My Lords, I refer the House to the Autumn Statement made by my right honourable Friend the Chancellor of the Exchequer in the House of Commons, copies of which have been made available in the Printed Paper Office, and the text of which will be printed in full in the Official Report.
The following Statement was made earlier in the House of Commons.
“Britain’s economic plan is working, but the job is not done. We need to secure the economy for the long term, and the biggest risk to that comes from those who would abandon the plan. We seek a responsible recovery, one in which we do not squander the gains we have made, but go on taking the difficult decisions, and one in which we do not repeat the mistakes of the past, but this time spot the debt bubbles before they threaten financial stability. We seek a responsible recovery, in which we do not pretend we can make this nation better off by writing cheques to ourselves, and instead make the hard choices. We need a Government who live within their means, in a country that pays its way in the world.
Three and a half years ago, I set out our long-term economic plan in the emergency Budget. That plan restored stability in a fiscal crisis, but it was also designed to address the deep-seated problems of unsustainable spending, uncompetitive taxes and unreformed public services for which there are no quick fixes. Over the last three years we have stuck to our guns and worked through the plan. We have done so in the face of a sovereign debt crisis abroad, and at home in the face of opposition from those who got Britain into this mess in the first place and have resisted every cut, every reform and every effort to get us out of that mess. We have held our nerve while those who predicted there would be no growth until we turned the spending taps back on have been proved comprehensively wrong.
Thanks to the sacrifice and endeavour of the British people, I can today report the hard evidence that shows our economic plan is working, but I also report the hard truth that the job is not yet done. Yes, the deficit is down, but it is still far too high, and today we take more difficult decisions. Yes, the forecasts show that growth is up, but the same forecasts show growth in productivity is still too low, and today we set out further economic reforms. Yes, jobs are up and unemployment is down, but too many of our young people lack the skills to fill those jobs and the opportunities to acquire them, so now we take bold steps to remove that cap on aspiration. Yes, businesses are expanding, but business taxes are still too high and exports are too low and we must address that. And yes, real household disposable income is rising, but the effects of the financial crash on family budgets and the cost of living are still being felt. So where we can afford to help hard-working families, we will continue to do so. The hard work of the British people is paying off, and we will not squander their efforts. We will secure the economy for the long term, and this Statement sets out how.
Let me turn to the report from the Office for Budget Responsibility. Again, I thank Robert Chote and his team for their rigorous and independent work. The OBR report notes that the Office for National Statistics has reassessed the depth of the great recession. The fall in GDP from peak to trough between 2008 and 2009 was not 6.3% as previously thought, but was instead an even more staggering 7.2%; £112 billion was wiped off our economy—about £3,000 for every household in this country—in one of the sharpest falls in the national income of any economy in the world. That is a reminder of the economic calamity that befell Britain and of the simple fact that our country remains poorer as a result of it. A lot of work still remains to be done to put that right. The data revisions also showed something else: there was no double-dip recession.
Let me turn to the future. At the time of the Budget in March, the OBR forecast that growth this year would be 0.6%. Today, it more than doubles that forecast and the estimate for growth will be 1.4%. Next year, instead of growth of 1.8%, it is now forecasting 2.4%. Faster growth now means that it has revised the following four years to 2.2%, 2.6%, 2.7% and 2.7%, so growth over the forecast period is significantly up. It is still not as strong as we would like it to be, but this is the largest improvement to current year economic forecasts at any Budget or autumn Statement for 14 years. I can report that Britain is currently growing faster than any other major advanced economy: faster than France, which is contracting; faster than Germany; and faster even than America. That contrast itself points to the risks that remain for the UK from abroad, and the weakness of many of our main trading partners.
The first risk the OBR identified to our economic recovery is a recurrence of the damaging instability in the eurozone. Even with the relative calm of recent months, the OBR still forecasts that the euro area as a whole will shrink by 0.4% this year. Its growth forecasts for the US and emerging markets have also been revised down, and world trade has been weaker than it expected in March. While our exports are growing, they are not growing as fast as we would like. That is because we are too dependent on markets in Europe and North America. The Prime Minister’s visit to China this week is the latest step in the Government’s determined plan to increase British exports to the faster growing emerging markets, something our country should have done many years ago. Today, I am doubling to £50 billion the export finance capacity available to support British businesses, expanding the help available to firms in these emerging markets and ensuring that our excellent new Trade Minister, Lord Livingston, has all the firepower he needs.
