12 03 08 bud08 chapter3

8/14/2019 12 03 08 bud08 chapter3

1/16

41Budget 2008

3 S u S t a i n a b l e g r o w t h a n d p r o S p e r i t y Over the last decade, coinciding with signifcant re orm programmes, UK productivity hasimproved and levels o employment have risen to record highs. However, at a time o ar-reaching change in the global economy, the Government must continue to provide a stablepolicy ramework, so that business has the certainty to plan ahead, while ensuring thatpolicy remains responsive to changing circumstances.

Budget 2008 includes short-term measures to enable small and growing businesses to accessthe resources they need during a time o global fnancial market disruption. At the sametime it builds on progress to date by announcing longer-term measures designed aroundthe levers available to Government to encourage productivity growth. These measuresinclude:

access to fnance measures including enhancing the Small Firms Loan

Guarantee Scheme and Enterprise Capital Funds to support small frms inaccessing the resources they need to start up and grow;

a package o re orms on regulation and tax simplifcation and

implementation o the business tax re orms announced in Budget 2007 ,including the lowest rate o Corporation Tax in the G7;

urther implementation o the Leitch a and Sainsbury b Reviews to build onimprovements in the UK skills base and to provide a world-class science base andinnovation ramework;

exploring options to make better use o transport in rastructure,

on top o the major programme o investment announced in the 2007Comprehensive Spending Review;

progress on business support simplifcation and measures to ensure

better access to Government procurement or small frms ; and

a study o public service markets and a new ramework or in rastructure

procurement .

a Leitch Review of skills: Prosperity for all in the global economy world-class skills , HM Treasury, December2006.

b The Race to the Top: A review of Governments science and innovation policies , Lord Sainsbury o Turville,October 2007.

The Governments objective o promoting sustainable growth and prosperity depends3.1

on continuing improvements in the productivity 1 o the UK economy, alongside growth inemployment. Over the last decade, the UK has increased its rate o productivity growth andhas narrowed the productivity gap with comparator countries (Chart 3.1), while at the sametime maintaining strong employment growth (Chart 3.2). This has been based on maintaining macroeconomic stability and the UKs openness to trade, investment and migration. It hasalso been driven by a programme o microeconomic re orms.

1 Supported by the renewed Public Service Agreements on UK productivity growth and regional growth.

8/14/2019 12 03 08 bud08 chapter3

2/16

3 S u S t a i n a b l e g r o w t h a n d p r o S p e r i t y e F S r

42 Budget 2008

Chart 3.1: Relative output per hour worked

Source: ONS.

112

116

120

124

128

200620001997

USGermany France

Index: UK=100

Chart 3.2: Employment and productivity growth

Source: ONS.

-4

-2

0

2

4

6Percentage annual growth

1980 1982 1984 1986 1988

Productivity

1990 1994 1996 1998 2000 2002 2004 20061992

Employment

Budget 2008 sets out measures designed around the levers which are available to3.2Government to improve productivity: taxes and regulation, investing in the work orce andskills, investing in in rastructure, strengthening competition and market rameworks, andimproving public sector e ciency . Alongside Budget 2008, the Government is publishing Enterprise: Unlocking the UKs talent and Innovation nation which provide more detail on thepolicy ramework that applies to these important drivers o productivity.

RESPONDING TO THE NEEDS OF BUSINESSThe global economy is in a period o ar-reaching trans ormation.3.3 The UK economy:

analysis of long-term performance and strategic challenges , published alongside Budget 2008,links analysis o the per ormance o the UK economy over the past decade with recent work onthe challenges ahead demographic change, environmental change, continuing globalisation,and rapid technological change global uncertainty.

3.4 The new and changing context acing the UK has implications or society as a whole.The Government alone cannot ensure that the UK will meet the challenges and seize theopportunities ahead. The Government will work in partnership with individuals, communities,businesses and government at all levels to address these issues. Firms o all types have a majorrole to play: seizing opportunities and making the most o avourable and competitive marketconditions, working with the Government to identi y and develop the uture re orm prioritiesand helping to ensure that the implementation o existing policies and re orms is as e ectiveas possible.

At this time it is even more important or Government to provide a stable policy 3.5ramework within which business can plan ahead. Evidence 2 shows that the UK is one o the

best places in the world to do business. The Government will maintain an environment that

encourages investment and growth. Where policy change is necessary to re ect changing circumstances, the Government is committed to work in partnership with business to ensurethat policy is responsive to business needs and objectives. As an important part o this, it will continue to consult business wherever possible, building on the increased number o tax consultations over the past year, and will maintain its consultative groups to discuss tax issues with business representatives.

The Government also recognises the need to respond to short-term challenges swi tly 3.6and exibly. Budget 2008 coincides with a period o disruption in global fnancial markets.This presents specifc challenges to business, particularly around access to fnance or smalland medium-sized frms (SMEs).

