My Lords, I refer the House to the Autumn Statement made by my right honourable friend the Chancellor of the Exchequer in the House of Commons, copies of which have been made available in the Printed Paper Office and the text of which will be printed in full in the Official Report.
The following Statement was made earlier in the House of Commons.
“Four years ago, in the first Autumn Statement of this Parliament, I presented the accounts of an economy in crisis. Today, in the last Autumn Statement of this Parliament, I present a forecast which shows that the United Kingdom is the fastest-growing major economy in the world. Back then, Britain was on the brink. Today, against a difficult global backdrop, I can report higher growth, lower unemployment, falling inflation, and a deficit that is falling too. Today, the deficit is half what we inherited. Our long-term economic plan is working.
Now, Britain faces a choice. Do we squander the economic security that we have gained, and go back to the disastrous decisions on spending, borrowing and welfare that got us into this mess, or do we finish the job, and go on building the secure economy that works for everyone? I say: we stay the course. We stay on course for prosperity.
Today, we do not shy away from the problems that remain unresolved in the British economy. Although the deficit is falling, it remains too high, so the measures that I announce today are not a net giveaway, but actually tighten the public finances a little. I could have eased up on our determination to deal with our debts; I have not.
Although business investment is rising strongly, we know that there is still much more to do on productivity, so today we boost our skills, our exports, our science and our infrastructure. Although employment is at a record high, we must never give up on the task of finding work for all young people, so today we move further towards full employment by supporting the businesses that create jobs and apprenticeships. For decades our economy has been too unbalanced, so we do more now to build the northern powerhouse. And today we back aspiration—the aspiration to save, to work, and to own your own home—in stark contrast to those who would hit people’s pensions and jobs and homes with higher taxes, for that is an approach that we entirely reject. Instead, we support people who want to work hard and get on, and it is for their sakes that we resolve to stay on course for prosperity.
I now turn to the report from the Office for Budget Responsibility. Let me again thank Robert Chote and his team for their hard work, and for restoring integrity and independence to our country’s economic forecasts.
Since the Budget, new international statistical standards have changed the assessment of the British economy in recent years. We now know that, contrary to claims that were made at the time, there was no recession in this Parliament, and no double dip. Indeed, the only recession was the great recession under the last Labour Government. We also know that the economy has grown faster than previously reported. It is up by more than 8% over the current Parliament: that is the third fastest growth in any major advanced economy since 2010. We know, too, that growth has been more balanced. We were told that business investment had risen by 4% over this Parliament; in fact, it has risen by 27%.
That is what we know about the recent past. Let us turn to the future. The warning lights are flashing over the global economy. Japan is in recession, the eurozone is stagnating, and the geopolitical risks are rising. I can tell the House that the OBR has therefore revised down its forecast for global growth this year and in every year. It notes that the slowdown is particularly acute in our main export markets, such as Europe, where growth is a full 1% lower this year than previously forecast. It makes it even more imperative that we connect British firms to the faster growing emerging economies of Africa, Asia and South America. Today I am providing a £45 million package to do that and to provide new support to first-time exporters.
As one of the most open trading economies in the world, with a large financial sector, Britain cannot be immune to the risks in the global economy, but nor are we powerless—provided we go on working through our plan to put our own house in order.
That brings me to today’s forecast. In the Budget, I reported that the OBR had revised up its forecasts for growth this year. A year ago, we expected GDP to grow by 2.4%. In March we expected 2.7%. Today, the British economy is forecast to grow by 3%. Over the last year we have grown two and a half times faster than Germany; over three times faster than the eurozone; and over seven times faster than France. I think we can safely reject the advice of those in this House who told us on the steps of the Élysée palace that we should be doing to Britain what has been done to France.
Growth in the UK next year is also forecast a little higher at 2.4%, with quarterly growth moderating as it returns to trend, then 2.2% in 2016, 2.4% the year after, then 2.3% in 2018 and 2019, and the growth we are now seeing is more balanced. Manufacturing is growing faster than any other sector, and investment is set to be up 11% this year—growing faster in the UK than in any other major advanced economy.
This balanced growth is creating jobs, too, with a record number in work. At the Budget, the OBR expected that over the last year employment would rise by 265,000. Today, I can tell the House that it doubles that number. Over the last year, half a million new jobs have been created. In March, it forecast that in the first three quarters of the year the number claiming unemployment benefit would fall by 7%. Today, it says that it actually fell by 23%. The number of young people on long-term unemployment benefit has almost halved in the last year alone. Unemployment is revised down in every single year of the OBR forecast, falling from the 8% we inherited to 5.4% next year, before settling at 5.3%.
On average, for every day this Government have been in office, 1,000 new jobs have been created, 1,000 new opportunities for people, new economic security for 1,000 families every single day. Britain’s long-term economic plan is working.
In response to the caricature that some like to draw—that these jobs are being created only in London, that they are part time with women losing out—I say, look at the facts. How many of the jobs being created are full-time? Eighty-five per cent. Where are the jobs being created fastest right now? In Scotland and in the north of England. What is happening to the gender pay gap? It has just fallen to its lowest level in the entire history of this country. That is progressive politics in action.
Regular earnings growth is now faster than inflation. For those in full-time work for over a year, earnings grew 4% over the last year. The compositional effect of many more people finding work, particularly young people, is weighing down on overall average earnings, but the OBR today predicts that ‘meaningful real wage growth’ will pick up through next year and grow above inflation for the next five years. Indeed, I can tell the House that GDP per capita has grown faster on average in this Parliament than over the last two Parliaments combined.
Living standards are also supported by our robust monetary policy arrangements with the Bank of England. Today, there is welcome news that the OBR has significantly revised down its forecast for inflation: it is expected to be down to 1.5% this year, 1.2% next year and 1.7% the year after, before it returns to target. So we have lower inflation, lower unemployment and higher growth.
That brings me to the forecasts for debt and deficit. There are those in this House who have been predicting from the opposition Dispatch Box in recent weeks that I would have to announce today that the deficit was rising and that borrowing this year would be higher than last year. We discover today—I am afraid not for the first time—that their predictions are wrong: the deficit is falling this year and every year, and, not only that, but in the final four years of the forecast, borrowing is actually lower than predicted in the Budget. The Office for National Statistics has made revisions to the way the national accounts are measured and one of the advantages of having created an independent OBR is that it has ensured that the figures presented today are comparable on a like-for-like basis with the forecast made in the Budget.