Let me turn to the forecast for employment. Today in Britain, employment is at an all-time high and the OBR has revised up its forecast for the future. It was expecting jobs to stay flat over the year, but it now expects the total number of jobs to rise by 400,000 this year. This is being felt right across the country. Since 2010, the number of jobs in Carlisle and on the Wirral, and from Selby to south Tyneside, have all grown faster than in London. Meanwhile, the number of people claiming unemployment benefit has fallen by more than 200,000 in the past six months—the largest such fall for 16 years. Unemployment is also lower than in 2010, and is forecast to fall further from 7.6% this year to 7% in 2015, before falling even further to 5.6% by 2018. We have the lowest proportion of workless households for 17 years.
There were those who said it was a ‘fantasy’ to believe that businesses could create jobs more quickly than the public sector would have to lose them. What they should have said was that it would be fantastic if it happened. So I have good news for them. Businesses have already created three jobs for every one lost in the public sector, and the OBR report today forecasts that this will continue, with 3.1 million more jobs being created by businesses by 2019, which, in its words, ‘more than offsets’ the million or so reduction in the public sector headcount. Far from the mass unemployment predicted, we have a record number of people in work, hundreds of thousands fewer on welfare, and unemployment lower than when we came to office, and we will have 2 million more jobs than in 2010—an economic plan that is working and a Government who are seeking a job-rich recovery for all.
Let me turn now to the forecasts for government borrowing and debt. When this Government came into office, the deficit was 11% of GDP. That was the highest level in our peacetime history. One pound in every four was being borrowed, and a former Chancellor and a former Prime Minister have now joined the consensus that spending was too high. The borrowing posed a huge risk to the economic stability and credibility of the United Kingdom, and we have taken many difficult decisions to bring that deficit down—every one contested and opposed.
I can report today, however, that the effort is paying off. The OBR uses a measure of what it calls ‘underlying public sector net borrowing’, which excludes the impact of the Royal Mail pension scheme and asset purchase facility transfers. I can tell the House that this underlying measure of the deficit, like the other deficit measure, has been revised down substantially since March. From the 11% back in 2010, the underlying deficit now falls to 6.8% this year, instead of the 7.5% the OBR forecast back in March. It then falls to 5.6% next year, then 4.4%, 2.7% and, in 2017-18, 1.2%. By 2018-19, on this measure, the OBR does not expect a deficit at all. Instead, it expects Britain to run a small surplus. These numbers mean that the Government will meet their fiscal mandate to bring the structural current budget into balance and meet it one year early.
Let me turn to the forecasts for cash borrowing on this same underlying basis. At the autumn Statement last year, there were repeated predictions that borrowing would go up. Instead, borrowing is down—and down significantly more than was forecast. In their last year in office, the previous Government borrowed £158 billion. This year, we will borrow £111 billion, which is £9 billion less than was feared in March. That falls next year to £96 billion, then down to £79 billion in 2015-16, £51 billion the year after and £23 billion the year after that. So we are set to borrow £73 billion less over the period than was forecast in March. That means that we are borrowing the equivalent of £2,500 less for every household in this country.
In 2018-19, on this cash measure too, the OBR forecasts that the Government will not have to borrow anything at all. Instead, we will run a small cash surplus. Of course, this will only happen if we go on working through our long-term plan, delivering the reductions in the deficit we plan this year, next year and in the three years after. If we gave up on the plan now, we would be saddled with a deficit still among the highest in Europe, and the government side of the House is not prepared to take that risk.
While the deficit remains, it adds to our national debt every year. The OBR today expects debt this year to come in at 75.5% of GDP, which is £18 billion lower than was forecast in March. It rises to 78.3% next year, before peaking at 80% the next year—5% lower than forecast at the Budget. In 2016-17, it then falls, albeit slightly, to 79.9%; then falls again to 78.4% and then to 75.9%. By 2017-18, debt is over £80 billion lower than forecast in March. The supplementary debt target is for debt to be falling in 2015-16. At the Budget, the OBR forecast debt to be falling in 2017-18. It is now forecast to fall in 2016-17, which is one year earlier.