3.7 Budget 2008 announces an access to nance package to ensure that small andgrowing rms have access to the resources they need:

2 Doing Business 2008, World Bank.

Working in

partnership

Access to fnance

8/14/2019 12 03 08 bud08 chapter3

3/16

e F S r S u S t a i n a b l e g r o w t h a n d p r o S p e r i t y 3

43Budget 2008

a temporary 20 per cent increase in the unds available through the Small

Firms Loan Guarantee (SFLG);

extending eligibility or SFLG to businesses with growth aspirations over ve

years old;

support or mezzanine nance provision through additional Enterprise

Capital Funds (ECFs);

a new capital und or emale entrepreneurs;

an increase in the investor limit o the Enterprise Investment Scheme (EIS)

rom 400,000 to 500,000 (subject to state aid approval) and a consultationon how best to simpli y the operation o the scheme; and

an increase in the individual option grant limit rom 100,000 to 120,000 or

the Enterprise Management Incentive scheme (EMI).

To secure EIS, EMI, Venture Capital Trusts and the Corporate Venturing Scheme under3.8state aid guidelines, shipbuilding and coal and steel production will be excluded as quali yingtrades. In order to ocus EMI more closely on SMEs and to bring it into line with state aid rules ,only companies with ewer than 250 employees will be able to make new grants o EMI shareoptions.

Since introduction in 1981, SFLG has guaranteed 5 billion o lending through around3.9100,000 loans. EIS has already helped raise over 6.1 billion, invested in over 14,000 smaller,higher-risk, unquoted trading companies. EMI allows smaller, higher-risk companies to granttax-advantaged share options to their employees. Around 70,000 employees across 7,000companies currently beneft rom it.

Box 3.1 Enterprise: Unlocking the UKs talent

Focusing on SMEs, this outlines a new policy ramework and sets out how the Government will encourage urther business start up and growth. Measures include:

improving access to fnance or SMEs (see paragraph 3.7 or more detail);

a consultation on the introduction o regulatory budgets, which would cap the new,

annually-recurring cost o regulation or business, including whether to pilot thisapproach or SMEs or a particular sector;

an increased ocus on minimising the impact o regulation on SMEs;

an independent review o regulatory guidance to reduce compliance costs;

urther development o enterprise education in secondary schools and extension

o it, where possible, into primary and urther education (underpinned by a 210million unding package, as agreed at the 2007 CSR); and

establishing a National Enterprise Academy (NEA).

BUSINESS TAXES AND REGULATIONThe Government has taken steps to ensure that the UK has a world class environment3.10

or business investment and growth, by modernising and simpli ying the tax system, improving the relationship between large business taxpayers and HMRC, 3 and by bearing down on theregulatory burden aced by business.

3 Framework or a better relationship: making a di erence. Review o Links with Large Businesses.HM Revenue and Customs,March 2008.

8/14/2019 12 03 08 bud08 chapter3

4/16


44 Budget 2008

Bet t e r r egu la t ionEnterprise: Unlocking the UKs talent 3.11 , sets out the next steps on this agenda.

The Government seeks to provide an e ective regulatory system, which enables3.12

businesses to start up, grow and stay competitive. It is undertaking radical re orm that willdeliver genuine reductions in the cost to business while continuing to deliver the necessary regulatory outcomes. It has already committed to a reduction o 25 per cent in the administrativeburden through regulation and to ensuring that the benefts o regulation justi y the costs.800 million o savings have already been achieved, with a urther 3.5 billion planned by 2010.

A s imp le r and more compe t i t i ve t a x sys t em3.13 Following extensive consultation on its implementation, the major package o business tax re orms announced in Budget 2007 will take e ect rom April 2008. The reduction

in the main rate o Corporation Tax (CT) to 28 per cent will deliver the lowest ever rate in theUK and the lowest in the G7, improving competitiveness and encouraging investment. There orms to the capital allowances system will improve economic e fciency by removing distortions to investment decisions. Budget 2008 announces, in response to consultation:

the 10 per cent rate o allowance or the new classi cation o integral eatures

o buildings will apply to both initial and replacement expenditure, rom April 2008; and

a measure to allow over 500,000 businesses to write-o small, unrelieved

capital allowances pools. (Further detail in Box 3.5)

3.14 Following last springs discussion document 4 on the taxation o oreign profts, theGovernment has been engaged in a constructive, ongoing dialogue with business. Budget2008 announces that the Government will bring orward proposals and publish a consultationdocument be ore summer 2008. The objective o any re orm is to enhance the competitivenesso the UK tax ramework, while being broadly revenue neutral.

