The Chancellor's statement

"BRITAIN is today experiencing the longest period of sustained economic growth since records began in the year seventeen hundred and one.

And the foundation of this Budget is our determination to maintain British stability and growth. Facing a future of intense global competition Britain must be prepared and be equipped: long term prosperity secured only if we make the right decisions to be world leaders in science, enterprise and education; family prosperity secured only if we also match a strong economy with investments to help parents balance work and family life, to give every child the best possible start in life, and to deliver a fair deal for pensioners.

So my Budget choice is to lock in stability and never put it at risk; and to strike the right balance between tax cuts that are affordable, investments that are essential and stability that is paramount: at all times putting Britain’s hard working families first. I start with the economic forecasts.

In any other period an oil price rise of over 100 per cent and rises in industrial materials and metals of around 50 per cent would have led to a surge of British inflation.

But inflation - which went as high as 20 per cent in the 1980s and 10 per cent in the early 90s - has, every year in the last eight years, been 3 per cent or less - the least volatile and most stable of all the major industrialised economies.

And with Bank of England independence and continued wage discipline, I can report that inflation is today just 1.6 per cent.

And we expect it to be just one and three quarters per cent this year and 2 per cent in 2006 and beyond as we continue to meet our 2 per cent inflation target.

I can also report that overall domestic demand is now forecast to continue to grow this year by three and a quarter to three and a half per cent, and by two and a half to three per cent in 2006.

The key to a sustained improvement in manufacturing is the rising level of business investment - which grew by five and a quarter per cent last year and is forecast to grow by four and a quarter to four and three quarters per cent this year.

And as trade and industry strengthen, we expect overall domestic investment to grow this year by six to six and a quarter per cent and exports to also rise at more than six per cent.

Before each Budget time we have heard predictions of a recession - predictions wrong in 1997, wrong in 1998, wrong in 1999, and wrong again in the years from 2000 to now. Most recently the Budget forecast for 2004 of growth at or above 3 per cent was said to be a deliberate misrepresentation of Britain’s economic position. Not to meet it - it was said - would destroy credibility.

I can report that growth in 2004 is as forecast - 3.1 per cent.

In December I reported 49 quarters of consecutive growth. Today I can report economic growth for the fiftieth consecutive quarter. The Budget forecast is continued growth in quarters 51, 52, 53 and 54.

This year and next the euro area is forecast to grow at 1.5 per cent and then just over 2 per cent, Japan even more slowly at less than 1 per cent. Again North America and Britain will see the fastest growth in the G7. And our forecast for British growth this year is 3 to 3.5 per cent and in 2006 2.5 to 3 per cent.

So it is Britain and North America that have over the last eight years grown at twice the rate of most of our G7 competitors, our living standards also rising twice as fast. And unlike the United States, Australia, Canada and New Zealand there is no quarter in which the British economy has not registered growth.

In each Budget I consider the uncertainties and risks to Britain from the world economy. Vulnerabilities come today not only from high oil prices, exchange rate volatility and current account imbalances but also from long term differential growth rates between our major continents.

Always vigilant to these risks the key to British stability and growth is that we sustain for the long term low inflation and low interest rates.

In the 18 years from 1979 to 1997 inflation averaged 6 per cent. In the last eight years inflation has been 2.4 per cent - half as much.

In the eighteen years from 1979 to 1997 interest rates averaged 10.4 per cent. In the last eight years interest rates have averaged 5.3 per cent - half as much.

And one fact tells the story of progress since the days of mortgage repossessions and negative equity: in the eighteen years to 1997, mortgages rates averaged 11.5 per cent, in the last eight years just 6.1 per cent - half as much.

To sum up:

And with the best living standards since 1997 rising on average by 3 per cent each year, Britain has today the best combination of low inflation, high employment and rising living standards in a generation.

Since 1997:

Not that long ago Britain seemed locked in a debate not just about inflation and stop go but also about intractable levels of unemployment.

Indeed in other countries high unemployment remains today the dominant economic issue.

If Britain today had German, French or euro area levels of unemployment we would have 2 million fewer jobs and if we had America’s higher level of unemployment, there would be one third of a million fewer jobs in Britain.

