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The Budget

It is a pleasure to be back at the Welsh Grand Committee, having attended after the emergency Budget last year. I thank the Committee for inviting me to make this statement today. As a former Secretary of State for Scotland and a Scottish MP, I fully understand the importance of securing a fair deal for the devolved countries. Last week’s Budget was an example of that commitment. In it we confirmed that the Welsh Assembly’s Budget would include an additional £65 million as Barnett consequentials of some of the decisions that we took in devolved areas; that we will consider all aspects of the Holtham commission’s final report; and that under the new budget exchange funding mechanism, the Assembly will be able to carry forward planned underspends to subsequent years, which I know will be welcomed by the Committee. The main focus of this year’s Budget is reforming the economy so that we have sustainable growth and jobs across all countries and regions of the UK, yet none of that would be possible without the difficult decisions we have already had to take—decisions that have secured our international credit rating, and have been praised by the OECD, the International Monetary Fund, the World Bank and many others. In the Budget, we set out our vision for delivering economic growth. That vision has four key economic ambitions at its heart: that Britain should have the most competitive tax system in the G20; that we should be the best place in Europe to start, finance and grow a business; that we should be a more balanced economy, by encouraging exports and investment; and that we should have a more educated workforce that is the most flexible in Europe. We set out a plan that will be of significant benefit to Wales. On the tax side, from April this year, corporation tax will be reduced not just by 1%, as we announced last June, but by 2%; and it will continue to fall by 1% in each of the next three years, taking our corporate tax rate down to just 23%. [ Interruption. ] That is a different sort of disruption from last time—I suppose it is the drill at these meetings. That reduction will support enterprise across the United Kingdom and allow Welsh businesses to invest more of the money they retain, hire more workers and take advantage of new opportunities as they arise. We also made tax changes on the personal front. Anyone earning less than £35,000 a year will, as of next week, be better off because of our £1,000 increase in the personal tax allowance that we announced in the Budget last year. That is the largest single increase in the personal income tax allowance in history. More than 1 million Welsh taxpayers will be better off as a result and almost 10,000 Welsh taxpayers will be taken out of paying tax altogether. As well as a competitive tax system, we need a fair one, which is why we have responded to the concerns of hard-pressed motorists by cancelling Labour’s fuel duty escalator for the remainder of this Parliament. We have also cut fuel duty by 1p per litre, which is already feeding through to the prices at the pump, and we have reversed the planned 5p a litre rise in April. As of next month, fuel will be 6p per litre cheaper than it would have been under the plans we inherited, providing help for families, businesses, and the Welsh economy. Small businesses have been an interest of the Committee for some time and they in particular have been the innocent victims of the credit crunch. They have seen the flow of affordable credit dry up. That is why we have agreed with the major banks a 15% increase in the availability of credit to small businesses—an additional £10 billion of lending this year—but that is not the end of the story. We are also increasing to 30% income tax relief for those who put money into the enterprise investment scheme, which will allow more equity investment to be available for small and medium-sized businesses, providing access to alternative forms of finance. That is one of the ways in which we are providing help for our country’s smallest businesses. We are also putting in place a moratorium on new regulation for micro-businesses—those with 10 employees or fewer. All those things will help to make Britain the best place in Europe to start, grow and finance a business. Manufacturing is crucial to the rebalancing of our economy. Over the past decade, manufacturing as a share of our economy has fallen by almost half. It is now growing at a record rate, with 14,000 more jobs having been created in the sector in the past three months. To help that continue and to build on that progress, the Government are creating new export credits to help smaller businesses, launching Britain's first technology and innovation centre for high-value manufacturing, and funding a further nine new university centres for innovative manufacturing. We also want to encourage manufacturers to invest in the latest machinery and technology, so we are doubling the limit on the capital allowances for short-life assets from four to eight years, which will make a real difference to many manufacturers. That will be of great benefit to the Welsh economy with its long history—and continued success—in manufacturing. Helping all parts of our country to succeed is also part of the purpose behind the new enterprise zones that were announced in the Budget. Clearly, that policy applies only to England, and it carries some Barnett consequentials with it. We are committed—I wrote on the day of the Budget to the Welsh Minister for Business and Budget—to working with the Welsh Assembly Government to explore options for extending the enterprise zone model across the whole of the UK. The Committee will know that we have said that in certain locations, we are willing to consider looking at capital allowances as part of the enterprise zone model, which may be of particular interest in Wales. In conclusion, this Government are looking to right the wrongs of the past. We will reverse the trend of the past decade that has seen our outgoings surpass our income, our economy become unbalanced and employment held back by a mountain of bureaucracy. Instead, we will make the UK Europe's leading destination for enterprise, with the most competitive tax system in the G20, the most flexible work force in the EU and an economy that is able to compete on the world stage. That is how we will drive growth across the United Kingdom; that is how we will create the jobs of the future; and that is how we will build the more dynamic, prosperous and sustainable economy that Wales, and indeed the whole of the UK, deserves.