3.15 The Government is determined to ensure that the North Sea fscal regime promotesinvestment and production, while ensuring a air return or the UK taxpayer. Following thepublication o the consultation document Securing a sustainable future in December 2007,Budget 2008 announces re orms to the North Sea scal regime. These include changes to thetreatment o CT losses created by decommissioning, extension o 100 per cent capitalallowances to long-li e assets and mid-li e decommissioning, and re orms to Petroleum

Revenue Tax. These will encourage urther investment in the UK Continental Shel by providing certainty or investors, helping acilitate asset trade, and simpli ying the regime. TheGovernment will continue to engage with oil and gas stakeholders on outstanding issues.

3.16 Building on the Budget 2007 re orms, the 2007 Pre-Budget Report launched asignifcant programme o tax simplifcation and announced three simplifcation reviews.Following discussions with business and tax pro essionals, Budget 2008 announces the initialoutcomes o each review:

VAT rules and administration: the Government will consult on simpli ying

the operation o the partial exemption regime and the capital goods scheme,and explore the need or business to seek permission rom HMRC be oretaxing otherwise VAT-exempt supplies o land and property;

4Taxation o the oreign profts o companies: a discussion document, HM Treasury (HMT) and HMRC, June 2007.

Business taxre orms

Taxation o oreign profts

North Sea fscalregime

Tax simplifcationreviews

8/14/2019 12 03 08 bud08 chapter3

5/16


45Budget 2008

anti-avoidance legislation: the Government will, as a rst step, repealcertain outdated and complex anti-avoidance provisions on bond washing,employment securities and other transactions in securities; and

CT rules or related companies: the Government will, as a rst step in

simpli ying associated companies rules, modi y the current rules relating tothe small companies rate where a director or shareholder is separately in a partnership.

Further work will continue to address other priorities outlined by business.3.17 5 Budget2008 announces a new simpli cation review, which will look at how to simpli y CT calculationsand returns or smaller companies .6 Updates on all our reviews will be announced at the2008 Pre-Budget Report.

3.18 Budget 2008 announces over 20 urther tax simpli cation measures (see Box 3.5). Alongside Budget 2008, HMRC is publishing details on how it is improving services or smallbusinesses and an update on progress against its administrative burdens reduction targets. 7

3.19 From 1 April 2008 the Government will increase the VAT registration threshold inline with infation rom 64,000 to 67,000, maintaining the highest threshold in Europe andkeeping around 6,000 small businesses out o the VAT system.

F i n a n c i a l s e r v i c e s3.20 The Government is committed to ensuring that the City o London remains the worldsleading international fnancial centre. The fnancial services sector makes a signifcantcontribution to the UK economy, accounting or 9.4 per cent o GDP in 2006, up rom 6.2 percent in 1997, and supporting over 1 million jobs. The continued prosperity o the sector is vital

to the UKs national economic interest.

3.21 The Government recognises the importance o working collaboratively with thefnancial services industry to ensure its continued competitiveness. The Chancellors HighLevel Group on fnancial services remains a key orum or senior-level engagement betweenthe Government and this industry and will next meet on 14 May 2008. The Government is working closely with industry experts to rame and lead the international communitysresponse to the recent fnancial market disruption, and is consulting widely and actively on aconsidered and proportionate set o re orms to strengthen the resilience o the banking system 8 while maintaining competitiveness. Budget 2008 extends collaboration with theestablishment o an industry-led working group to examine proposals to improve the supply o mortgage unding (see Chapter 5). These actions build on the introduction o a new legislative ramework or UK covered bonds.

The fnancial services sector will beneft signifcantly rom the reduction in the CT3.22rate to 28 per cent rom April 2008. Following extensive discussion with industry stakeholders,Budget 2008 introduces a series o new measures to improve the taxation o assetmanagement, enable the expansion o securitisation transactions in the UK (see Box 3.2) and

5 Detailed updates on the VAT and related companies reviews were provided to stakeholders in December 2007 and canbe ound at: http://www.hm-treasury.gov.uk/pbr_csr/documents/pbr_csr07_tax.c m. HMRC is publishing alongside Budget2008 Simpli ying anti-avoidance legislation: a progress report on anti-avoidance simplifcation . All three updates highlight areaso uture work to be progressed post-Budget 2008.6 Further details o this review and how to participate are available at: http://www.hm-treasury.gov.uk/budget/budget_08/bud_bud08_index.c m7 Delivering a new relationship with business: Progress on HMRCs plans to improve the SME customer experience , HMRC,March 2008.8 Financial stability and depositor protection: Strengthening the ramework, HM Treasury, January 2008.

Delivering urthersimplifcations

VAT registrationthreshold

A competitivefnancial centre

Workingcollaboratively

8/14/2019 12 03 08 bud08 chapter3

6/16


46 Budget 2008

promote the expansion o the market in Islamic nance . The Government would like to takea similarly collaborative approach when considering other areas o fnancial services taxation. Where evidence-based, targeted changes can be identifed that will increase competitiveness without impeding broader objectives, the Government will take action.