On this revised basis, the forecast at the Budget would have shown borrowing falling from the £150 billion we inherited to £99.3 billion last year, £86.4 billion this year, £68.3 billion next year, then £41.5 billion, £15.8 billion, and then a small surplus of £3.7 billion in 2018-19. That is the Budget forecast. Today’s forecast shows borrowing falling from £97.5 billion last year to £91.3 billion this year, then £75.9 billion next year, then £40.9 billion, £14.5 billion, and then a surplus of £4 billion in 2018-19. So borrowing falls every year. It falls slightly less than expected in the first two years, but then falls slightly more than expected in the four years after that. We end in a marginally stronger position than expected at the Budget, and I can tell the House that by 2019-20 Britain is now predicted to have a surplus of £23 billion—out of the red and into the black for the first time in a generation, a country that inspires confidence around the world because it seeks to live within its means.
As a percentage of GDP, today the deficit is also forecast to fall this year, down by 0.6% of GDP—down from what the OBR describes today in its own report as,
‘the post-war record deficit of 10.2% of GDP’.
in 2009-10 to 5% this year. The deficit is no longer down by a third, but is now cut in half. It is still too high, but with our plan it falls again to 4% next year, then 2.1%, then 0.7% before we move into surpluses of 0.2% and 1% of GDP. The structural deficit also falls and moves into surplus at the same pace over the next five years, as forecast at the Budget.
We continue to meet the debt mandate a year late and the fiscal mandate two years early. Again, because of the statistical revisions and the reclassification of Network Rail—given that Labour tried to put it off balance sheet—the OBR has given us a like-for-like comparison on debt as a share of GDP. On the new basis, it is 80.4% this year, next year it peaks at 81.1%—half a per cent lower than previously forecast at the Budget—and it is then lower in every subsequent year, at 80.7% in 2016-17, 78.8% the year after, then 76.2%, before reaching 72.8% in 2019-20. Again, this is less than was forecast at the Budget.
Borrowing is falling. The deficit is down this year to half what we inherited. Debt is falling in the same year predicted, and lower in every year thereafter. There will be a surplus that is higher and by the end of the period worth £23 billion. Britain is back living within its means. Our long-term economic plan is on course.
The House will want to know why the public finance numbers are much better than some were predicting, even though tax receipts have deteriorated. The answer is that we cannot look at taxes alone; we have to look at spending, too. As has been widely reported, tax receipts have not been rising as quickly as the OBR had previously predicted. The OBR now forecasts that revenues will be £23 billion lower by 2017-18. However, that is more than offset by three things. First, we are paying less in welfare and saving money on public service pensions because of lower inflation and more people being in work. That saves £4 billion a year.
Secondly, the revisions to our national accounts have slightly increased the measured rate of spending cuts in this Parliament. We have a choice: we can ease up, or we can continue with our plans. Our policy of continuing the spending cuts in the first two full years of the next Parliament, at the same pace as we achieved in this Parliament, now produces £4 billion less spending. Thirdly, and crucially, the interest we pay on our national debt is £16 billion lower in that year. That is, by a large margin, the biggest saving and demonstrates the value of our fiscal credibility around the world. Some have pointed to lower tax receipts and put forward policies for higher taxes. I prefer lower tax receipts offset by lower debt interest payments, and that is what we are seeing today.
I do not hide from the House that in the coming years there are going to have to be very substantial savings in public spending. Next week we will publish a new charter for budget responsibility that will reinforce our commitment to finish the job in the next Parliament, and we will ask the House to vote on it in the New Year. However, no charter, valuable as it is, can be a substitute for the hard work of identifying real savings in the cost of government and delivering them in practice. That is what we have done in this Parliament, and it is what we will have to do in the next.
The work starts with our spending plans for 2015-16, which save £13.6 billion. We have published the detailed and specific departmental proposals that will achieve them. There will be two further years where decisions on this scale will be required and, as I have said before, we are going to have to go on controlling spending after those years if we want to have a surplus and keep it. Of course, people are already saying it will be impossible to achieve those levels of savings. We heard exactly the same thing in 2010, often from exactly the same people. In fact, we have come in under budget every year of this Parliament. This year I can confirm that we will be spending £10 billion less than set out in our original spending plans.
There are those who say we should cut even faster, and those who say we should cut more slowly. But we have got the pace right, as is clearly demonstrated by the fact that our economy is growing faster than almost any other. And because of careful management, we can afford to put part of that underspend money into our national health service to cope with the pressures it faces: £2 billion every year to the front line of the NHS—not money that busts our plans, but extra money that is available because we have a plan. Instead of returning the foreign exchange fines paid by the banks to the City, as happened under the previous Government, we are using that windfall for a £1.2 billion investment in GP services across the UK. That is a down-payment on the NHS’s own plan, proving definitively for anyone in any doubt that we cannot have a strong NHS without a strong economy. I can also tell the House that we will help with the employment of carers, who do so much, by extending the £2,000 employment allowance to include them.
We have shown in this Parliament that we can deliver spending reductions without damaging front-line public services if we are prepared to undertake reform. Crime is down. Satisfaction with local government services is up. Savings and reform—and we will do exactly the same again. Continuing to reduce departmental spending in the first two years of the next Parliament would mean at least £15 billion off Whitehall budgets. Our control of public sector pay in the past four years has delivered £12 billion of savings. By continuing to restrain public sector pay, we expect to deliver commensurate savings in the next Parliament until we have dealt with the deficit. Today I can confirm that we are committing to complete the public service pension reforms proposed by Lord Hutton, bringing total savings of £1.3 billion a year. Administration costs in Whitehall are already down 40% over this Parliament. Today, the Minister for the Cabinet Office and Paymaster General, my right honourable friend the Member for Horsham (Mr Maude), is publishing a plan for a further £10 billion of efficiencies.
I am also confident that in the next Parliament we can continue to crack down on tax avoidance and evasion, and aggressive tax planning. Doing so at the same rate as in this Parliament would raise at least another £5 billion, and today I commit to delivering that. Then there is the new welfare cap that we have introduced to control the one sixth of public spending that was subject to absolutely no control at all. The OBR today reports that,
“the Government is on track to meet the welfare cap commitment”.
Today we undertake further steps to control benefit spending by freezing universal credit work allowances for a further year, cutting tax credits when overpayments are certain, and ending unemployment benefits for migrants with no prospect of work. Total welfare spending is now set to be £1 billion a year lower than forecast at the Budget and it will go on falling as a share of our GDP. And, as I have made clear, I believe that we need to freeze working-age benefits for two years, saving billions more.
Decisions to control public spending are never easy, but the impact on people’s lives when economic stability is lost is far, far greater. I have always believed that we should be straight about what is required to restore stability and what is required to stay on course. Our task is made easier by the deal we secured for this country when we got the European Union budget cut. Some people claimed that our payments to the European Union would go up this year. Instead, I can confirm that the OBR’s forecast today shows Britain’s net payments to the EU falling by around £1 billion for this year and next year, and falling in real terms over the next five years. That is the dividend we receive thanks to a Prime Minister who fights hard for our national financial interest in Brussels.