The official figures published today show that since 1997 we have created two million one hundred thousand jobs. This week, every working week, another 125,000 men and women are finding new jobs, an additional 50,000 new vacancies are advertised and almost 4000 new business are starting up.

And with a total of 650,000 vacant jobs needing people with skills to take them, the answer is not to abolish the New Deal which has helped 1.2 million people into work but to extend it to become a New Deal for jobs and skills.

And so the Secretary of State for Work and Pensions is today announcing new rules to encourage incapacity benefit claimants into work and reforms in housing benefit to help job creation. Building on the 40 per cent increase in the numbers of lone parents in work since 1997, we will next month extend to new areas the £2000 first year return to work bonus for lone parents.

We are today announcing for areas of high ethnic minority unemployment new centres for vocational qualifications and for entrepreneurship. And alongside a new Union Learning Academy, the Secretary for Education and I are today also allocating £65 million for the coming year to employers for our successful employer training pilots.

The Home Secretary is today announcing targeted early intervention for young people at risk of offending in their school years, such as mentoring or tuition, to help prevent them becoming both long term unemployed and persistent offenders later in life.

Mr Deputy Speaker, the foundation of fiscal strength and soundness is our decision in 1997 to radically reduce national debt.

In one year alone Britain paid off more debt than all the debt cumulatively repaid in all the previous 50 years.

And with the national debt reduced from 44 per cent of national income in 1997 to 34 per cent today, Britain now has the lowest debt burden of all our major competitors.

Lower debt and lower interest rates mean debt interest payments consume a lower share of national income than at any time since 1915.

Our bill for debt interest payments is now £4 billion a year less than 1997.

The lowest debt interest payments for a century are matched by the lowest unemployment costs for a generation. So social security bills for unemployment have been halved since 1997, saving another £5 billions a year.

As recently as 1994, 75 per cent of all new public spending went to debt interest and social security - paying the bills of economic failure.

Today 75 per cent of new money goes to investment in hospitals, schools and public services.

To build upon that fiscal discipline, I can report that following the Lyons Report on public sector assets £14 billion of asset disposals have already been identified, £4 billions to be sold this year.

I can also report the first 7,800 civil service jobs to be relocated out of London and the South East to Yorkshire, South West, the North East and West, the Midlands and East England, and Scotland and Wales.

I can report - ahead of target - the first £2 billion of value for money Gershon savings, on top of £2 billion savings in procurement announced in December. And I can also report - on target - the reduction of the first 12,500 civil service posts.

And having examined, in detail, representations put to me, I hold to Sir Peter Gershon’s recommendation that to go beyond his proposal for £21 billion savings would, in Sir Peter’s words, put the delivery of front line services at risk.

I turn to the fiscal figures.

After all my announcements today, borrowing which in the early 1990s reached the equivalent of £90 billions, will be £34 billions this year falling to £32 billions next year, then falling again to £29 billions, falling to £27 billions, then to £24 billions and then £22 billions.

The deficit for this year is now forecast to be 3.1 per cent of national income in France, 3.5 per cent in Germany, 4.1 in America and 6.4 in Japan.

In Britain the figure is forecast to be 2.6 per cent, falling in successive years to 2.2, 2.0, 1.6 and 1.5 per cent of national income.

And for those who take an interest in these matters I can inform the house that in every year our figures meet the Maastricht criteria. In this Budget the Treasury does not propose to initiate a further euro assessment.

Our first fiscal rule is to balance the current budget over the economic cycle. For the years to 2009-10 the current balance is minus 16 billion, minus 6 billion, plus 1 billion, plus four billion, plus nine billion and plus twelve billions.

So we are meeting our first fiscal rule - the golden rule - in this economic cycle with a margin of 6 billion. And our second rule - to keep debt below 40 per cent of national income - is met with a margin of 57 billions.

While debt is now forecast to rise to 46 per cent of national income in America, 48 per cent in France, 57 per cent in Germany and 90 per cent in Japan, in Britain this year debt is forecast to be 34.4 per cent of our national income and in future years will be 35.5, 36.2, 36.8, 37.1 and 37.1 per cent - at all times debt below 40 per cent of national income.

So with our deficits lower than our competitors, lower than a decade ago - and with our debt lower than our competitors and lower than a decade ago - we are meeting both our fiscal rules both in this economic cycle and the next.

