Firstly, there will be help now to get people back into work quickly, and support businesses and homeowners facing problems.
Secondly, there will be measures to support investment in the growth and green industries of the future – while, as the recovery takes hold, ensure our public finances are sustainable.
We will protect investment in schools, hospitals and other key public services – and we will work to rebuild our financial services.
Taken together, this Budget will build on the strengths of the British economy and its people, speed the recovery, providing jobs and spreading prosperity.
In all of these decisions, we have been guided by our core values of fairness and opportunity – and our determination to invest and grow our way out of recession.
Mr Deputy Speaker, today’s Budget will take Britain through the most serious global economic turmoil for over 60 years.
The impact is being felt in every continent, country and community.
When the world economy was plunged into deep crisis in the 1930s, the response, both nationally and internationally, was too little and too late.
This failure to act turned a serious downturn into a prolonged depression.
We will not repeat those mistakes again.
This time, we and other countries, have worked to avoid them.
Across the globe, we have seen decisive action by national governments, and internationally too.
This action, taken promptly and decisively, gives us good grounds for confidence.
Mr Deputy Speaker, today’s Budget builds on the substantial help for people and businesses in the Pre-Budget Report in November.
It builds on the steps we have taken to recapitalise and restore confidence in our financial institutions.
And it builds on the outcome of the G20 Summit in London this month, when the world’s leading economies came together to agree unprecedented co-ordinated action to speed global recovery.
The action already taken here, and internationally, and the measures I will announce today, mean that I expect the economy to start growing again towards the end of the year.
I am also confident that, as the global economy recovers to double in size over the next 20 years, Britain can, and will be, a world leader.
This Budget will help make sure we seize this opportunity.
Mr Deputy Speaker, as I told the House in November, we and other countries have been battling against a succession of shocks which have hit the world economy.
At the end of 2007, problems in international mortgage markets began to put a damaging squeeze on credit.
In early 2008, we also saw dramatic volatility in many commodities prices, adding to uncertainty and putting pressure on growth.
Last autumn, the dramatic failure of one of the top investment banks in America – Lehman Brothers – shattered already fragile confidence and brought the international financial system to its knees.
Since then, an extraordinary international financial crisis has fed into the wider economy, causing a steep and widespread world recession.
A crisis that started in the developed economies has spread to emerging and developing countries.
Industrial production has fallen and unemployment is rising – by 5 million in the US alone.
In the last few months, world trade fell – and while our exports are down 14 per cent, exports in Germany are down 21 per cent, in China 26 per cent, and in Japan 45 per cent.
For the first time since the Second World War, the world economy is expected to contract this year.
Mr Deputy Speaker, the last few months have seen considerable economic uncertainty.
And that has fully justified the action we, and other countries, have taken to support business and people.
Since the autumn, we have put the banks on a stronger footing, cleaning up their balance sheets, and helping boost bank lending.
As a result, banks will be able to lend billions of pounds more this year and next, to homebuyers and businesses.
Getting credit flowing again is the essential precondition to economic recovery.
In the Pre-Budget Report, I announced a range of measures to help the country through the recession, putting £20bn back into the economy.
This help is coming through now – from an income tax cut, and a VAT reduction which will continue until December.
There is increased support for pensioners, as well as investment in vital public services and accelerated capital projects – protecting thousands of jobs.
And because of the reforms we have made to the welfare system since 1997, this comes on top of extra help when families need it most.
I understand the anxiety behind calls to support those whose wages have fallen.
This is exactly the support our flexible system can – and is – already offering.
As shorter working weeks or irregular patterns reduce wages, those on tax credits can see an automatic increase to compensate for the loss of income.
In March, for example, 355,000 families were receiving on average £35 a week more support through tax credits.
Demonstrating how our welfare system automatically helps people when they need it most.
Mr Deputy Speaker, fiscal support has been complemented with sharp reductions in interest rates by central banks around the world.
The Bank of England interest rate is now down to half a per cent, the lowest it has ever been.
This has reduced the cost of mortgages and loans.
The average saving, since October, for the 4 ½ million families with tracker mortgages is over £230 a month.