3.23 In order to promote the City o London as a centre or global Islamic fnance and putin place a level-playing feld between conventional and alternative fnancing instruments,Budget 2008 announces:

the Governments aim to legislate, ollowing consultation, in Finance Bill

2009 to provide relie rom stamp duty land tax (SDLT) or alternative nanceinvestment bonds;

amendments to legislation to classi y alternative nance investment bonds

as loan capital or stamp duty and stamp duty reserve tax (SDRT);

adjustments to legislation to allow existing CT and income tax rules on

alternative nance arrangements to be amended by regulation; and

work with the Financial Services Authority and stakeholders to clari y the

regulatory treatment o sukuk.

The Government will continue to examine the easibility o a sovereign sukuk issue.3.24It will also, in Finance Bill 2008, take legal powers to acilitate any uture sovereign issuance,and provide a ull response to the recently closed public consultation on sukuk issuance in thesummer o 2008.

Islamic fnance

8/14/2019 12 03 08 bud08 chapter3

7/16


47Budget 2008

Box 3.2: Enhancing the competitiveness of UK financial services

Recent steps to support competitiveness include:agreement on a joint unding package or Crossrail;

working with the fnancial sector to create an International Centre or Financial

Regulation in London;

actively supporting work to expand and develop carbon markets, and to promote

the role o London as a key centre o expertise in carbon trading (see Box 6.1);

a better regulation package or the asset management sector that will save it up to

290 million per year;

consulting on a Legislative Re orm Order to modernise the governance arrangements

o the Lloyds insurance market, complementing Lloyds own re orms and helping itcontinue to compete in the global insurance market; and

strengthening economic and fnancial dialogue with China and India, providing a

strong ocus on fnancial markets and related opportunities or UK-based frms.

Budget 2008 announces improvements to asset management taxation : ollowing extensive consultation, launching a new tax regime or Property

Authorised Investment Funds on 6 April 2008;

working urther with industry on options or re orm o SDRT Schedule 19;

engaging with industry to consider a direct tax exemption or Authorised Investment

Funds, taxing the investor as i they held the underlying assets directly;

removing tax barriers impacting the development o o shore unds in Finance Bill

2008;

introducing new tax rules to acilitate the development o the proposed regulatory

regime or Funds o Alternative Investment Funds;

announcing that the Government is minded to simpli y the tax rules or the qualifed

investor scheme by replacing the substantial holding rule; andconsidering proposals to adapt the tax rules or Investment Trust Companies to

enable tax-e fcient investment in a wider range o asset classes.

On securitisation , Budget 2008 also announces:the introduction later this year o regulations enabling expansion o securitisation

transactions into real estate.

The Government is taking steps towards modernising insurance taxation by:continuing the consultation on the taxation o general insurance reserves; and

announcing urther discussions with industry on the use o general insurance losses

and on the possible extension o the tax rules applying to equalisation reserves tothe Lloyds market.

Simplifcation measures on li e insurance, insurance premium tax or overseas insurers andon securitisation, which will also enhance the competitiveness o UK fnancial services, arein Box 3.5.

INVESTING IN WORKFORCE AND SKILLSBudget 2008 announces measures which, building on a decade o investment and3.25

re orm, help deliver a skilled work orce and a exible labour market complemented by world-class science and innovation.

8/14/2019 12 03 08 bud08 chapter3

8/16


48 Budget 2008

Sc ience and Innova t ionThe Sainsbury Review concluded that the UK is well placed to beneft rom the3.26

opportunities o globalisation, but that urther action is needed to secure the UKs comparativeadvantage in high-value, knowledge-intensive sectors. The review recognised that measures

such as research and development expenditure do not capture the UKs signifcant strengthsin non-scientifc innovative activity.

3.27 Good progress is being made in the implementation the Sainsbury Review recommendations. The Technology Strategy Board (TSB) is delivering on its leadership roleand will shortly publish its strategy, including joint initiatives with the Regional Development Agencies and Research Councils and programmes to support innovation across a wider rangeo sectors. The Department or Innovation, Universities and Skills (DIUS) will pilot a re ormedSmall Business Research Initiative (SBRI) with the Ministry o De ence, Department o Healthand other selected partners, prior to wider roll-out in 2009. DIUS and the Department orChildren, Schools and Families (DCSF) are delivering a new campaign on Science, Technology,

Engineering and Mathematics (STEM) skills, including a new 6 million communicationscampaign, working towards better careers guidance or pupils, and planning or a NationalScience Competition rom 2008-09.

3.28 The Wellcome Trust has created Project Enthuse, which will provide a comprehensiveunding and support package to enable all secondary schools to develop the skills o their

science teachers at the National Science Learning Centre. The Government will invest10 million over fve years to support the scheme, levering up to 20 million investment rombusiness and the Wellcome Trust.