And it is because our public finances are strong that in this Parliament we have also been able to meet the extra and unanticipated costs of Iraq, Afghanistan and the fight against terrorism - in total £4.9 billion - and today I am able to set aside for additional defence expenditure for the year ahead an extra £400 million.

Those in this House who have forecast recession and those who have called our spending unaffordable have been consistently wrong and with the most recent figures published today for both economic growth and receipts, they are wrong again.

Indeed those who call spending unaffordable must explain why last year, this year, next year and the year after the British deficit is lower than the projected deficits in Germany, Japan and the USA.

And last year, this year and in each and every year ahead the level of British debt is also lower than debt levels in Germany, Japan and the USA.

Today Britain strong among our main competitors where in the early 1990s we were weak. And it is because we have entrenched stability for the longer term that I can announce that, from May, we will now issue long term bonds with maturities for the first time in a generation of up to fifty years - only possible because of our long term stability - now locking in low borrowing costs and simultaneously benefiting taxpayers and investors.

Mr Deputy Speaker, I turn now to measures for enterprise.

Faced with the accelerating pace of technological change and the rapid expansion of global competition as I found in China - developing countries on course to produce half the world’s manufacturing exports - Britain’s economic destiny cannot be founded upon a low skilled, low tech economy but depends upon establishing British leadership in skills, science and the knowledge economy.

For decades the neglect of investment damaged growth and prosperity. And today like every advanced nation Britain faces a stark economic choice: we could repeat the mistakes of the past, once again failing to invest long term in our science, infrastructure and skills, or, just as together we forged a British way to stability in the global economy, together we forge a British way to success in the new economy.

After listening to business and industry - management and workforces - I firmly believe that a shared British national purpose can be built across our country to meet the great economic challenges to our future:

This Budget sets out the British way to long term stability. I will set out the right choices for Britain for investment. But first I turn to how Britain can lead the way in removing barriers to enterprise.

Mr Deputy Speaker, Britain now has one of the most open competition policies in the world. We are the most active advocate of free trade. And today the enterprise challenge is to enhance the flexibility needed for a successful economy and tackle the regulatory concerns all industrial economies face while securing the standards required in a successful society.

Some say the only way to cut the burdens facing business is to cut standards for consumers or employees. Today the report of Philip Hampton rejects this course.

When now China has, and Hong Kong plans, a minimum wage, it is right not to diminish or destroy minimum wage protections in Britain but to uphold them.

But it is also right to lessen the burden of regulation and enhance our flexibility while still ensuring high standards.

So instead of a one size fits all approach which can mean that unnecessary inspections are carried out while necessary ones are not carried out, the best practice risk-based regulation now means more inspection only where there is more risk and a light and limited touch where there is less risk.

Adopting, in full - and legislating for - the Hampton Review recommendations for this risk-based approach, for consumer and trading standards a single body will take over the responsibilities of the four inspection bodies we inherited in 1997.

The Secretary of State for the Environment is announcing that there will now be five inspection bodies for food safety, the countryside, agriculture, animal health and environmental protection - compared with 22 separate bodies in 1997.

Five existing agencies will be merged into the Health and Safety Executive.

The Insolvency Service Agency will take over the responsibilities of the DTI’s Companies Investigation Branch.

In total we will reduce 35 agencies to just 9 - a reduction of 26.

For companies meeting high standards the Hampton Report estimates a major reduction in the number of inspections - a million fewer inspections every year, a reduction in inspections of one third. But for companies persistently breaking the rules there will be tougher penalties.

Our next aim is that companies trading throughout the country and meeting the rules should no longer be subject to hundreds of different local inspections.

And to reduce the burdens on business by also cutting back on the flow of regulation the Government is accepting the recommendations of the Arculus Report, published today, setting requirements for every department for year by year reductions in the burden on business.

And in addition to reducing inspection bodies from 35 to just nine I can also announce a further reduction. We are today bringing forward proposals for a reduction in public sector inspectorates from 11 to 4 - with single inspectorates for criminal justice, for education and children’s services, for social care and health, and for local services.