And we have now given the Bank of England new means to support the flow of credit and put money into the economy.
Inflation has come down which means people’s income will go further.
Taken together, the total policy support for the UK economy is expected to protect up to half a million jobs.
Other governments across the world have been doing the same.
The total amount of fiscal support, across the G20, will amount to over 5 trillion dollars.
Mr Deputy Speaker, there’s also been unprecedented co-ordinated action at an international level.
The G20 group of economies came together – first in November and then in London earlier this month – to fight this global recession.
We agreed to take whatever further measures are necessary to deliver the IMF forecast of global growth of over 2 per cent by the end of next year.
In total, the G20 agreed over one trillion dollars of additional support for the world economy.
Mr Deputy Speaker, there are no quick fixes. No overnight solutions.
But because of the progress we have made, here and internationally, we can begin to restore confidence, save jobs, and bring the world economy more quickly out of recession.
Now we must make sure we deliver on these agreements – starting at the meeting of world finance ministers in Washington this week.
And I want the next meeting of EU finance ministers to be focused on rebuilding growth in Europe, based on the foundations laid by the G20.
We also need a clear path to recovery – both fiscally and by investing to build Britain’s future.
Mr Deputy Speaker, the UK went into this global recession with employment at an all-time high, inflation, public debt and interest rates at low levels.
But no country can insulate itself from this worldwide downturn.
The position here, as in every country, deteriorated in the autumn.
In the last few months, world trade fell at the sharpest rate since 1945.
As an open economy, the world’s sixth biggest exporter of goods and the second largest exporter of services, we are affected by the collapse in demand in other countries.
The unexpected severity of the recession has led the IMF to downgrade its own forecasts for the world economy three times since October.
We, as well as other countries as diverse as Japan and France, India and the US, have reduced our growth estimates.
Mr Deputy Speaker, the UK economy contracted by 1.6 per cent in the last quarter of 2008.
For the first quarter of this year, I expect the economy will again contract by a similar amount.
And my forecast for GDP growth for the year as a whole will be –3 ½ per cent – in line with other independent forecasts.
But because of our underlying strength, the measures we are taking, domestically and internationally, I expect to see growth resume towards the end of the year.
The IMF forecasts published today confirm the problems that all countries will face this year.
But they also show that the British economy will suffer less than Germany, less than Japan, less than Italy, and less than the euro area as a whole this year.
The British economy is diverse, flexible and resilient – which is why we can be confident in recovery.
Next year, because of the pick up in world demand, the continuing benefit of lower prices, and the substantial recovery measures put in place, I am forecasting growth of 1 ¼ per cent in 2010.
In future, the sources of our growth will be more varied – and we need to ensure we play to our country’s strengths.
It will increasingly come from an expansion in investment by businesses in the industries of the future, such as low-carbon, advanced manufacturing and communications.
These industries, together, are as important to the British economy as the financial services sector.
That is why it has been so important that we have increased investment in Britain’s science base by 88 per cent in real terms over the last ten years.
Growth will also be driven by the opportunities to export as the global economy doubles in size in the next two decades.
From 2011, I am forecasting that the economy will continue to recover, with growth of 3 ½ per cent from then on.
To account for the impact of the global shock, I have further adjusted trend output – or the productive potential of the economy.
But in future years, the economy will recover towards a trend rate of growth of around 2 ¾ per cent.
Inflation is expected to continue coming down sharply, reaching 1 per cent by the end of this year.
I am today writing to the Governor of the Bank of England, in the usual way, to confirm that the inflation target remains unchanged at 2 per cent.
Retail Price Index inflation is forecast to remain negative, falling to –3 per cent by September, before moving back above zero next year.
Mr Deputy Speaker, the deepening global recession has had an impact on the public finances, here and in every country across the world.
In this Budget, I will set out steps to ensure they are on a sustainable path.
And due to the measures that I will announce today, the current deficit is expected to halve within four years.
But before I turn to that, I want to set out the additional help we will give to people and businesses to get through the recession – and build towards recovery.
Mr Deputy Speaker, we know, from previous recessions, that people’s greatest fears are the loss of their job and their family home.