Alongside Budget 2008, the Government is publishing 3.29 Innovation nation (see Box 3.3), which sets out a vision or supporting innovation across all sectors o the economy.

Some businesses and Higher Education Institutions (HEI) are uncertain about whether3.30knowedge trans er activity has charitable status and how this impacts on its CT treatmentHMRC will continue to work with the sectors and regulators to provide greater certainty. TheGovernment will also continue to support links between HEIs and business and promoteknowledge trans er.

Box 3.3: Innovation nation

Commitments include:

development o an independent Innovation Index to capture a wider range o

innovation, to be piloted in 2009, with a uller system in place in 2010;

working with the TSB and its partners to double the number o Knowledge

Trans er Partnerships, and to pilot a new Further Education (FE) Specialisation andInnovation Fund to support knowledge trans er between FE and business;

improving the innovative capability o the public sector, including a new Public

Sector Innovation Laboratory and Whitehall Innovation Hub;

urther action on Intellectual Property (IP), building on the Gowers Review, a includingdedicated IP management training or all Business Link and UKTI advisers; and

publication o the frst Annual Innovation Review or the UK in the autumn.

a Gowers Review of intellectual property , HM Treasury, December 2006.

ImplementingSainsbury

ProjectEnthuse

8/14/2019 12 03 08 bud08 chapter3

9/16


49Budget 2008

A l ex ib l e l ab our marke t and s t rong sk i l l s bas eThe exibility o the UKs labour market has increased to historically high levels since3.31

the 1990s. 9 This allows frms to adjust smoothly to changing circumstances, helps maintainhigh levels o employment and is vital or a resilient economy. Net migration has helped to fll

skill gaps and accounted or an estimated 15-20 per cent o average economic growth in theUK between 2001 and 2006. 10

3.32 In its plans or implementing the Leitch Reviews 11 recommendations, the Governmentset out the ambition to achieve a world-class skills profle or the UK by 2020. Over 1.8 millionpeople have improved their unctional literacy and numeracy skills since 2001, over 100,000people complete apprenticeships in England now compared to 40,000 in 2001-02, and morethan 72,000 employers and 160,000 employees have benefted rom Train to Gain. The 2007Comprehensive Spending Review set out an increase in resources or adult training, rom 3billion in 2007-08 to 3.6 billion in 2010-11, to enable almost 2.8 million adults to gain higher-level skills (see Chapter 4 or urther details on wel are and skills).

3.33 As a key part o the skills re orms, the Government will expand and improve Train toGain, with Government unding rising to over 1 billion by 2010-11. I employer demandexceeds the amount o skills support on o er within the resources already committed to Trainto Gain, the Government will reassess the position, exploring how such demand can be met.Through Train to Gain employers have a choice over their training provider. Providers canonly access Train to Gain unding i they deliver training that meets employers needs.

3.34 The principles o customer choice will also underpin Skills Accounts, which will givelearners purchasing power through virtual vouchers. Skills Accounts will be rolled outnationally rom 2010 and will mirror the operation o Train to Gain, with the learners choicedirecting the fow o unding to the wide range o accredited, high quality providers not just

Further Education (FE) colleges. This unding will be re-balanced between providersthroughout the year to respond to the actual choice o learners.

Through Skills Accounts the Government will ensure that every adult can access3.35investment in their skills. To expand this investment, Budget 2008 announces 60 milliono additional unding or adult skills, ocused on Level 3, which will support increasedopportunity and progression. This will provide new opportunities or people to realise theirtalents, o er adults a second chance to retrain, and will be used to test new ways o delivering training. It will also enable leading employers to take on more adult apprentices.

To help in orm learners choices a new advancement and careers service or adults3.36in England will be trialled over the next two years and be ully operational rom 2010-11. DIUS will set out the ramework or the development o this service shortly.

3.37 FE success rates have improved signifcantly rom 59 per cent in 2000-01 to 77 percent in 2005-06. Evidence 12 shows that, in the current inspection cycle, over 90 per cent o inspected FE colleges have been graded satis actory or better. For 2008-09 the minimumper ormance standards or providers has been raised, and the intention is to continue toraise it each year.

9 Developing an index o labour market adaptability or the UK , BERR Employment relations research series,No.85, November 2007.10 The Economic and Fiscal Impact o Immigration, Home O fce, October 2007.11 World Class Skills: Implementing the Leitch Review o Skills in England,Department or Innovation,Universities and Skills, July 2007.12 O fce or standards in education, childrens services and skills.

ImplementingLeitch

Train to Gain

Skills Accounts

Improving quality

8/14/2019 12 03 08 bud08 chapter3

10/16


50 Budget 2008

3.38 The Government is developing a programme o National Skills Academies to driveemployer-led excellence in the delivery o skills training by sector. There will be twelve inplace by the end o 2008 .