The Inland Revenue and Customs will also now consult on a single tax account for small business where information need be provided only once, a single point of contact for both VAT and corporation tax, and flexible payment options.

70,000 firms no longer have to provide forms that account for every VAT transaction but make just one calculation and pay one flat rate. Working with the Chambers of Commerce we will encourage take up among the 600,000 companies now eligible to benefit from this VAT simplification.

Because half the major new regulations are from the European Union we will propose the same risk based approach for Europe and to avoid what is called gold plating the Foreign Secretary is today publishing new guidelines for the implementation of EU law into the UK.

But meeting the global challenge demands we match reforms improving the competitive environment with the sustained investments business is calling for in infrastructure, science and education: investments that our competitors are now making; investments which if not made would put the future prosperity and stability of our economy at risk.

Mr Deputy Speaker, our aim must be that Britain becomes the world’s leading location for research-based, science-based and knowledge-based industries.

Stem cell research holds the key to tackling some of the world’s most intractable diseases from diabetes to Parkinsons. I firmly believe that Britain can be a world leader.

Building on the £40 million Research Council investment and £20 million committed by the Wellcome Trust, and supported by the new UK Stem Cell Foundation, Britain will - with a ten year development plan - create a new national network for stem cell research.

The NHS is potentially the richest source of medical knowledge in the world. With the Health Secretary we are setting the goal that Britain become the world’s premier location for tracking diseases and developing drugs to treat them.

Because British businesses can also be world leaders in environmentally-friendly technologies, such as in carbon capture and storage, we propose, at the request of business, to bring public and private sectors together in a new national energy research network.

I also want Britain to be a world leading location for the next wave of research and development.

So with Bristol, Nottingham and Birmingham today joining Newcastle Manchester and York as ‘Science Cities’, I intend to:

Having rejected the representations to reduce help for small businesses, I am not cutting small business support I am enhancing it, so that it serves all communities of our country.

And I am determined that in every area of our creative industries - now 8 per cent of our national income - Britain supports the talents of our young people and promotes excellence.

To promote young British entrepreneurial talent in business, we will expand our new entrepreneur scholarships and I have set aside funds to ensure that by 2006 we meet our target that every school pupil has enterprise education.

To ensure help direct for British film makers, we will replace existing reliefs with new tax reliefs for both low budget and larger budget films.

To promote excellence in management and leadership within the arts - with training for the next generation of leaders - the Secretary for Culture is providing over two years an extra £12 million for the Arts Council and other arts bodies.

Winning the Olympics for Britain in 2012 would itself be a major boost to British sports and the British economy.

And to encourage young sports talent the Secretary for Culture is announcing a £27 million initial investment to bring private and public sectors together to create for our country a new National Sports Foundation.

Mr Deputy Speaker, having doubled transport investment since 1997, and with the railways carrying more than 1 billion passengers last year, it is right to examine Britain’s long term needs and priorities. And the Transport Secretary is announcing today that the outgoing Chief Executive of British Airways Rod Eddington will work with his Department and the Treasury in this task.

So having announced decisions on investment I come to my decisions on tax. I have examined rates of corporation tax and capital gains tax. I have no need to raise them so I propose to freeze rates.

On air passenger duty, I will freeze rates.

On insurance premium tax, I propose to freeze rates.

On the climate change levy and the aggregates levy, I will freeze rates.

On company car tax, I will freeze rates.

I will implement from midnight on Sunday the normal annual inflation rise of 1p on a pint of beer, 4p on a bottle of wine but I will freeze duty on spirits, cider and sparkling wine. My decision on cigarettes is, for public health reasons, to go ahead with the annual inflation rise of 7p a packet from 6 o’clock this evening.

I have today written to the European Commission proposing that the tax free limit on goods brought into the UK from outside the European Union should rise from £145 to £1000.

I will maintain the duty differential for rebated oils as we continue to tackle oils fraud and tax evasion but because of the sustained volatility in the oil market, for the third successive budget I will this year defer this and the usual inflation increase for fuel duty until September 1st.

For environmental reasons, I will continue, for three years, the lower duties planned for natural gas, bioethanol, biodiesel and liquified petroleum gas.

While implementing the normal inflation rise for vehicle excise duty, there will be no increase for medium sized and small cars which are more environmentally efficient - almost half our cars. I am aligning the timing of oil companies’ corporation tax payments more closely with petroleum revenue tax.