But let me enter this note of caution. The OBR is clear that this is a cyclical improvement. The forecast for the continuing fall in the structural deficit has not improved. The structural deficit is the borrowing that stays behind even when the economy improves. Thanks to our actions, it has fallen from the 8.7% we inherited to 4.4% today—more than in any other major advanced economy. It goes on falling, but no faster than was previously expected because, as we have always argued, the central task of reforming government and controlling spending does not simply dissolve when growth returns. It supports the case we have made all along that economic growth alone was never going to be enough to repair Britain’s broken public finances. An improving economy does not let us off the hook for taking the difficult decisions to make sure that the Government live within their means.
The single most important economic judgment I make today is this: we will not let up in dealing with our country’s debts; we will not spend the money from lower borrowing; we will not squander the hard-earned gains of the British people. The stability and low mortgage rates, the lower deficit and falling borrowing have been hard won by this country, but let us be clear that they could easily be lost. That is why we must work through our plan to secure the British economy for the long term.
So this autumn Statement is fiscally neutral across the period. Indeed, I can announce today that we will take three new steps to entrench Britain’s commitment to sound public finances. First, we will bring forward next year an updated charter for budget responsibility and ask Parliament to support it. I can say today that both parties of the coalition have agreed that we must ensure that debt continues to fall as a percentage of GDP, including using surpluses in good years, for this purpose. In other words, this time we will fix the roof when the sun is shining.
We will look to see whether the five-year time horizon of the fiscal mandate could be shorter and even more binding now that the public finances are closer to balance, and we will see how fiscal credibility could be further enhanced by a stronger parliamentary commitment to the path of consolidation already agreed for 2016-17 and 2017-18. The answers will be written into an updated charter for budget responsibility, which will be presented to Parliament a year from now and voted upon.
The second step we take today to entrench Britain’s commitment to sound public finances is this: we will cap overall welfare spending. Welfare budgets were completely out of control when we came to office and the number of households where no one had ever worked nearly doubled. We have taken very difficult decisions to bring benefit bills down; we have saved £19 billion a year for the taxpayer. We need to maintain that discipline. The percentage of spending in the UK subject to fixed spending controls is very low by international standards—at just 50%. So from next year, we will introduce a new cap on total welfare spending.
I have had representations that the basic state pension should be included within that cap, but that would mean cutting pensions for those who have worked hard all their lives because the costs on, say, housing benefit for young people had got out of control. That is not fair, so we will not include the state pension, which is better controlled over a longer period. We will also exclude from the cap the most cyclical of benefits for jobseekers. All other benefits—from tax credits to income support to the vast majority of housing benefit—will be included in the cap.
At the beginning of each Parliament, the Chancellor of the day will set the welfare cap for the coming years, and will ask the House of Commons for its support. If the cap is breached, the Chancellor will have to explain why, and hold a vote in the House. The principle is clear: the Government have a responsibility to taxpayers to control their spending on welfare, and Parliament has a responsibility to the country to hold the Government to account for it.
That brings me to our third step. Ultimately, the test of fiscal credibility is whether you are prepared actually to make the difficult decisions that will keep spending under control. Tight discipline means that most departments are now living well within their set budgets. This year they are expected to underspend by £7 billion, which is testimony to good financial management. We can therefore be confident in reducing the contingency reserve by £1 billion this year, and reducing departmental budgets by a similar amount in the next two years. That will save a further £3 billion in total. The protections for the NHS and schools will apply, and the security and intelligence agencies and Her Majesty’s Revenue and Customs will be exempt. The Barnett formula means that over the next two years, the budgets for Scotland, Northern Ireland and Wales will see a net increase. We will not apply those additional savings to local authorities, because we expect them to freeze council tax next year.
This year, Britain becomes the first G8 country to meet our promise to the poorest in the world to spend 0.7% of our national income on development, but we do not have to increase the budget of the Department for International Development further in order to do that. The effectiveness of the British Government’s aid effort in the Philippines, matched by the generosity of the British public, is a reminder of what marks us out as a nation, and we in this country can be very proud of it.