All over the world, as the economy slows, unemployment is rising.
In the UK, the claimant count increased in February by 137,000.
Today’s figure shows that in March it went up by 74,000 – taking the total claimant unemployment rate to 4.5 per cent.
It is not in any Government’s power to prevent all job losses.
And even when the recovery is under way, it will take time for unemployment to start falling.
But Governments must give people targeted help to find a new job as quickly as possible – and, where necessary, to gain the new skills which will allow them to do this.
This is not just morally the right thing to do but economically essential.
All the evidence shows that the longer people are out of work, the more difficult it becomes for them to re-enter the labour market.
So today I will announce steps to ensure short-term job loss does not turn into a lifetime on benefits.
Mr Deputy Speaker, the core of the Government’s approach is the Job Centre Plus network.
Its tailored help has almost halved the average time people spend out of work compared to previous recessions.
Even in the tough economic conditions since November, it has helped over a million people move into new employment.
Mr Deputy Speaker, I am determined that this support can continue to be given to people who lose their jobs.
In November, I increased the resources for Job Centre Plus and the New Deal by £1.3bn.
I can announce today an additional £1.7bn of funding so that everyone can receive high-quality support.
Most people, even now, continue to find work within a matter of weeks.
But we need to step up help to those who have greater difficulty in re-entering the labour market.
So there will be additional support for people who have been out of work for 12 months through the Flexible New Deal.
I am also determined that we do even more to protect young people from the damaging impact of long-term unemployment.
The alternative is a return to the days when a whole generation of young people found themselves abandoned to a future on the scrapheap.
We will not repeat that mistake.
So I want to offer a guarantee. From January, everyone under the age of 25, who has been out of work for 12 months, will be offered a job or a place in training.
Those in work will receive a wage.
Those in training will receive additional money on top of their benefits.
To provide these extra opportunities, we are working with employers to create or support as many as 250,000 jobs.
This will include delivering local services, traineeships in social care, and other high demand sectors – as well as jobs for people of all ages in particularly badly hit communities.
Mr Deputy Speaker, I also want to do more to help people gain the crucial skills that will be needed in the future.
So, as part of my guarantee to young people, I will spend over £260m of new money, for training and subsidies to help them get the skills or experience needed in sectors with strong future demand.
We will also be providing extra investment, to ensure we deliver on our guarantee that every 16 and 17 year old who wants to stay in education or training can do so.
To deliver this for the next two years, I am providing a further £250m this year and £400m in 2010-11.
This will enable an additional 54,000 places, in sixth forms and further education colleges, for students in the next academic year.
For this and other measures, there will be consequential provisions, where appropriate, for Scotland, Wales and Northern Ireland.
Mr Deputy Speaker, I will shortly set out long-term measures in housing and for business to build the recovery.
But I first want to set out how we can offer more support now in these areas.
One of the biggest fears when people lose their jobs, is that they, and their family, will also lose their homes.
I want to do more to reduce the number of repossessions.
Last year, I increased and extended the Support for Mortgage Interest scheme, which covers mortgage interest payments for people who have lost their jobs.
Today I can announce that I will maintain the higher level of support for a further 6 months to help homeowners as they look for a new job.
That is in addition to the scheme to help people stay in their homes if their income falls.
The housing market is also being held back by a lack of mortgage credit.
The Government has taken action to encourage an increase in mortgage lending – and this year, the major UK banks will increase the availability of mortgages by around £20bn.
To build on this, today I can announce the introduction, following state aid approval, of the scheme to guarantee securities backed by mortgages – which will help to ease the flow of mortgage finance.
Mr Deputy Speaker, the recession and the credit crunch have made it much harder for people to take their first step up the housing ladder.
This is not just difficult for those involved – but also undermines the entire housing market.
So, to help, I have decided to extend the Stamp Duty holiday on properties sold for less than £175,000 until the end of the year.
Sixty per cent of residential properties will continue to be exempt – encouraging modest and middle income homebuyers.
I can also announce an £80m extension to HomeBuy Direct – the Government shared equity mortgage scheme, which has already received interest from over 32,000 people since September.