Anti avoidance measures published in detail today include action against avoidance of capital gains tax, stamp duty land tax and VAT; and against schemes using financial products, double taxation relief and international arbitrage.

Churches and sacred places are at the centre of our religious life and the history and the fabric of our country. I propose to extend for a further three years until 2008 the 100 per cent VAT refund for renovation of buildings and to give the same refund to the construction and repair of memorials.

The whole House will wish to thank our armed forces for the service they give in peace and in war.

From next month servicemen and women injured in the line of duty will be entitled to new compensation payments. Currently such compensation payments would be taxed where recipients stay on in the forces but not taxed if they leave. The Secretary for Defence is announcing that in future no serviceman or woman will be penalised when they continue to serve our country.

Mr Deputy Speaker it is right to honour the life and service of the Queen Mother with a permanent memorial to her.

After approval from Her Majesty the Queen I can announce that the Treasury will allocate the proceeds from a new coin celebrating the Queen’s eightieth birthday to a memorial to the Queen Mother to be situated on the Mall.

In the last year under the chairmanship of Ian Russell, a Commission has examined how we can encourage young people into community service including for gap years.

And I can now announce that the Heritage Lottery Fund, Sports England, the Government and the private sector are joining together to create Britain’s first national community service for young people: with private finance matching public, up to £150 million to recruit one million young volunteers, matching their idealism and their willingness to serve with the needs of communities across our country and internationally.

And having accepted the recommendations of the Commission for Africa we will work throughout our G8 Presidency to secure their implementation. The International Development Secretary is announcing today that by July he plans to sign new debt reduction agreements with 19 of the world’s poorest countries - Britain unilaterally providing our share of 100 per cent relief on multilateral debts, the money used to fund urgently needed health and education.

Mr Deputy Speaker with both our economy and public finances strong I can afford tax cuts for hard working families.

For homebuyers I propose to set a new threshold for stamp duty from midnight tonight. I will raise the residential stamp duty starting threshold, doubling it to £120,000.

I will exempt more estates from inheritance tax.

I will raise the starting point for tax from just over £260,000 to - from April 6th - £275,000 and, in successive years, £285,000 and then £300,000.

94 per cent of estates will pay no inheritance tax.

A record 18 million people now own their own homes in the United Kingdom.

But we want to do more to help young people buy their first home.

So the Government proposes to match the stamp duty cut with two important public investments to encourage more homeowners.

First, we propose in a new partnership with the Council for Mortgage Lenders - together typically financing 25 per cent of the purchase price - a shared equity scheme that will raise the numbers eligible for low cost homeownership schemes to 100,000 new homebuyers.

Second, starting with nine pilots across the country we will build new private homes in council estates. Where once all were tenants we will offer new opportunities to own your own home.

The household savings ratio is now 5.6 per cent - four times that of the USA and Canada - and 16 millions now have Individual Savings Accounts.

The decision I have to make is whether to extend the tax free advantages for the first £7000 of savings in ISAs.

I propose to extend that exemption for the whole of the next five years to 2010.

Raising by 2010 the cumulative total that could be saved tax free since 1997 to over £100,000.

Our child trust fund is designed to build savings and wealth for every child in the country. I can announce today that in addition to the £250 and £500 downpayments families are already receiving, we will now consult on extending the child trust fund so that there are payments not just in primary school but in secondary school years too.

I can announce that under the figures for the next three years published today the pension credit will - from now to 2008 - rise by 13 per cent, in line with earnings.

In 1997 the poorest pensioner received just £69 a week.

By 2007 this will be £119 a week.

In total the pension credit, which is rising in line with earnings, will benefit a total of 3.2 million pensioner households and, in all, 3.7 million pensioners.

In April I will raise the personal income tax allowance in line with inflation from £4,745 to £4,895. I could use resources available to me to raise the personal allowance by even more than inflation. But having examined representations made to me, I have found that using £1 billion to raise the personal allowance would give a family in work on median earnings (23,400 a year) with two children just 80 pence a week or £40 a year.

But using the same resources to raise the child tax credit will give that same family £5 a week - or £260 a year.