Another bill that has gone down is the cost of our overseas military operations. The end of our operations in Afghanistan allows us to save an additional £200 million this year from the special military reserve. I join the rest of the House in saluting the brave men and women of our armed services who for more than a decade have risked their lives for our security in Iraq and Afghanistan. Even as we speak, they are tackling the horrific Ebola virus in west Africa, a fight that reminds us all of the value of Britain’s commitment to 0.7% in development aid. Today I am extending our inheritance tax exemption to cover our aid workers who lose their lives in dealing with humanitarian emergencies. LIBOR fines will continue to support our military and emergency service charities with support for our armed services benevolent charities and the Gurkhas and £10 million for veterans with hearing problems. We will ensure that the first world war continues to be properly commemorated, and this morning I have announced we will repay the entire outstanding national debt incurred to fight the first world war.
We will extend the cathedral renovation fund to cover repairs to our country’s churches. Thanks to the brilliant campaigns run by my honourable friends the Members for Filton and Bradley Stoke (Jack Lopresti) and for Bristol North West (Charlotte Leslie) and others, we will use the LIBOR money for new helicopters for the Great Western air ambulance, and the Kent, Surrey and Sussex air ambulance, too. I will go further and refund VAT for our search and rescue and air ambulance organisations across the UK. Our hospice charities also make an enormous contribution to our communities. They have long been subject to unfair rules that force them to pay VAT, when the NHS does not. I am today refunding the VAT that these hospice charities incur.
I turn now from those who have paid too much tax to some of those who have paid too little. First, we will make sure that big multinational businesses pay their fair share. Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes. Today, I am introducing a 25% tax on profits generated by multinationals from economic activity here in the UK which they then artificially shift out of the country; that is not fair to other British firms and it is not fair to the British people either—today, we are putting a stop to it. My message is consistent and clear: low taxes; but low taxes that will be paid. Britain has led the world on this agenda and we do so again today. This new diverted profits tax will raise more than £1 billion over the next five years.
Secondly, I am taking action today to make sure that our banks pay their fair share, too. Under the rules we inherited, banks can offset all their losses from the financial crisis against tax on profits for years to come. Some banks would not be paying tax for 15 or 20 years, which is totally unacceptable. The banks got public support in the crisis and they should now support the public in the recovery. I am today limiting the amount of profit in established banks that can be offset by losses carried forward to 50%, and delaying relief on bad debts, which together will mean that banks contribute almost £4 billion more in tax over the next five years. We will also put in place internationally recognised measures on hybrids and the reporting of tax by country.
That is multinationals and banks paying their fair share, and so should people aggressively trying to avoid their tax—that is the third step. I am taking measures to prevent the disguising of fee income by investment managers; the avoidance of tax through special purpose share schemes, miscellaneous losses and payments of benefits in lieu of salary; the avoidance of stamp duty on takeovers; and unfair benefits from the transfer of some intangible assets on incorporation. Those measures and others set out in the document raise £2.8 billion. We are also consulting on other measures, including the use of so-called ‘umbrella companies’ to deprive people of basic employment rights such as the minimum wage, and, as a result, to avoid tax.
Fourthly, I want to preserve the non-dom status that makes our country attractive, but I want these people to pay a fair contribution while having certainty about their future arrangements. In the next Parliament, the £30,000 annual charge will remain unchanged, but those who have been here for 12 of the last 14 years will see their payment rise to £60,000; and I am introducing a new £90,000 charge for those resident in this country for 17 of the past 20 years. To tackle the continued use of enveloped properties to avoid stamp duty, I am increasing the new annual charge by 50% above inflation on properties worth over £2 million. All these tax measures I have announced amount to £9 billion over the next five years. The distributional analysis the Treasury publishes today shows that the decisions across this Parliament mean that the rich are making the biggest contribution to deficit reduction. In fact, the net contribution of the richest 20% will be larger than that of the remaining 80% put together, proving that we are all in this together.
We will make further reductions in Government spending and welfare, and we will make sure taxes are paid, but ultimately our future living standards depend on Britain earning its way in the world, so we must increase our productivity. Today, we take steps to back business, support science and invest in infrastructure. This Government have succeeded in making Britain the most entrepreneurial economy in Europe, and today we want to go further. To ensure that our growing smaller businesses have access to credit, we will expand the British business bank and act to encourage peer-to-peer lending. With the Governor of the Bank of England, I am extending the Funding for Lending scheme by a further year and focusing it exclusively on smaller firms. We will strengthen entrepreneurs’ relief and the social investment tax relief. We will accept almost all the recommendations of the Office of Tax Simplification to reduce the administrative burden on firms, and I thank Michael Jack and John Whiting for their work.
Our tax breaks have ushered in a golden age for Britain’s creative industries as well. Today, we will extend our new theatre tax break to orchestras; and we will help one area of television production that has been in decline, with a new children’s television credit, alongside our new animation credit. I know that the whole House has been saddened to hear that ‘Wallace and Gromit’ may no longer be produced because the man behind Wallace’s voice has retired, but after next May I am sure the whole House will unite behind a suitable and by then available candidate.
We also want to help British businesses do more research and development—that is crucial to our productivity. Today, I am increasing the R&D tax credit for small and medium companies to 230% and the credit for larger firms to 11%. This Government have repeatedly helped small business deal with the burden of business rates and we do so again today. We will double small business rate relief for yet another year. The last Government were going to close it, but it benefits half a million firms and means a third of a million firms pay no rates, and we are going to continue to fund it. I will also continue to cap the inflation-linked increase in business rates at 2%. I am also announcing a full review of the structure of business rates, and I urge business groups to engage with us on that. Last year, to help our high street shops, pubs and cafes, I introduced a new £1,000 discount on their rates. With the brilliant small business Saturday this weekend, I am increasing that help for the high street by 50%, to £1,500 next year.
The fall in the global oil price has meant a welcome boost to much of the British economy and to families. There is record investment this year in the North Sea, but the lower oil price clearly presents a challenge to this vital industry. My right honourable friend the Chief Secretary to the Treasury will set out our full proposals in Aberdeen tomorrow, but I can tell the House today that we will go ahead with an immediate reduction in the rate of the supplementary charge from 32% to 30%; we will expand the ring-fenced expenditure supplement from six to 10 years; and we are introducing, with immediate effect, a new cluster area allowance. That demonstrates our commitment to the tens of thousands of jobs that depend on this great British industry. Despite falling fuel prices, let me make this absolutely clear: we have cut fuel duty and we will keep it frozen—with my honourable friend the Member for Harlow (Robert Halfon) sitting right behind me, I would not dare do anything else. Just as we demand that falls in oil prices should be passed on to people at the pumps, other fuel price surcharges should also come down. We are going to require airlines to list the charges separately from the taxes on tickets, but I also want to reduce the cost of those tickets for families directly. My honourable friends the Members for Altrincham and Sale West (Mr Brady) and for North West Leicestershire (Andrew Bridgen), and many others, have asked me to help reduce air passenger duty for children on economy flights, so from 1 May next year APD for children under 12 will be abolished. I will go further than they asked: from the following year, we will get rid of APD for children under 16 altogether.