Altogether, additional support for those who lose their jobs and new help for people to get on the housing ladder.
Mr Deputy Speaker, in November I announced a series of measures to help businesses now.
Over 100,000 businesses, which employ well over half a million people, have taken up the option to defer their tax bills. I will continue this help.
Some 800,000 smaller companies will benefit from the delay in the increase in corporation tax.
And last month, I announced that we would allow companies to spread out payments of this year’s up-rating of business rates.
But today I want to do more to help firms with cash flow problems.
Many viable companies face temporary difficulties because of the shortage of credit.
So today I am extending the help which allows loss-making companies to reclaim taxes on profits made in the last three years.
This help, which will lead on average to repayments worth £4,000 each year, will now be available for two years until November 2010.
Well over 100,000 businesses will have their full current losses wiped out.
And today I can also announce additional targeted support for companies’ cash-flow, with a top-up trade credit insurance scheme.
This will match private sector trade credit insurance provision if insurers reduce their cover to any business operating in the UK.
I also want to help the UK’s automotive industry, which has been one of the British success stories of the last decade.
But the loss of consumer confidence and credit crunch has led to a sharp fall in vehicle sales around the world.
In order to help the car industry and retail trade, I can announce that a scrappage scheme will be implemented next month.
It will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars over ten years old.
It will be a time-limited scheme until March 2010. My Right Honourable Friend the Secretary of State for Business will announce details shortly.
Mr Deputy Speaker, we have made our choice to help those who have lost their jobs find work quickly and, if needed, to learn skills.
We are acting decisively to prevent a new generation of young people becoming a lost generation.
We are offering real support to homeowners – and to business – through this unprecedented economic crisis.
We could have decided to do nothing. But we chose to act.
By doing so we have not just protected people but we will also reduce the length and severity of the recession, lessening the impact on our public finances in the medium term.
Mr Deputy Speaker, I now turn to the public finances and the action I will take to put them on a sustainable footing in the medium and long-term.
As I told the House in November, tax revenues were falling.
The financial sector, which provided 27 per cent of corporate tax revenues, was already badly hit.
But since then, with the recession spreading across almost every sector, the wider tax-take has also come down sharply.
Corporation tax and income tax revenues have fallen. The problems in the housing market have led to a dramatic reduction in stamp duty.
In the UK, tax as a share of GDP is 1.2 percentage points lower now than it was a year ago.
Here and across the world, tax revenues are down and will take some years to come back up.
At the same time, our reformed welfare state is rightly providing support to families, but it does come at an added cost to the exchequer.
Many countries have also intervened to strengthen their banking systems.
My public finances forecasts today include a provisional estimate for the potential cost of this – totalling 3 ½ per cent of GDP.
Mr Deputy Speaker, around the world, fiscal deficits and government debt have been rising sharply to levels not seen since the Second World War.
This is a response to an unprecedented financial crisis and a deep and widespread global recession.
Allowing borrowing to rise – protecting services, helping people and businesses – is the right thing to do.
The alternative, to take money out of the economy now, as some have suggested, would damage key public services, create more unemployment, lengthen the downturn and lead, in the end, to higher, not lower debt.
This Government, and others, have learnt from the historic economic mistakes of the interwar period, that countries cannot deflate their way out of recession.
Mr Deputy Speaker, taken together, my Budget measures today represent a fiscal easing of about half a percent of GDP this year – followed by a tightening of 0.8 per cent of GDP per year until 2013-14.
I believe this is a sensible pathway to sustainable public finances.
It will mean, as I have said, that the budget deficit will be halved in the next four years.
At this stage, when there is so much uncertainty, to do so quicker would prevent us helping people now, choke off the recovery, and stop us investing for the future.
Many countries, as a result of their action to support the economy, have seen higher deficits.
In the US, for example, the Congressional Budget Office expects their deficit to be 13 per cent of GDP in 2009, 10 per cent in 2010, and even in 2019, the deficit will be above 5 per cent.
Our own figures for public sector net borrowing will be £175bn this year, or some 12.4 per cent of GDP.