We are also immeasurably proud of the work of Britain’s Armed Forces. As they wind down their operations in Afghanistan, the budget that we spend there is also falling fast, so we can reduce the military special reserve by a further £900 million this year while still funding all operational costs. To reflect our society’s debt of gratitude to our service men and women and their families, I want to make a further £100 million of LIBOR fines available to our brilliant military charities, and to extend that support to those who care for the work of our police, fire and ambulance services. I think the whole House will agree that the terrible events in Glasgow this weekend, and the work that those services are doing right now to cope with the adverse weather conditions, remind us how much we owe to them.
Discipline with the public finances means more than just words. It means making difficult decisions, and being prepared to stick to them. It means using surpluses in good years to keep debt falling, so that we fix that roof when the sun is shining. It means capping welfare to keep it under control, and, when we do want to spend more money, it means finding extra ways in which to pay for it. One of the biggest single items of Government spending is the basic state pension. I am proud to be in a Government who have introduced a triple lock that ensures a fair and generous increase in the state pension every year for those who have worked hard all their lives. I can confirm that next April the state pension will rise by a further £2.95 a week. That increase, and the other increases that have been made under this Government, mean that pensioners will be more than £800 better off every year. I can announce that we are also going to offer current pensioners an opportunity to make voluntary national insurance contributions to boost their income in retirement, and that we will extend that opportunity to those who reach pension age before the introduction of the single-tier pension. That will help those who have not built up much entitlement to the additional state pension, especially women and the self-employed.
However, we must also guarantee that the basic state pension is affordable in the future, even as people live longer and our society grows older, and the only way in which to do that is to ensure that the pension age keeps pace with life expectancy. The Pensions Bill, which is currently going through Parliament, puts in place reviews of the pension age every five years. We have set the principle that will underpin those reviews. We think that a fair principle is that, as now, people should expect to spend up to a third of their adult lives in retirement. Based on the latest life expectancy figures, applying that principle would mean an increase in the state pension age to 68 in the mid-2030s and to 69 in the late 2040s. The exact dates will be set by the future statutory reviews and in line with the most up-to-date demographic data, of which the next update is published next week. This is one of those difficult decisions that Governments have to take if they are serious about controlling the public finances. Future taxpayers will be saved around £500 billion. Young people will know that our country can afford to give them a proper pension when they retire. That is this generation fulfilling its obligations for fiscal responsibility to the next generation, not saddling them with the debts and the decisions we were not prepared to deal with ourselves.
Having sound public finances also means making sure that we collect the taxes that are due. Most wealthy people pay their taxes and make a huge contribution to funding our public services; the latest figures show that 30% of all income tax is paid by just 1% of taxpayers. We have given incentives to enterprise and cut punitive tax rates, and this year the rich pay a greater share of the nation’s income taxes than was the case in any year under the last Labour Government. But alongside those paying the most tax are those who try to avoid paying their fair share of tax. So today we set out in detail the largest package of measures to tackle tax avoidance, tax evasion, fraud and error so far this Parliament. Together it will raise over £9 billion over the next five years.
We are going to tackle the growth of intermediaries disguising employment as false self-employment, depriving workforces of basic employment rights such as the minimum wage in a bid to avoid employer national insurance. We will halve the final period exemption for capital gains tax private residence relief. We will end the abuse of dual contracts, offshore oil and gas contracting, derivatives linked to profits and share buy-backs. And we will ensure the tax advantages of partnerships are not abused either. We are introducing a new, limited power that requires people to pay up front their taxes where the scheme they used has already been struck down by the courts. We are going to strengthen Whitehall’s capacity to prevent error and tackle fraud in the benefit and tax credit systems, and expand its efforts to recover money that is owed.
There is one personal tax change we make today which is not about avoidance, but is about fairness. Britain is an open country that welcomes investment from all over the world, including investment in our residential property. But it is not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence while those who do not live here do not—that is unfair. So from April 2015, we will introduce capital gains tax on future gains made by non-residents who sell residential property here in the UK.
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Having a Government who live within their means is essential to secure the economy for the long term, but it is not sufficient. Britain has to earn its way in the world. Our infrastructure needs to be overhauled. We have to help our businesses compete. Above all, our young people need the skills to succeed in the modern world. This autumn Statement takes the next big steps in all these areas.