Improving productivity for all businesses also demands a major investment in our nation’s infrastructure. Because we have controlled our day-to-day spending, I can confirm that we will invest more as a share of our GDP over this Parliament and the next than was achieved under the whole period of the last Labour Government. This week we have set out plans for the biggest road building programme for a generation. We have committed billions to our flood defences, and today I take forward the recommendation of my honourable friend the Member for Waveney (Peter Aldous) and expand tax relief on business investment in those flood defences, too. It is all brought together in the national infrastructure plan, which is now helping our country attract more investment from around the world than any other single country in Europe.
Britain is raising its ambition, and nowhere is that clearer than in our commitment to science. It is a personal priority of mine as Chancellor. Scientific advance is a human endeavour worthy of support in its own right, but it is also crucial to our economic future. When this Government came into office, the UK was ranked 14th in the global innovation index—today, we are ranked second. But we aim to be the best. A year ago, I abolished the arbitrary cap on the total number of undergraduates at our universities. Today, I am going to revolutionise the support for our postgraduate students, too. Until now, there has been almost no financial support available, and the up-front costs of postgraduate degrees deter bright students from poorer backgrounds. Today, across all disciplines, we will make government-backed student loans of up to £10,000 available, for the first time ever, to all young people undertaking postgraduate master’s degrees.
The next step is the allocation of £6 billion on the biggest-ever sustained programme of investment in the research facilities of our scientific community. This includes money for major new scientific challenges, including the search for advanced materials, ground-breaking work on ageing and the exploration of the universe. The Rosetta comet mission captured the nation’s imagination. I can tell the House that, yesterday, Britain was awarded the lead role in the next international effort to explore the planet of Mars. We on the government Benches have often gazed at the barren and desolate wastelands of the red planet, and we have long given up hope of finding intelligent life there, but signs of any life at all would be a major advance.
Many of the new science investments will be made in the north of England. One of the great challenges of this country is to create a more balanced national economy—a challenge that has eluded Governments for generations. Our ambition is to build a northern powerhouse as a complement to the strength of our capital city, bringing together our great cities of the north. Since I set out that ambition less than six months ago, we have proposed, reported on, and given the green light to the concept of High Speed 3. This week, we commit billions of pounds to other road and rail improvements across the whole of the north of England. I can today confirm that we will tender for new franchises for Northern Rail and the TransPennine Express, replacing the ancient and unpopular Pacer carriages with new and modern trains.
When I set out the ingredients of a northern powerhouse, I promised to make progress. Today, I deliver. A few months ago, there were no proposals for major scientific institutions in the north of England. Today, we commit to a massive quarter of a billion investment in a new Sir Henry Royce Institute for advanced materials science in Manchester, with branches in Leeds, Liverpool and Sheffield. We back the brilliant work on ageing being conducted at Newcastle University, and big data computing at Hartree.
We are also committing to the industry of the north, with investment in new high-value manufacturing research. We are supporting new academy schools, and we are announcing a new sovereign wealth fund for the north of England so that the shale gas resources of the north are used to invest in the future of the north. The cultural life of the north will get a boost too, including a major new theatre space in Manchester. Manchester City Council proposes to call it the Factory Manchester. Anyone who is a child of the 1980s will think that that is a great idea.
Six months ago, people would have said it was completely impossible to get the 10 local authorities of Greater Manchester to come together with the Government to agree a major devolution of power to the city and the creation of a new directly elected mayor. We have delivered in Manchester, and my door is open to other cities who want to follow its cross-party lead. I said that I had put the northern powerhouse at the heart of this Autumn Statement, and with billions of investment in science, transport and new civic power in our great northern cities, that is exactly what we have done this week. We show today what can be achieved if we have the determination and ambition to deliver a truly national recovery.
We will also respect and fully implement the devolution settlements across the nations of our United Kingdom. Today, I announce that we recognise the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland. The Treasury believes it can be implemented provided that the Northern Ireland Executive can show that they are able to manage the financial implications. The current talks will see whether that is the case. If it is, the Government will introduce legislation in this Parliament.
In Wales, we are working towards a cross-party agreement on further powers for next March. I confirm today that we have reached agreement with the Welsh Government on the full devolution of business rates. This is a great opportunity to grow the Welsh economy. Last week, the Government supported the proposals of Lord Smith’s commission on Scotland. They will lead to the devolution of income tax rates and thresholds and other powers and ensure that the Scottish Government are responsible not just for spending money but for raising the taxes to pay for it. We will publish the draft clauses in the New Year. The sheer scale of the devolution to Scotland now makes unanswerable the case for English votes for English laws.
To improve the productivity of our economy, we back business, build infrastructure and support growth across the whole UK. But in the end, Britain’s future lies in the hands of its people and their aspirations—aspirations to save, to work and to buy a home. Today we support each one.
First, on saving, from next April, we will trust people with control over their own pensions. In this Autumn Statement, I confirm that the 55% death tax that currently applies when a person passes an unused pension pot on to their loved ones will be abolished. People will be able to pass on their pensions to their loved ones tax free. I can also tell the House today that we will ensure that people who die before the age of 75 with a joint life or guaranteed-term annuity can pass that on tax free, too.
Next week, we will publish the market-leading rates on our new 65-plus pensioner bonds, which will be available from January. Our £15,000 new individual savings accounts are hugely popular with savers, too. Next April, we will increase the limit to £15,240. But we will do something more. At the moment, when someone dies, the savings in their ISA lose their tax-free status and their spouse starts paying tax on that money. From today, I can announce that when someone dies, their husband or wife will be able to inherit their ISA and keep its tax-free status. Pass on your ISA tax free and pass on your pension tax free. We are delivering fairness to savers and to those who aspire to work, too.
The number of young people on unemployment benefits has halved. Our goal is to abolish youth unemployment all together. To support businesses that take on young people, we are already, from next April, abolishing national insurance contributions for employing anyone under the age of 21. Today, I can go further. Under this Government, almost 2 million people have taken up an apprenticeship. The Prime Minister has set this country an ambition of 3 million apprentices in the next Parliament. We back the businesses that employ apprentices, especially young apprentices under the age of 25.
At the moment, we charge national insurance on businesses that employ apprentices. Today, I can announce that the jobs tax on young apprentices will be abolished altogether. When a business gives a young person a chance in life, we will support them, not tax them.