From 2010, as the economy starts to recover, and the measures announced in November and today take effect, borrowing will fall to £173bn, then £140bn, £118bn and £97bn.
As a share of GDP, our borrowing will be 11.9 per cent of GDP next year, and then, as we move towards balance, 9.1 per cent in 2011-12, then 7.2 per cent and 5.5 per cent in 2013-14.
Mr Deputy Speaker, this downturn will inevitably mean sharp increases in national debt relative to GDP.
UK net debt, which includes the cost of stabilising the banking system, will, as a share of GDP, increase from 59 per cent this year, to 68 per cent next, 74 per cent in 2011-12, 78 per cent and 79 per cent in 2013-14.
It will stabilise and then begin to fall in 2015-16.
In countries across the world, because of this economic crisis, it will take longer for deficits to come back into balance.
Because of the steps we are taking, I expect the underlying current budget deficit to come back into balance two years later.
Mr Deputy Speaker, we need to help people now, to maintain key public services, invest for the future, while keeping the public finances on a sustainable footing.
Indeed, this is the best way to drive up economic growth, which, in turn, is the best way to bring down borrowing and rebalance the public finances.
We must do this within a time-scale that does not damage the recovery.
This will require tough decisions, but I am determined that they will be fair decisions.
Mr Deputy Speaker, it cannot be fair that those who should pay tax, are allowed to avoid it.
Over the last decade, we have taken a number of measures, which have reduced tax evasion and avoidance – on average reducing avoidance by over £1bn a year.
I intend to build on this today. We have identified loopholes and schemes, which, when closed, will result in £1bn of extra revenue over the next 3 years.
Mr Deputy Speaker, in this Budget there will be new measures, to help pensioners and savers on middle and modest incomes.
It is important that everyone is encouraged to save for their retirement – and we will continue to support them to do so.
But I intend to address the anomaly which sees a tiny proportion at the top taking a large slice of the help we give people to save.
It is difficult to justify how a quarter of all the money the country spends on pensions tax relief goes, as now, to the top 1 ½ per cent of pension savers.
So from April 2011, I will restrict pension tax relief for those with incomes over £150,000 so it is gradually tapered to the same 20 per cent rate the majority of people receive.
We will consult on implementation. I am introducing measures from today to prevent forestalling.
Again only affecting those with incomes over £150,000.
Mr Deputy Speaker, I am not proposing to increase taxes on income for this year.
However, as the economy recovers and wages start to grow again, it is right that we take additional steps.
I believe that it is fair that those who have gained the most should contribute more.
Only those with incomes over £100,000 a year – or 2 per cent of the population – will be affected.
In November, I announced a new rate of income tax of 45 per cent on incomes above £150,000 – the top one per cent of taxpayers.
In order to help pay for additional support for people now, I have decided that the new rate will be 50 per cent, and will come in from next April – a year earlier.
In November, I also announced that I was reducing personal allowances for the very highest earners with incomes over £100,000.
These allowances are worth twice as much as those of basic-rate taxpayers.
I have now decided to fully withdraw the benefit of that allowance for those with incomes over £100,000 from next April.
Mr Deputy Speaker, these measures are necessary to build our recovery and secure our country’s economic future.
Along with other measures, including for landfill, company cars and gaming, I can also announce the following.
I will continue to monitor oil prices, but I expect that fuel duty will increase by 2 pence per litre in September, and then by 1 penny a litre above indexation each April for the next four years.
Alcohol duties will go up by 2 per cent from midnight tonight.
There will be an increase in tobacco duty of 2 per cent from 6pm tonight.
Taken together, these measures will raise over £6bn by 2012 – to secure Britain’s economic future and to provide help for people now when they need it most.
Mr Deputy Speaker, the importance of our public services, on which we all depend, becomes even clearer during difficult times.
We have made our choice to continue investing in our public services which underpin the health and strength of our nation now and in the future.
In the last ten years, this investment has seen an extra 40,000 doctors, 41,000 teachers and over 70,000 nurses.
But just as every family is looking closely at their own budget – to ensure they get best value for money – so should the Government.