So the best way to do most to help low and middle income families is not through a further rise in personal tax allowances but through tax credits which offer the best family tax cut.

So today I can now announce that payments for children under the child tax credit will rise each year in line with earnings and over the coming three years by a total of 13 per cent.

Including child benefit, rising in this period from the £28 a week we inherited to a maximum of £63 a week for the first child and £111 a week for two children.

So with our new system of tax credits offsetting income tax liabilities the effective point at which a family with two children starts paying income tax which was £15,000 in 1997 is now £21,200 and from April 2007 will be over £22,000 - tax credits effectively wiping out income tax liability until earnings of £430 a week.

Because of rising child tax credits a total of 3 million of Britain’s 7 million families with children will now receive more in tax credits and child benefit than they pay in income tax - and have their income tax liability effectively wiped out.

Mr Deputy Speaker after the rises in tax credits to 2007 the effective income tax rate for a family with two children earning £25,000 a year will be just 6 per cent and at £30,000 just 10 per cent --- again a family tax cut that does most to help low and middle income Britain.

And with child benefit up from £11 in 1997 to £17 this April, every family in Britain is better off. Mr Deputy Speaker, I turn now to the overall fiscal impact of this Budget.

Some people have suggested that this year is the right year for a fiscal loosening. But to repeat the pattern of past governments at this stage of the Parliament would risk a return to the high inflation, high interest rates, stop go and short-termism of the past and put long term stability at risk.

It is right to chose the prudent course for Britain.

So I can confirm that my Budget proposals involve this year a modest fiscal tightening.

It is stability, sustained economic growth and the reduction of unemployment, debt interest payments and tax avoidance that have enabled us to keep interest rates low and maintain our fiscal discipline while able to invest more in public services --- an approach that will be sustained in the coming Parliament.

So for policing and law and order I can confirm that expenditure in 2007-8 will, as stated in our spending plans, be £3.5 billions higher than this year.

Expenditure on transport will be £2.4 billions higher than this year.

Defence £3.7 billion higher
Education £12 billions higher
Health £23 billions a year more in 2007-8 than in 2004-5.

And in striking the right balance in this budget between tax and spending, my Budget judgement is that alongside affordable tax cuts we make the essential long term investments the nation needs - and we reject representations for unacceptable spending cuts in education, health and the front line public services.

It is because education is the twenty first century road to prosperity that Britain must become the best educated, best trained, best skilled country in the world.

Since 1997 we have doubled investment per pupil from £2,500 to £5,000 a year.

But still we invest less per pupil than our major competitors.

By next year, for the under fives, there will be 1,000 sure start children’s centres, by 2010 3500 - an average of five in each constituency.

From 2007 free nursery education of 15 hours.

And during the coming Parliament 1 million new childcare places - and announced by the Secretary for Industry paid maternity leave rising to one year.

Like every parent I know how important the first months and years are for determining the life chances of a child.

And I want for every child the best possible start in life. So I can announce that from next year we will offer help with early learning in every area for all children who need it. And through increased funding for sure start and the national parenting fund we will provide new help for parents to help their children grow and learn.

Our aim: to ensure that every young child is ready to benefit from school. I can also announce that to support children’s centres and children’s services we will end a long standing grievance and refund the VAT incurred by local councils on these services.

Our aim - education from the age of three that is nationwide, of high quality and available to all.

And we also want what every parent wants - that British primary and secondary schools be the best equipped in the world for twenty first century learning.

Having established ‘Building Schools for the Future’ to renovate and rebuild secondary schools, we will now establish a building programme for primary schools too.

In each of the next three years for primary schools alone the Secretary for Education will invest more, rising from £1.6 billion this coming year to, in 2007-8, £1.8 billion.

But it is right also to put this primary school programme on a long term footing. So the Secretary for Education and I now plan to invest even more --- a total of £2 billion in 2008-9 and 2.3 billion in 2009-10, a total investment over the next five years in primary schools alone of £9.4 billion.

And as we move this new programme forward, over 8,900 primary schools will be rebuilt or refurbished - an average of 15 per constituency.