We also back people of all ages in work, which is why the Government have raised the tax-free personal allowance to £10,000. Next year, the tax-free personal allowance, which was set to rise to £10,500, will rise instead to £10,600. That is a total wage boost for working people of £825 a year. It means that 3.5 million of the lowest paid will now be taken out of tax altogether. That shows that we on the government Benches do not sneer at people who want to work hard and get on. I just wanted to flag that up.
It is the first step to the new goal that we have set of raising the personal allowance to £12,500 so that people working full time on the minimum wage pay no tax at all. Today, I can also announce that, unlike previous increases in the personal allowance threshold, this increase will be passed on in full to higher-rate taxpayers paying 40% tax. So the higher-rate threshold goes from £41,865 this year to £42,385 next year. That is the first increase in the higher threshold in line with inflation for five years. This year’s increase means that 138,000 fewer people will pay the higher rate than would otherwise be the case. It is a down-payment on our commitment to raise the higher-rate threshold to £50,000 by the end of the decade.
There are those who have said that it was impossible to control public spending, improve public services, reduce the deficit and still cut income taxes for hard-working families on low and middle incomes. Today, we have settled that argument: it is possible, provided that we hold to our long-term economic plan, and we are doing it.
I turn now to my final measure. As well as the aspiration to work and to save, there is the aspiration to own our own home. Today, I am announcing the complete reform of a tax that has been described as one of our worst designed and most damaging. Stamp duty is charged at a single slab rate on the whole purchase price of a home.
It means big jumps in tax when house values tip into a new band. The distortions can be particularly damaging at the lower end: someone buying a property worth £250,000 pays £2,500 in tax, but if they buy a house worth just £1 more, they pay over £7,500—three times as much. In recent years, the burden of stamp duty has increased on low and middle-income families trying to buy a new home as prices have risen. That makes it even more difficult to get together the cash deposits that buyers need. It is time that we fundamentally changed this badly designed tax on aspiration, so I am today abolishing the residential slab system altogether. In future, each rate will apply only to the part of the property price that falls within that band, like income tax.
Here are the new marginal rates: you will pay no tax on the first £125,000 paid; and then 2% on the portion up to £250,000; 5% up to £925,000; 10% up to £1.5 million; and 12% on everything over that. As a result, stamp duty will be cut for 98% of home buyers who pay it. Someone buying an averagely priced house of £275,000 will pay £4,500 less in tax. The average home in London will see a similar reduction. As I said, 98% will pay less, and the whole reform represents a tax cut of £800 million per year. Only homes that cost just over £937,000 will see their stamp duty bill go up under this system—gradually to start with, rising to more substantial sums for the most expensive homes. A £5 million house will see its stamp duty rise from £350,000 to £514,000, but, of course, this is a charge that is paid only once, when the property is bought.
I can tell the House that these changes to stamp duty become effective from midnight tonight. Anyone who has exchanged contracts but not completed by midnight will be able to choose whether to pay under the old system or the new, so no one in the middle of moving house will lose out. The changes will apply in Scotland until the Scottish Government’s new regime comes into effect next April. At the end of the Statement, I will move a Motion to introduce this. There will be a debate tomorrow and legislation will follow.
There has been a debate in this country about taxing houses. The system that I introduce today replaces a badly designed system that has distorted our housing market for decades. It reduces stamp taxes for 98% of people who pay them in this country. It increases the taxes on the most expensive 2% of homes, but asks people to pay that tax only when they buy the house and they have the money. It does not involve a revaluation of hundreds of thousands of homes in this country. Today I am cutting stamp duty for millions of home buyers in this country—98% will be better off. That is a fair, workable, lasting reform of the taxation of housing, and it is in stark contrast to the shambles of the anti-aspirational, unworkable homes tax that the Labour Party wants to impose.
Four and a half years ago, our economy was in crisis. People questioned whether Britain could remain among the front-rank economic nations of the world, but we set a course to restore stability, to get on top of our debts and to show that Britain was not going to be counted out. Through the storm we have stayed the course. Now Britain is on course for surplus, on course for lower taxes, on course for more jobs, on course for higher growth and on course for a truly national recovery—a long-term economic plan on course to prosperity”.
My Lords, I am grateful to the Minister for referring to this Statement. We have an economic debate scheduled for tomorrow, in which a very significant number of Peers will contribute to what I think will be a very fruitful debate. One is also conscious of the fact that the very limited amount of time that we have to deal with the Statement scarcely merits this particular form of parliamentary procedure.
We have four issues on which we want to challenge the Minister with regard to the Budget: living standards and wages; tax receipts and borrowing; growth and immigration; and taxation and the National Health Service. Is it not quite clear that a great deal of revenue has been lost this year despite the Government’s boast about increasing employment, because many people in work, far from paying taxation, are actually receiving social payments? The Government’s much vaunted boast about the improvement in employment is destroyed by the fact that, clearly, we are not improving productivity. The only key to Britain actually paying its way is by improving our balance of payments and trade. That means that productivity ought to be a key objective of the Government. From what I could see of the Statement this morning, there was just a glancing reference to the issue of productivity.
The OBR also indicates today that wage growth is again weaker than expected. We know that the Chancellor puts on his long-range spectacles at this point—almost a telescope—to let us know when wages might, in due course, exceed inflation in rise. However, we are once again in a position that we have had year after year in which living standards have been falling because real wages have been dropping. Working people are now £1,600 a year worse off than they were in 2010. Someone in full-time work is £2,000 a year worse off. The issue is quite clear: working people are facing a cost of living crisis. That is why the Government are facing their own cost of living crisis, in the obvious fact that tax receipts are far below what the Government used to promise and predict. As a result, we are in a position where the Government are obliged to come before this House and the other place with a clear record of failure.
The books were meant to be balanced by 2015. In fact, that was the cardinal point of the coalition proposals on the economy. What we are facing is downright failure; and, of course, the failure is attributable largely to the shortfall in tax revenues. The OBR says that, so far in 2014-15, weaker than expected wage growth is depressing PAYE and NIC receipts. Does the Minister agree with the analysis from that independent source? Is it not clear that there is a great drop in tax revenue, which makes an absolute mockery of the idea that the Government somehow had a long-term plan? The Government are therefore forced to borrow.
Back in 2010, the Chancellor and the Prime Minister pledged to balance the budget by the end of this Parliament and to see the national debt falling. In 2010, the Prime Minister said:
“In five years’ time, we will have balanced the books”.
The national debt is now forecast to rise again this year. Perhaps I may ask the Minister—clearly, he will acknowledge that the Government have missed their targets—whether he will give us the figures on how much more will have been borrowed in this Parliament than was planned in 2010.