Let me start with infrastructure. We are going to be spending more on capital as a proportion of national income on average over this decade than over the whole period of the last Government. That has involved making tough choices about priorities in spending and sticking to them. But that is not the most difficult decision in this area. We have to decide whether we are serious as a country about competing in the modern world and say to people that we need the new roads and the new railways, including the northern hub and High Speed 2. We have to say that we are prepared to push the boundaries of scientific endeavour, including in controversial areas, because Britain has always been a pioneer.
We should say that the country that was the first to extract oil and gas from deep under the sea should not turn its back on new sources of energy such as shale gas because it is all too difficult, and the country with the world’s first civil nuclear programme should not be a country that says we can do this no longer.
Yesterday, my right honourable friend the Chief Secretary and Lord Deighton published the update to the national infrastructure plan. That includes a co-operation agreement with Hitachi on the next nuclear power station in Anglesey and a deal with the insurance industry to invest at least £25 billion in UK infrastructure. We published the strike prices that support long-term investment in offshore wind and prioritise it over onshore wind. Today we go further, with a commitment to invest in quantum technology, and a new tax allowance to encourage investment in shale gas that halves tax rates on early profits. In the week in which Professor Peter Higgs travels to Stockholm to collect his Nobel prize for physics, we commit to build a new centre in his name at Edinburgh University, because science is a personal priority of mine.
Some of the most important infrastructure for British families is housing and we must confront this simple truth: if we want more people to own a home, we have to build more homes. The Office for Budget Responsibility is absolutely right today to draw attention to the weakness of housing supply in this country. The good news is that the latest survey data showed residential construction growing at its fastest rate for a decade. Our hard-won planning reforms are delivering a 35% increase in approvals for new homes, but we need to do more.
This week, we are announcing £1 billion of loans to unblock large housing developments on sites in Manchester and Leeds and across the country. We will increase the housing revenue account borrowing limit by £300 million. Aspiration is not only for people who can afford their own home. We want to regenerate some of our most run-down urban housing estates. Councils will sell off the most expensive social housing, so they can house many more families for the same money. We are going to give working people in social housing a priority right to move if they need to for a job.
Right-to-buy applications have doubled under this Government, and we will expand it more. The very same spirit of aspiration that underpins right to buy is what drives this Government with Help to Buy. It is not enough to build more houses if families who can afford mortgages do not have the large deposits that the banks have demanded. Help to Buy is now helping thousands to own their own home. I can today announce that Aldermore and Virgin, two challenger banks, expect to join the scheme this month.
Help to aspiring families and building more homes: that is what we stand for. We must also avoid the mistakes of the past decade. We want a responsible recovery. That is why I am the first Chancellor to give the Bank of England the responsibility and the power not only to monitor overall debt levels, but to take action to deal with asset bubbles if they threaten our stability.
We want a functioning, stable housing market. The OBR’s latest house price forecast today, while higher, still has real house prices 3.1% lower in 2018 than at their peak in 2007. Together with Governor Carney, I acted last week to focus the funding for lending scheme away from mortgages on to small business lending, where its support is still needed. It is precisely because the authorities can act in this targeted and pre-emptive way, and because our public finances are under control, that the Bank can keep overall interest rates lower for longer and support the rest of the economy.
Investing in the physical infrastructure of our country is critical to our future. But in this global economy, it is better education and skills that hold the key to long-term national success. This week’s programme for international student assessment—PISA—scores show how much ground this country has to make up. My right honourable friend the Education Secretary is doing more to transform school standards and raise the aspirations of pupils from the poorest families than anyone who has done that job before him. His expansion of free schools and academies has the full backing of this Chancellor.
We also know that children do better at school when they have a proper meal inside them. This autumn Statement has found the financial resources to fund the expansion of free school meals to all schoolchildren in reception, year 1 and year 2, announced by the Deputy Prime Minister and supported by me.
But today we also focus on what happens when our young people leave school—and we do more to help them. First, we will not abandon those who leave school with few or no qualifications. At present, Jobcentre Plus does almost nothing to help 16 and 17 year-olds who are not in work or education. We will change that and will now fund the jobcentres to support these very young adults to find an apprenticeship or a traineeship.
