organisations are already working very successfully with the public sector and there are significant areas of public service delivery where the Government are opening opportunities for the third sector. It is clear that we will not tackle the challenges of the coming years and continue to build the excellent public services to which we all aspire without the close involvement of the third sector.

Copies of the Action Plan will be placed in the Library for the reference of Members and will be available in the Vote Office.

The Action Plan will also be available on the Cabinet Office website at: www.cabinetoffice.gov.uk/thirdsector

I will attend the second Transport Council of the Finnish presidency which takes place in Brussels on 11-12 December.

The Council will be asked to agree conclusions on the Commission Communication, presented to the Council in June, on its mid-term review of the programme for the promotion of short sea shipping (any maritime journey within or between member states or a close third country, that is, Norway). This is a priority of the Finnish presidency. The programme was presented in 2003. It contains 14 different actions ranging from identifying bottlenecks which impede the smooth operation of short sea shipping to streamlining procedures through the setting up of short sea shipping promotion centres and legislative measures. The UK achieved all of its negotiating objectives for inclusion in the draft conclusions.

The Council will aim to reach a general approach on a directive amending the current EU provisions on port state control (examination of ships in port). This will bring about consolidation of the current directive and its subsequent amendments into a single text. The new directive will also ensure more precise targeting of ships for inspection, resulting in more effective use of resources, and provide for the refusal of access to EU ports of ships which are repeatedly found to be substandard.

There will be a progress report on the regulation on liability of carriers of passengers by sea and inland waterways in the event of accidents. This aims to incorporate the Athens convention relating to the carriage of passengers and their luggage by sea of 1974, as amended by its protocol of 2002, into community legislation. It also extends these provisions to the carriage by sea within the member states and to international and domestic carriage by inland waterways. We can accept this general aim, but we, like a number of other member states, oppose application to domestic sea journeys or to inland waterways.

As the final maritime item on its agenda, the Council will aim to reach a general approach on a proposal for a decision concerning the ratification by EU member states of the 2006 consolidated maritime labour convention of the international labour organisation (ILO). The convention aims to promote decent living and working conditions for seafarers and fairer competition conditions for operators and shipowners. The UK supports the proposal.

The Commission will give a further report on progress in the PPP concession contract negotiations for the Galileo satellite navigation programme. We continue to examine the emerging deal very carefully for its justification in terms of value for money, affordability, and risk to the public sector.

The Commission is also expected to report on the latest position in its consideration of the potential roles and the terms of any future relations with non-EU countries in the Galileo programme and on its new Green Paper on Galileo applications.

Over lunch Ministers will discuss the member states’ bids for location of the Galileo supervisory authority (GSA). The UK’s bid is for Cardiff and we continue to lobby in favour of it.

The Council will aim to agree conclusions on the Commission’s Communication on freight transport logistics, entitled: “Freight Logistics in Europe—Key to Sustainable Mobility”. The communication was presented to the Council in October. The Commission plans to present an action plan for freight transport logistics in 2007. Logistics are Finland’s central presidency priority in the transport field. The UK supports this initiative from the Commission and the proposal to develop an action plan.

The Council will aim to reach a general approach on a directive on retrofitting of blind-spot mirrors to heavy goods vehicles larger than 3.5 tonnes registered in the community. The UK supports the objectives of this proposal, which would extend the provisions of a type-approval directive adopted in 2003 (for new trucks) to the existing fleet. Approximately 30 per cent. of current HGVs in the UK will be exempt on age grounds. The age of the affected fleet together with the date of implementation has to be agreed as does the issue of the possible inclusion of front blind-spot mirrors for the largest of vehicles.

The Commission will give further progress reports on two aspects of aviation external relations on which it has been given mandates to negotiate agreements—with the US on a comprehensive air transport treaty, and with Russia on payments for Siberian overflights.

The Council will be asked to adopt a mandate authorising the Commission to open air transport negotiations with Ukraine.

The Council will aim to reach a general approach on a Regulation amending Regulation 1592/2002, which established a framework for aviation safety regulation built around the European aviation safety agency. The amending proposals extend the regulation’s scope to cover safety standards and licensing of operations and their personnel, and the safety oversight of third country operators. We were concerned during negotiations to ensure that the extension of tasks to the agency matches its fitness to carry them out and that the proposals should not impose restrictions on non-EU airlines contrary to international obligations or member states' interests.

Under AOB there will be reports on the EU-Russia transport dialogue and on the ministerial conference on road safety held in Verona on 3-4 November.

We have completed our consultation on the Government’s proposals for streamlining and modernising the licensing system for operators of heavy goods vehicles and public service vehicles.

We proposed three key changes to take forward our commitment in the White Paper, “The Future of Transport”, to provide better regulation of the road haulage and passenger transport industries:

(1) new arrangements for holders of more than one licence involving the allocation of a lead traffic commissioner who will be responsible for all of an operator's licences;

(2) a simplified fee structure with most licence fees being merged with fees for annual roadworthiness tests;

(3) abolition of windscreen discs and margin concession for goods vehicles.

We propose to implement the first of these proposals as planned and the traffic commissioners will shortly be consulting the industries on the detail of the new arrangements with a view to their introduction in 2007.

In response to concerns raised by the road haulage industry, we have modified the proposed fee structure for goods vehicles so that only O licence vehicle fees will be merged with roadworthiness test fees. This will remove the vast majority of financial transactions but produce a fairer distribution of costs between different sectors of the industry. For the PSV sector, all fees will be merged except for application fees for new licences or major variations. We plan to introduce the new structure in 2008. Vehicle and Operator Service Agency will be consulting the industries on arrangements for giving credit for fees paid in advance under the current system.

We plan to go ahead with the abolition of windscreen discs for goods vehicles when we are satisfied that access to new technology is sufficiently advanced to ensure that existing levels of enforcement can be maintained. However, evidence has been presented to us that abolition of the margin concession could impose a much higher burden on the industry than we originally thought. We therefore propose to carry out further work to evaluate the costs and benefits of this proposal before making a decision. We will also look at options for minimising the burden of an immediate notification requirement.

These measures will cut significantly the administrative burdens of the licensing process and reduce costs for the road haulage and passenger transport industries while maintaining safety standards. They will also build on administrative improvements already made by the VOSA.

An analysis of the responses received to the consultation is available from the Departmental website (www.dft.gov.uk) and copies have been placed in the House Libraries.