3.39 DIUS are working with employers to end the outdated distinction between company

training and national qualifcations. Three major employers are now recognised to award theirown qualifcations. Around thirty more have had their training recognised and DIUS willexpand the scheme urther over the next year.

INVESTING IN INFRASTRUCTURE3.40 The Eddington Review 13 made clear the importance o transport in rastructure or theUKs economic per ormance. The 2007 Comprehensive Spending Review set out theGovernments plans to increase capital investment in transport rom 6.7 billion in 2007-08 to8.1 billion in 2010-11 including provision or Crossrail. This will provide a direct link betweenLondons main economic centres o the West End, the City and Canary Whar and connect

these directly with Heathrow Airport and the Thames Gateway. Crossrail is projected togenerate economic benefts o more than double its cost and to create up to 30,000 jobs.

3.41 Improving the passenger experience at the UKs major airports, particularly Heathrow,is critical to UK competitiveness. To reduce delays or travellers at Heathrow, Budget 2008announces new measures with airport operators to improve average and maximum waitingtimes at immigration. This will be accompanied by greater use o automated biometrictechnology and ast-track routes through immigration.

3.42 Costs o congestion are orecast to more than double by 2025. Budget 2008 rea frmsthe commitment to exploring national road pricing to tackle congestion and emissions. Itannounces an invitation to the private sector to run a number o projects based on charging

by time o day, distance travelled and route chosen. The Government will make availablesu cient unding to ensure that these projects help answer the crucial questions on

easibility, cost e ectiveness, privacy and the impact o real nancial incentives on driverbehaviour. Budget 2008 also confrms additional unding to help local authorities developproposals or charging schemes, which will be taken orward consistent with consideration o a national scheme.

For motorways, the Government will set out the scope or introducing hard shoulder3.43running by Pre-Budget Report 2008, and or locking in the bene ts o extra capacity, such aslanes reserved or car-sharers or those willing to pay a toll.

3.44 The Haulage Industry Task Group ound that when hauliers break the law, or exampleon overloading or drivers hours, they gain an un air competitive advantage. Budget 2007announced signifcant increases to the resources devoted to en orcement activity. Alongsidethis the Government conducted the Freight Data Feasibility Study to look at options orcreating a database o oreign hauliers, including a vignette scheme. The conclusions, to bepublished next week, fnd that the options produce limited sa ety, congestion andenvironmental benefts. The Government will there ore not take orward a vignette at thistime but will instead ocus on improving the UKs en orcement system. To support this andunderstand better the movement o oreign vehicles within the UK, the Government willre resh the 2003 Foreign Vehicle Data Survey .

13 Transports role in sustaining the UKs productivity and competitiveness, HM Treasury, December 2006.

Skills Academies

Employer

qualifcations

Crossrail

Heathrow

Road pricingand active tra fc

management

Supporting theroad haulage

industry

8/14/2019 12 03 08 bud08 chapter3

11/16


51Budget 2008

STRENGTHENING COMPETITION AND MARKETFRAMEWORKS

The Government recognises the importance o strong market rameworks or3.45businesses. Measures on the environment set out in Chapter 6 develop the rameworks to givebusinesses incentives to reduce carbon emissions and bring orward investment in a widerange o low-carbon technologies.

3.46 The advice, fnancial assistance and other support provided through the Governmentsbusiness support schemes enable many businesses to start up and grow. To improve thee ectiveness o these schemes the Government is reducing their number rom over 3,000 tono more than 100 by 2010. The launch o all new products will be completed by March 2009,to enable closure or notice o closure o all obsolete schemes by the start o 2010. Budget 2008announces the merger into Business Link, with the associated resources, o all in ormation,diagnosis and brokerage services associated with: all Regional Development Agency (RDA)support by March 2009, UK Trade and Investment (UKTI) support by June 2009, Protecting

the Natural Environment support by April 2010, and Resource E ciency support by October2009. 14

3.47 An e ective competition regime makes a key contribution to market rameworks. TheGovernment has implemented signifcant re orms to ensure that the UK has a world-classcompetition regime. To achieve urther progress it announced in February 2008 an independentreview o competition and innovation in the water sector. This will explore options to increasethe e fciency o water use and deliver benefts to both businesses and households throughincreased competition and innovation.

The Government takes seriously the need to tackle uel poverty to ensure that3.48vulnerable households can a ord to heat their homes adequately (see Chapter 4). In themedium to longer-term low energy prices are determined by competitive energy markets. TheGovernment will there ore continue to press or the liberalisation o EU energy markets and welcomes O gems investigation into the markets in electricity and gas or households andsmall businesses.