The reason why wages, incomes and borrowing have been hit hard this year is that productivity growth has been weak. Yet the Chancellor announced that, on this year’s figures, he is forecasting growth not to accelerate but to slow down next year. I know that he wants to blame the poor performance on the eurozone and the international situation. The Conservative Party, in particular when it is in trouble, is pretty good at analysing the difficulties that the international situation presents for the economy while decrying completely any aspect of the collapse of American, German or French banks as regards the British problem in 2008. Instead, it attributes all to the government overspend, when it is quite clear that the problem in 2008 was the collapse of receipts. This Government are facing exactly the same failure with regard to receipts.
One reason why growth has been so weak is that the Government are constantly forecasting that it will be greater than is the case because they are content to measure the wrong figures. They should concentrate on productivity and the creation of real jobs and ensure that the British balance of payments begins to improve as opposed to what is happening at present. Is it not the case that since 2010 our performance in the G20 places us 22nd out of 28 countries in the EU as far as these figures are concerned? Business investment has also lagged behind that of our competitors and fell in the most recent quarter. Bank lending to business is below what should be available and is still falling. The number of apprenticeships for young people is down this year on last year’s figure. These are all issues which I hope the Minister will address although I recognise that he has to give an abbreviated reply to a Statement of this kind.
The noble Lord has responsibility for infrastructure, but what percentage of the planned construction is actually being constructed? How many houses are being built? How many roads have been started? Or is this just another promise that the Government are making for the next Parliament that they will not realise if we have the misfortune of seeing them re-elected? Is that not also the case with rail? The Chancellor referred to improving the rolling stock in the north of England but he did not put a date on it. There is never a date attached to plans for so-called improvements in infrastructure—there are figures but no achievements. In fact, the greatest achievement of this Government in infrastructure over the past few years has been Crossrail, the majority of which was planned and developed under a Labour Government. We expect the Government to produce a plan to create more good jobs and to adopt a more balanced approach. That is clearly not predicted in today’s Statement.
What about another promise that has bitten the dust: the promise that net immigration to the UK would be down to the tens of thousands? What is the actual figure? It is 200,000. That is yet another projection by the Government that is belied by the facts. The Prime Minister claimed in the Times a month ago that 80% of the Government’s planned spending cuts—which have so heavily cost so many people of limited resource—have now been made. He said 80%, but the Institute for Fiscal Studies says that it is 50%. Would the Minister care to say which is right? Spending on social security in this Parliament is more than £20 billion higher than the Government planned in 2010, so they cannot even get their sums right.
We have been promised an extra £2 billion for the National Health Service. The calculation for the first year has to take into account the fact that £700 million had already been allocated to the health service and is now somehow being reallocated by the Government. Why does the Chancellor not introduce an annual charge on the highest value properties, as we are suggesting, to enable an investment of £2.5 billion a year to be made in the National Health Service? That is the figure that is clearly necessary to avoid the great difficulties it faces.
I am aware that this is meant to be only an introduction, and tomorrow we will be able to deliver a rather longer statement. However, I hope that I have at least identified to the Government that they have some singular and important questions to answer, lest the country treats this Statement with the same level of credibility that the Government’s past performance merits.
I, too, look forward to the debate tomorrow. The thing that resonated with me was the noble Lord’s reference to a clear record of failure, and he should know. Let us compare records. Fortunately, the previous Government wrote its own when it left a note for the Chief Secretary, with three words: “No money left”. Let us look at the record of this Government. We have the fastest-growing economy in the G7, demonstrating well balanced growth across all the industrial sectors and spread effectively regionally. We have record levels of employment, and record falls in long-term unemployment and youth unemployment. We have restored this country’s fiscal credibility from the record deficit we inherited. We have halved the deficit this year and are still on path to eliminating it by 2018-19.
If you look at the work of the OBR, you will see that the borrowing is slightly higher this year and next year, and slightly lower in the next two years, taking us to a surplus of £4 billion in 2018-19. I fully accept that we are not as effective in reducing it as our predecessors were in increasing it, but we are doing a pretty good job, given the global economic environment. We have also seen extremely low and falling levels of inflation; we are investing in business and productivity; and we have supported people through the recovery from the depths of a savage financial crisis by reducing personal allowances, making sure that we have frozen fuel duty, freezing council taxes, capping the rise in rail fares, et cetera.
I fully accept that this country has a long-term productivity problem. I am looking forward to the debate tomorrow, in which I am sure we will get some insights into how to cure that. My right honourable friend the Chancellor was not short in his analysis or the work he is doing on that. Quite simply, productivity has to come from: increasing the Government’s own efficiency; creating space for the private sector; and increasing the dynamism of the private sector through lower taxes and infrastructure investment, which we have discussed. By the way, as regards this Government’s record on infrastructure, through this Parliament £47 billion will have been spent on infrastructure, private and public. In the previous Parliament it was £41 billion. That is a 15% increase, which, in the context of the financial environment, particularly in the first few years, is extraordinary.
The noble Lord was right to say that there has been a shortfall in tax receipts, which is the principal reason why borrowing this year is a little higher. It is higher than was forecast in the Budget, although it is still coming down and will go down every year. Everyone was prepared to say that it was going up. No, the deficit continues to come down. I should explain the situation on tax receipts, which is important. Again, it is the productivity issue: the economy has grown faster than earnings. There is also an interpretation issue; in the second half of the year, we will see tax receipts do a little better than last year, when they were front-loaded—so there is an adjustment there. The biggest reconciliation of the difference between the OBR forecast this time and at the time of the Budget is the £16 billion improvement we get in reduced interest costs because interest rates are coming down, principally because inflation is under control. I have been trying for some time to find a good reason for having a high debt level. This is the only one I can think of: when interest rates are low, the interest burden comes down. That explains two-thirds of our ability to decrease spending in a couple of years’ time to make up the shortfall in tax receipts.
I want to dwell a little longer on the earnings situation. The noble Lord is right that earnings have not recovered as fast as we all would have wanted. People have been faced with difficult challenges. I have listed the kind of measures the Government have taken to mitigate the impact on our citizens. The reason is simply because the economy recovered more slowly than we expected. That was a result of the crisis being deeper than we had understood at the time, very high commodity prices in 2011-12 and a very weak eurozone. Essentially, that delayed the recovery; that explains why it is taking longer to get the deficit down. The Government have a clear plan to get us there. In listening to the series of observations the noble Lord made, I could not, with the best will in the world, detect an alternative plan.
The noble Lord raised two other points. I absolutely agree that our export performance is weak. It has been for some time. Addressing some of our productivity problems and improving the performance of our businesses will be at the heart of improving our export performance. The weakness of the eurozone—the customer for about 40% of our exports—is of course an important factor. We have been very focused, through our interventions with UKTI and UK Export Finance, on supporting the growth of exports to other markets, which in volume terms are, I think, up about 18% since 2010. We have to support that switch away from the slow-moving markets to the faster-growing markets. I absolutely accept that.