Because the teaching and educational revolution in our schools is no longer blackboard and chalk, it is computers and electronic whiteboards I can also announce that our three year programme of spending on IT capital will now be raised to £1.67 billions. Capital investment in buildings, technology and computers for both primary and secondary schools which was just £100 per year per pupil in 1997 and was last year £650 will rise by 2010 to at least £1,000 per pupil per year, ten times the investment of 1997.

And because senior pupils also need access to the most modern computer hardware and software not only in the classroom but at home, they will be offered the opportunity at low cost to lease computers for home use.

And I can announce a new ‘teach for Britain’ scheme - extending the Teach First programme which offers outstanding graduates incentives to teach in the most challenging schools. From London now and Manchester next year, Teach First will be extended to four more cities starting with Liverpool and Birmingham.

But Mr Deputy Speaker: with China and India producing 4 million graduates a year I am convinced that Britain cannot afford to waste the ability of any young person, discard the future of any teenager, or leave untapped the talents of any adult.

Unleashing the potential of every individual in the country is key to the economic success of the whole country.

Universal education from 5 to 11 was achieved in 1893.

Universal education from 5 to 14 in 1918.

From 5 to 15 in 1947.
From 5 to 16 in 1972.
But for 30 years as the world has moved on the span and reach of education have remained the same.

But with global competition it is essential and with the financial support I am offering our goal should now be that children not only start education at 3 but continue in education or training until 18. Not 11 years of learning as in the past but 15 years.

So to advance our objective that nine out of every ten 17 year olds stay on at school or join a vocational course, we will now offer those in full time education or unwaged training up to £75 a week in education maintenance allowances and children’s benefits. For teenagers who are both out of work and out of education, we will pilot special transitional help if they agree to return to training.

Every year 150,000 16 and 17 year olds are in work but not in training. So building on the successful adult employer training programme and starting in eight areas every young employee will be offered apprenticeships or college based training, with time off for employees in return for financial help to employers.

And to help ensure all further education colleges are centres for excellence serving both teenagers and adults, I can now announce a five year £1.5 billion programme for their renovation and renewal. In 1997 there were just 75,000 in apprenticeships. By 2008 300,000 will be in young or full apprentice training. Our goal: to make available for the first time universal education or training until the age of 18.

Mr Deputy Speaker no direct payments to school headteachers existed in 1997. Today the typical primary school receives £30,000, the typical secondary school £96,000 - money direct to the school and the headteacher to spend on the schools priorities.

I can announce that payments will rise each year to 2008 in England. Separate announcements of allocations will be made for Scotland, Wales and Northern Ireland.

Head teachers of a typical primary school will receive £31,000 this coming year rising to £34,000, rising to £36,000, a guarantee over the next three years of a total of over £100,000.

And headteachers of the typical secondary school will receive 98,500 next year rising to 109,000, rising to 115,000, a guarantee over the next three years of a total of almost one third of a million pounds.

So I have been able to cut stamp duty, to help savers and to bring about a family tax cut -- and at the same time to invest in the best start in life for every child and the best opportunities for every young person.

We have made our choice.

Affordable tax cuts and essential spending increases.

Investments that would not be possible if I were to accept representations for £35 billion of spending cuts.

Mr Deputy Speaker you judge a society by how it treats the most vulnerable.

Thousands of pensioners and other patients in hospital are effectively charged a payment - with, for many, cash deducted from their weekly pension and benefits to pay for their stay.

It is because this government believes in a high quality NHS free at the point of use and rejects charges that I am, from today, permanently abolishing these hospital charges in the NHS. The British National Health Service is and will remain safe in this government’s hands.

In 1997 there was no winter fuel allowance.

This autumn we will again pay a £200 winter fuel allowance - for pensioners - £300 for the over 80s.

In the Pre Budget Report I announced a £50 council tax refund.

Today with the resources now available I can announce that we will pay to every pensioner household - 65 and over - paying council tax, a refund not of £50 but a council tax refund of £200.

A measure that is fairer and is worth more to more pensioners than all other proposed schemes.

And I can do more.

It is now time with the resources available to legislate so that in every community of the United Kingdom there is, from next year, free local bus travel for every pensioner and every disabled person too.

Mr Deputy Speaker:

Stability the foundation.

Investment not cuts.

Every child the best start in life.

A Budget for Britain’s hard working families and pensioners."