3.49 The O fce o Fair Tradings (OFT) market study into the commercial use o publicin ormation 15 highlighted important issues around access to public sector in ormation orcommercial or other re-use. The Government commissioned Cambridge University to analysethe pricing o this in ormation. This analysis is published alongside Budget 2008. TheGovernment will look closely at public sector in ormation held by trading unds to distinguishmore clearly what is required by Government or public tasks and ensure that this in ormation

is made available as widely as possible or use in downstream markets. In the lead up to thenext Spending Review the Government will ensure that in ormation collected or publicpurposes is priced so that the need or access is balanced with ensuring that customers pay a

air contribution to the cost o collecting this in ormation in the long term. These issues willbe considered in conjunction with the assessment o trading unds (see Chapter 5).

3.50 The Government wants to see SMEs compete more e ectively or public sectorcontracts, since this is likely to provide greater choice and better value or money, as well asencouraging innovation and enterprise. Enterprise: Unlocking the UKs talent announces reetrial periods or all suppliers newly registering with Supply2Gov. It also announces that rms

14 Further details o launch timetable are set out on http://www.berr.gov.uk/bb /simpli ying-business-support/page45200.html15 The commercial use o public in ormation (CUPI), OFT, December 2006.

Business supportsimplifcation

Competition inutilities

Commercialuse o publicin ormation

Improvedprocurement or

SMEs

8/14/2019 12 03 08 bud08 chapter3

12/16


52 Budget 2008

supplying services to Government will be able to sell public sector invoices to debt specialists, which will be particularly advantageous to SMEs in managing their cash ow.

In addition, the Government will set up an advisory committee, chaired by Anne3.51Glover (Chie Executive o Amadeus Capital Partners Limited). This will provide advice or

the 2008 Pre-Budget Report on necessary Government action to reduce the barriers to SMEscompeting or public sector contracts, within the scope o EU law and the policy objectiveo value or money, and advise on the practicality o setting a goal or SMEs to win 30 percent o all public sector business in the next fve years. The Science and Innovation WhitePaper published alongside Budget 2008 includes re orms o the SBRI which provides or aproportion o Government departments research and development budgets to be spent withSME suppliers. (For more detail on how improved public procurement can also help achievesome o the Governments social and environmental objectives see Chapter 4 and Chapter 6respectively.)

Box 3.4: The Lisbon Strategy or Growth and Jobs

The EU plays a signifcant role in promoting productivity growth and securing prosperity or the UKs citizens and businesses. The Spring 2008 European Council will launch thenext cycle o the Lisbon Strategy or Growth and Jobs the EUs structural re orm agendadesigned to raise the rate o growth and employment to underpin social cohesion andenvironmental sustainability. The measures set out in Budget 2008 are ully consistent withthe Lisbon Strategys objectives. The priorities at EU level include moving ahead with theproposals or liberalisation o the telecoms and energy sectors, implementing the ServicesDirective, delivering EU targets or reducing administrative burdens and assessing the EUsskills needs. The Strategy is approaching its 2010 deadline and the EU must there ore startto prepare a comprehensive economic re orm strategy or post-2010, which is robust tonew trends and continues to ensure sustainable growth with opportunity or all.

The Varney Review o taxation in Northern Ireland3.52 16 concluded that there is noclear case or changing corporation taxation in Northern Ireland. Sir Davids second review, which is expected to report soon, is seeking to identi y ways o improving Northern Irelandscompetitive position and increasing the size o the private sector. In England, The Review of sub-national economic development and regeneration 17 set out a package o institutionalre orms o regional, sub-regional and local governance and decision-making to enable every spatial area to improve its competitiveness and ulfl its economic potential. The Department

or Business Enterprise and Regulatory Re orm (BERR) and the Department or Communitiesand Local Government (CLG) will consult on implementing these re orms shortly.

IMPROVING PUBLIC SECTOR PRODUCTIVITY The public sector represents a signifcant proportion o the economy. Chapter 53.53

sets out progress on delivering the Governments vision o improved public sector e fciency and e ectiveness. Public sector productivity is not only about reducing cost but also aboutdelivering world-class public services that match peoples expectations. This section outlinesmeasures to ensure that, where Government delivers in rastructure and services in partnership with business, it obtains high quality outcomes and value or money.

3.54 Where public services are delivered by a combination o public, private and voluntary sector providers, air competition means that services are provided by whichever can o er the

best value or money with high quality and innovative services or citizens that are responsive

16 Review o tax policy in Northern Ireland, HM Treasury, December 2007.17 HM Treasury, BERR and CLG, July 2007.

Fairer publicservice markets

8/14/2019 12 03 08 bud08 chapter3

13/16


53Budget 2008

to their needs. BERR has commissioned a review o the emerging public services industry toidenti y opportunities to support its competitiveness, led by Dr DeAnne Julius. It will report insummer 2008.