Before opening up to broader questions, I will mention housing. It is both a supply and a demand question. We are working very hard to increase supply, whether it is through the individual schemes that my right honourable friend the Chancellor went through at Bicester, Ebbsfleet, Barking, Brent Cross and the four London estates that are being regenerated, or at Northstowe, where we are freeing up land for building. We are also putting more money into affordable housing. If noble Lords were to add up all the schemes and initiatives in the Autumn Statement, they will come up with a very sizeable increase to supply. On the demand side, Help to Buy has been very successful. Continuing low interest rates are very successful and the radical reform to stamp duty rationalises that very inefficient tax in a way that will support home buyers, particularly at the lower end of the market.
Finally, the Government have increased spending during this Parliament by nearly £13 billion to support the National Health Service. I will not repeat the individual initiatives. As the noble Lord pointed out, we have made a down payment of an extra £2 billion, which is the pro rata amount that the chief executive of the National Health Service has asked for to get it to £8 billion by the end of the next Parliament. Again, a great plan has been established. We will finance it on the basis of its merits.
My Lords, I very much welcome the Autumn Statement—little surprise, as this is a coalition government Statement in which the Liberal Democrats have clearly had considerable involvement. I thoroughly enjoyed the demolition of the Labour Party case by the Minister. I am surprised that he did not mention one obvious point, which comes on page 6 of the Autumn Statement. For the last couple of years we have listened to the Labour Party indicate that real wages have not increased. On page 6, the Statement indicates that the OBR now forecasts that wages will exceed inflation for the next five years. I would have thought that that rather shoots the fox.
I will ask one or two questions. First, the Chancellor deals with spending cuts on page 9 of the Autumn Statement. Even as a friend, I suspect he rather glosses over the impact that spending cuts are likely to have after 2015-16. I do not know whether the Minister can add anything on where these cuts will come from. As the Minister rightly indicates, infrastructure spending has been quite significant in these proposals, not only in the Autumn Statement, but in the road scheme announced on Monday and the infrastructure plan announced on Tuesday. Does he agree with the argument that the Liberal Democrats have been making that, when looking at spending cuts in the next Parliament, infrastructure spending should be ignored because of the long-term capital effect and capital advantage of such spending? On the proposal for postgraduate loans—a topic that is obviously very dear to my right honourable friend Vince Cable—does the Minister agree that this will have a significant impact on the possibility of research into science? Finally, on the desirable attempt to extract the tax on multinational companies, the proposal is that there should be a 25% tax on the profits of a multinational company earned in the United Kingdom. Is he able to expand on that? I understand that one of the arguments of companies such as Amazon and Starbucks is that they do not make any profits in the United Kingdom.
There were five questions there. First, I obviously accept the point that my noble friend makes about real wages, although wages exceeding inflation has been coming through only in the last year. He is absolutely right that the forecast from the OBR is that that will continue and that we will see earnings outstrip inflation, which would be a good thing.
Secondly, what is the story behind the spending cuts, which are quite significant? The simple story is that we plan to continue at the rate we have successfully implemented in this Parliament. We know that we can do it. In fact, we have managed to do it every year and still end up with an underspend. My right honourable friend the Minister for the Cabinet Office put out a paper this morning on how we will find another £10 billion of efficiency reforms on top of the nearly £15 billion that we have achieved in this Parliament. There will of course be a continuing review of welfare to ensure that we are focused on getting people back to work and that we are targeting those who really need to receive it. It represents a significant amount of our public expenditure, so that has to be part of the programme.
My noble friend asked whether we would effectively ring-fence the infrastructure investment. There is a commitment—effectively a fiscal rule—that we will retain public sector gross investment at a consistent level. If we stick to that, that is what will happen. Of course, the great success of all that we have accomplished is that so much of our infrastructure has been financed by the private sector, so it is not constrained by that measure anyway.
I think that postgraduate loans are a terrific initiative because not having money was becoming a constraint on people doing research. Therefore, that is a good thing on a number of grounds.
The multinational tax measure is looking at companies which put in place elaborate structures effectively to move their profits to offshore locations with a lower tax rate. The mechanism to capture that will dismantle those structures and look at the real profits, which we can then tax.
My Lords, like earlier Autumn and Budget Statements since 2012, there is no reference in this Statement to the likely impact of the measures on child poverty levels, despite the legal duty to eliminate child poverty by 2020. Can the Minister therefore tell your Lordships’ House what the impact of the two-year freeze in benefits for working-age families will be on child poverty levels? Also, how did that freeze fare when set against the new family test, particularly taking into account the significant reduction in the real value of benefits for children under this Government?
The fundamental approach of this Government to addressing poverty is to get people back into work and to ensure that real earnings recover and outstrip inflation, as we discussed earlier. In looking at the distributional analysis to see who is contributing towards the benefits, the top 20% pay more than the remaining 80%, so that is how the balance of our distribution looks.
I think I am actually described as non-aligned, which means that I am sort of drifting in a certain direction.
I first congratulate the Government on not achieving their deficit reduction target because, in so doing, they have played their part in contributing to a recovery in economic activity. That has allowed greater prosperity eventually to reach broader sections of society, and a fairer society that is based on a growing economy.
I have two questions. The first relates to the taxation of the profits of the likes of Google. That strikes me as rather like the game of whack-a-mole that we play at summer fairs. Whatever they do, they find another way to get round it—often with the help of the noble Lord’s previous employer, Goldman Sachs. Would it not be more sensible for us to support a global initiative to tax the owners of companies rather than the companies? Frankly, the taxation of companies is a futile game because they are getting better and better at finding ways of avoiding it.
Secondly, there is little in the Statement about monetary policy, although an accommodating monetary policy has undoubtedly helped over the last five years. If the noble Lord was still an investment banker and he had a company as a client with a large debt on one side of the balance sheet and a large asset, in the form of cash, on the other, he would advise the company to cancel them out. Why do we not do that with the gilts that have been bought through QE and at a stroke reduce borrowing as a percentage of GDP? No harm would be done; there would be no fascist printing of money because these gilts were bought for fair value in the open market. I urge the Minister to go back to the Treasury and say that the moves it has introduced are just tinkering. That is what Governments do. It is not a row of beans when these Statements come. There is no real impact on the economy. The two moves I have suggested could have a material effect.
I will be delighted to use my expertise as a poacher turned gamekeeper to help structure the profits diversion tax in a way that actually works. The noble Lord is quite right; it will only work ultimately if we capture this on a global basis. That, of course, is the work that is going on. The noble Lord will not be surprised to know that I will not be making any comments on monetary policy, which is a matter for the Bank.