Since 2004, the Government has identified and made £26.5 billion in efficiency savings, while continuing to invest to improve schools, hospitals and other public services.
In November, I announced plans to find an additional £5bn of efficiency savings in 2010-11, on top of a total of £30bn in this spending review period.
Mr Deputy Speaker, some have argued that we should cut public services immediately, rather than invest and grow our way out of the recession.
That would be the wrong thing to do.
I can confirm that we are able to secure these savings that year, while increasing investment, as planned, for local health services by over 5 per cent and for schools by over 4 per cent.
Yesterday, we published the reports of the five independent reviews I set up last year.
They have identified extra efficiencies from 2011 which rise to a further £9bn of additional savings a year by 2013-14.
They include efficiencies in public sector back-office functions and IT, improved procurement, and better collaboration and innovation at the local level.
This will allows us to protect front line public services, while keeping current spending growth, in real terms, at an average of 0.7 per cent a year from 2011-12 onwards.
Mr Deputy Speaker, capital spending is equally important to the future of our country.
Over the last five years, this investment has transformed services with 61 major hospital schemes, 140 new schools and improved transport links, including the modernisation of the West Coast main line.
It is essential to help create jobs, boost the recovery and deliver economic success in the long term.
I intend that capital investment will continue at historically high levels to 2012, as we prepare for the Olympic games in Britain.
After this, public sector net investment will be at 1 ¼ per cent of GDP by 2013-14, still twice as high as in 1997.
Indeed, the efficiency savings we are making will help us direct more money to continue to support investment that everyone in our country depends on.
The Government has set itself a central goal of realising up to £16 billion of property and other asset sales in the three years from 2011-12, with proceeds raised being used for new capital investment.
Mr Deputy Speaker, as a result of the measures I have announced today I can afford to make investments in the future of Britain.
These funds will be invested now, to help ensure we seize the opportunities that will come from a world economy expected to double in size.
I have announced today £3bn extra support to help people find work quickly, with a new guarantee for the young.
There will also be £1bn to help us combat climate change, by supporting low carbon industries and green collar jobs.
There is close to £1bn to help homeowners, meet future housing supply and allow the construction industry to recover quickly.
And there is £2.5bn for business, to encourage investment in the industries and high-paid high-skilled jobs of the future.
Sectors such as advanced manufacturing, the creative industries and low-carbon technologies.
All essential if we are to prepare for the future.
Mr Deputy Speaker, a successful economy needs a strong financial sector.
We don’t want to throw away the many advantages that have come from our position as a world centre for finance.
I intend that we retain that position. Hundreds of thousands of jobs across the country depend on it.
We need to build trust in the banking system, and harness the strengths of the financial services sector for the benefit of society
Crucial to this is financial regulation.
I will shortly publish a Treasury paper with my recommendations for wide-ranging reform.
They will propose action to reform corporate governance and remuneration at banks to avoid undue risk taking.
To improve regulation of capital and liquidity so banks do not over-extend themselves.
To increase transparency, to achieve a single set of accounting rules – so that we can see the risks banks are taking.
And to regulate all important institutions including hedge funds.
It will also propose action to reduce the impact of the failure of financial firms; protect and support consumers; improve efficiency and competition in financial markets; as well as strengthening regulators’ powers.
And all these steps will, in turn, complement the G20 agreement to restore trust in the global financial system.
Mr Deputy Speaker, strengthening the banking system is crucial to the recovery and to the economy.
But the strength of our economy, and health of our society, also depends on meeting long-term demand for housing.
I have two measures to help achieve this.
First, we want to work with the industry to tackle the restraints, which house-builders have told me, could prevent them from acting now to increase housing supply.
This will give construction firms more certainty and help them meet housing demand more effectively.
Second, lack of finance now is affecting house builders and preventing the long-term investment that we need.
So today I can announce £500m of extra financial support.
It will kick-start building on housing projects, stalled because of the credit crunch, delivering thousands of new homes.
As part of this support, we are providing £100m for local authorities to build new energy-efficient housing.
I have one further announcement to make about housing for a particular group.
The whole country is united in admiration for the courage a