Building on this,3.55 HM Treasury, together with other Government Departments, will

study a number o key public service markets where the Government is committed to mixedprovision. This work will consider opportunities or air competition to deliver better quality public services and improve value or money.

3.56 Infrastructure Procurement: delivering long-term value , published alongside Budget2008, sets out the Governments next steps to improve its procurement o signifcant assets,in rastructure and long-term service provision. It recognises the evolving needs o the publicsector and explores new approaches to complex procurement, building on the experience o the Private Finance Initiative. It outlines a ramework that will secure value or money whileensuring e ective scrutiny and continuing to improve the commercial skills o procurers.

In rastructureprocurement

8/14/2019 12 03 08 bud08 chapter3

14/16


54 Budget 2008

Box 3.5: Delivering tax simpli ication

To enhance UK productivity and competitiveness, Budget 2008 announces more than 20tax simplifcation measures benefting sectors across the UK economy:

Business rom April 2008, allowing businesses to write-o unrelieved expenditure when

certain capital allowances pools reach a de minimis o 1,000. This removes theneed or over 500,000 businesses to track small pools over several years to receivecomparatively small amounts o relie ;

as outlined earlier in Chapter 3, consulting on simpli ying the rules and processes

that govern the Enterprise Investment Scheme;

rom 1 July 2008, increasing voluntary disclosure limits or indirect tax returns to

the greater o 10,000 or 1 per cent o turnover, up to a maximum o 50,000,removing the need or business to report up to 8000 errors each year;

rom 1 June 2008, simpli ying legislation on taxing otherwise VAT-exempt supplies

o land and property;

introducing an online system rom 1 January 2010, which will acilitate the recovery

o overseas VAT by UK business;

working with EU partners, aiming to reduce the Intrastat burden on business by

lowering the coverage requirement to 95 per cent, which would remove the need or around a quarter o Intrastat declarants to complete returns on their importso EU goods;

modernising Pay As You Earn processes to simpli y arrangements or all working

students and reduce burdens on their employers. HMRC published a consultationdocument on 20 February 2008;

as outlined earlier in Chapter 3, simpli ying the North Sea fscal regime;

removing the requirement or energy suppliers to identi y their energy bills as

accounting documents or the climate change levy, reducing administrative burdens;and

removing the requirement or new heavy goods vehicles and buses with an

appropriate manu acturers certifcate o con ormity to undergo a physicalexamination be ore being issued with a reduced pollution certifcate.

Savings and Assets

rom April 2009, reducing administrative burdens by making it voluntary or

Child Trust Fund (CTF) providers to receive the CTF voucher in order to open anaccount;

rom April 2008, introducing a package o measures to simpli y the administration o

ISAs and the Tax Deduction Scheme or Interest, including consolidating regulations,and reducing requirements or in ormation returns and records retention;

consulting this summer on simpli ying and clari ying the tax treatment o dividends

paid by Real Estate Investment Trusts (REITs) into Share Incentive Plans (SIPs);

rom today, abolishing the stamp duty 1land tax (SDLT) lease duty rule or all

residential transactions, and or non-residential transactions, increasing thethreshold rom 600 to 1,000; and

8/14/2019 12 03 08 bud08 chapter3

15/16


55Budget 2008

rom today, abolishing the requirement to complete an SDLT 60 certifcate veri ying

that no SDLT return is required or most property transactions below 40,000,leading to a reduction in the need to submit about 270,000 returns per year.

Financial Sector removing the requirement or overseas insurers to appoint a jointly and severally

liable tax representative in the UK or insurance premium tax;

responding to representations rom the securitisation industry, removing certain

stamp duty and stamp duty reserve tax barriers to securitisation transactions; and

ollowing consultation, simpli ying and clari ying aspects o the li e insurance

taxation system through a package o measures on unding rules, the tax treatmento structural assets, rules on oreign currency assets, and the acilitation o trans erso business between riendly societies.

As set out earlier in Chapter 3, Budget 2008 announces simplifcation o the tax rules oro shore unds and that the Government is minded to simpli y a tax rule or the qualifedinvestor scheme.

Charities

ollowing consultation, introducing a package o measures to make the Gi t Aid

system easier to use, including simpli ying record-keeping and auditing processes( or urther detail on the consultation see Chapter 5); and

consulting with charities on anti-avoidance legislation relating to substantial donors

to simpli y the system or charities and prevent innocent transactions rom beingcaught.

Modernising tax administration

consulting later this year on how to harmonise and simpli y the rules about interest

on tax paid late and on repayments o tax overpaid, and

ollowing consultation and in the context o wider tribunal re orm, announcing

streamlined and more consistent processes across taxes or reviewing decisionsand handling appeals be ore they come be ore a tribunal.

8/14/2019 12 03 08 bud08 chapter3

16/16


12 03 08 bud08 chapter3

Documents