I congratulate my noble friend on his kindness in not repeating the Statement because it is perfectly obvious that the noble Lord would have had nothing to say by way of reply. Does my noble friend think that it is something of a nerve for the parties opposite, including those who have now flown to the Cross Benches, to complain about the Government’s progress in reducing the deficit when they have opposed every spending cut and every initiative by us to increase revenues? Are they not rather like a bunch of arsonists complaining that the fire crew is taking too long to put out the fire?
Can I press the Minister further on the health increase to which he referred? It was mentioned by the Chancellor in the other place that £2 billion will be spent every year. The Green Book states on page 68 that it will be an extra £2 billion for the NHS. Given that that is the case, can the Minister give an assurance that there will be full Barnett consequential of the full sum for the devolved Administrations?
My Lords, I congratulate the Government on at last recognising the benefits in giving tax credits to children’s television productions, on which the Liberal Democrats, Pact and the Children’s Media Foundation have campaigned for many years. This is great news, as the industry has been in decline. When will the tax credit come into force? I declare an interest as a children’s television producer.
Can the Minister shed some light on the increase in infrastructure spend over the forecast period? In his Statement today the Chancellor said:
“Improving productivity for all business demands a major investment in our nation’s infrastructure”.
Over the past few weeks we have been showered with press releases setting out various infrastructure projects; I stopped counting when we got to around £15 billion. I was therefore a little surprised by table 4.3, the summary of the effect of government decisions, which shows that over the forecast period there is only a £600 million increase in capital. Can the Minister tell us what the actual increase in infrastructure spend is and how it is to be financed if it is only £600 million over the next four years?
As I explained to the noble Lord earlier, we have made a very detailed analysis of infrastructure spend, which is running on average at £47 billion per year. The majority of that, more than 60%, is financed by the private sector, which of course is a great sign of the success of this Government. Every scheme which has been announced has a clear funding plan attached to it. The real transformation that has taken place with this Government is that instead of having a plan for roads one year at a time—if there is a bit more money you can tell the Highways Agency to build a road; if there is no money, you tell it to stop, which results in a very inefficient road-building programme—we have given it a proper organisation, a proper strategy and a proper financing plan over the next six years.
My Lords, does my noble friend agree that it is very good news that we have now reached the point at which the deficit has been halved, and that the Government are determined to eliminate it completely? This raises broad macroeconomic issues that we can debate tomorrow. Does he also agree that this is an extraordinarily imaginative Autumn Statement? Perhaps I may take just one example, that of the Chancellor’s decision that hospice charities should no longer be subject to VAT. That is an example of the good things in the detail of the Statement which will be very much welcomed.
One of the things I have enjoyed about working with my right honourable friend the Chancellor is that, right through to the end of this Parliament, the Treasury is looking at new measures and trying to continue to implement the plan that has been laid out with such effectiveness. To be sticking to the target of getting the deficit down within the context of a very challenging economic environment, while being focused on structural issues and other important things that affect the economy and broader society, is indeed the sign of a good Statement.
My Lords, does the Minister recall the promise made by Mr Osborne when he was the shadow Chancellor to the effect that, when his party came to Government, he would raise the inheritance tax threshold to £1 million? He wowed his party conference with that statement. That is said to have made Mr Brown put off the election, and indeed to increase the inheritance tax threshold to £325,000 and introduce transfers between spouses. What has happened to that promise? The threshold is still £325,000 and there is no mention of it in the Statement today, yet it was a central point of Tory policy at the last election. When are we going to hear more about this issue, or have the Government dropped that promise?
The Government keep all taxes under review. With respect to taxes at the end of life, the focus of the Government has been much more on pension reform, which has been radical and generous in terms of how it will treat inheritance. In fact, my right honourable friend the Chancellor confirmed today that the tax on passing on a pension pot, which had been at 55%, will be removed. He has also introduced a similar arrangement for ISAs being passed on to spouses. While we have not yet made changes to inheritance tax, we have been thoughtful about taking care of some of the issues that complement it.
My Lords, I am sure that the Great Western Air Ambulance Charity and the Kent, Surrey and Sussex Air Ambulance Trust are worthy and deserving causes. Why are they the only two air ambulances that are being singled out for LIBOR money for new helicopters? What about the air ambulances throughout the rest of the country? I just do not know how the Government can operate on the basis of singling out two particular helicopters.
The Government have of course embraced the most significant increase in the national minimum wage. The new rate of £6.50 came into effect on 1 October. This affects about a million people. I have already listed the other things that we have done. These include increasing the personal allowance on a consistent basis, by again another £100 to £10,600, as my right honourable friend announced today, as well as the other measures to deal with cost-of-living challenges.
My Lords, I congratulate the Chancellor on his Statement in noticing the shoddy disgrace in the north of England known as Pacer trains. The Statement says:
“I can today confirm that we will tender for new franchises for Northern Rail and the TransPennine Express, replacing the ancient and unpopular Pacer carriages with new and modern trains”.
Noble Lords will remember that these Pacers are four-wheel rattletraps, commonly known by people who have to travel on them as nodding donkeys. I have two questions. First, does that mean that the replacement trains will all be new and modern, or does it mean, as has been suggested, that most of them will simply be refurbished rattletraps from the London Underground or from other places? Secondly, do the Government still have the same commitment to replacing Pacer trains in other parts of the country, such as the south-west?
It is absolutely the Government’s policy to upgrade our infrastructure in the rolling stock. The Chancellor is the architect of the northern powerhouse, so his commitment to getting that done quickly and effectively for the north is right at the top of his priorities.
My Lords, the diverted profits tax is to be welcomed, although I suspect it will be difficult to implement. Can the Minister say whether it is intended to be applied to profits diverted from England to Northern Ireland and Scotland, should those countries end up with lower tax regimes?
The noble Lord is right. Though it may not have succeeded, the idea was for the Autumn Statement and the science announcement to amplify each other, but if they have had the opposite effect we will clearly have to have a word with the communications team.
Consistent with our other strategies, the science strategy is really to make sure that we are clear about what we are trying to do in the long term. We have put a financial settlement behind it that enables us to get it done. This includes a support of science as something worth while in its own right, and a very clear strategy about the things that we are good at and how they tie in to our potential economic advantage. It is likely to include the upgrading of what is effectively our laboratory base, so that that remains at the world’s cutting edge. This country has gone from about 20th in the Midlothian innovation index to second in the past five years. We want to stay there and do even better if possible. There will also be a fund for “grand challenges” where smart ideas that have great potential can apply for money. One of the most interesting things is the £250 million investment in a new advanced materials research institute in Manchester, connected to other universities. It will be called the Sir Henry Royce institute, and will be a magnificent initiative.