Without basic maths or English, there is a limited chance any young person will be able to stay off welfare, so we are taking a new approach. Starting in some areas at first, anyone aged 18 to 21 signing on without those basic skills will be required to undertake training from day one or lose their benefits. If they are still unemployed after six months, they will have to start a traineeship, take work experience or do a community work placement—and if they do not turn up, they will lose their benefits.
A culture of worklessness becomes entrenched when young people can leave school and go straight on to the dole with nothing expected in return. That option is coming to an end in our welfare system.
The second reform is to apprenticeships. We have doubled the number of apprenticeships and now we will transform the way they are provided by funding employers directly through HMRC. I can tell the House there will now be an additional 20,000 higher apprenticeships over the next two years. I can also announce a big expansion of start-up loans, through which a new generation of entrepreneurs is being created: 50,000 more people will be helped to fulfil their aspiration to start their own business. We are extending the new enterprise allowance, too.
This year is also the 50th anniversary of the Robbins report, which challenged the nonsense that university was suitable only for a small few. In 1963, Robbins said:
‘Courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so’.
That was true then, and I believe it should remain true today. Our reforms to student loans, difficult as they were, have put our universities on a secure footing. Some predicted that applications from students from poor backgrounds would fall. Instead, I can report that this year we have had the highest ever proportion of young people from disadvantaged backgrounds applying to university.
But there is still a cap on aspiration. Each year, about 60,000 young people who have worked hard at school, got the results, want to go on learning and want to take out a loan to pay for it are prevented from doing so because of an arbitrary cap. That makes no sense when we have a lower proportion of people going to university than even the United States, let alone countries such as South Korea. Access to higher education is a basic tenet of economic success in the global race, so today I can announce that next year we will provide 30,000 more student places, and the year after we will abolish the cap on student numbers altogether.
Extra funding will be provided to science, technology, and engineering courses. The new loans will be financed by selling the old student loan book, allowing thousands more to achieve their potential.
Education underpins opportunity. It is business that provides those opportunities and the best way to help business is by lowering the burden of tax. KPMG’s report last week confirmed for the second year running that Britain has the most competitive business tax system in the world. Some in this House suggest that our response to this good news should be to increase corporation tax from 20%. Today, we publish the first of our studies into the dynamic effects of tax changes that shows that our corporation tax cuts increase investment and raise productivity—so much so that more than half the cost of the tax cut to the Treasury will be recovered because of higher growth. Putting up corporation tax hits investment, cuts productivity, costs jobs and raises much less. We thank the honourable Members for their submission, but we think it would be economic madness to pursue it.
Quite the reverse, today we take further steps to make our business taxes yet more competitive. The Budget announcement that we would abolish stamp duty on AIM shares was applauded around the world. Today, we also abolish stamp duty for shares purchased in exchange traded funds to encourage those funds to locate in the UK. We are making our successful film tax relief even more generous, and looking to extend the principle, including to regional theatre. We set out major reforms to encourage employee ownership of the kind that makes John Lewis such a success. And from April, we will be one of the first countries in the world to introduce a new tax relief for investment in social enterprises and new social impact bonds. I want to thank Sir Ronnie Cohen and my honourable friend the Charities Minister for all their help in putting this innovative scheme together.
Business rates impose a heavy burden on businesses of all sizes. Today, we will help ease that burden—and here is how. The last Government wanted to halve small business rates relief—a relief that helps cut rates bills for half a million companies and means a third of a million of the smallest businesses pay no rates at all. If we had followed that plan, small businesses would have faced a rate increase of up to £3,375. So we have rejected that plan. Instead, we have extended that rate relief scheme year after year. It was due to expire next April. We will now extend it for another whole year. We have also listened to the small business groups and will relax the rules that discourage these firms from expanding and opening extra premises.
But that does not go far enough. All businesses are expecting rates to rise by 3.2% next year. Instead, I will cap the inflation increase in business rates for all premises at 2% from next April. We will also allow businesses to pay their rates in 12 monthly instalments. We will clear almost all the backlog of valuation appeals by July 2015, with reform of business rates on the agenda for 2017 revaluation.
There is one group of businesses that has found the recession especially hard, as it has coincided with a rising challenge from the internet that is only getting stronger. These are our local retailers—the shops, the pubs and the cafés that make up our high streets across Britain. With Small Business Saturday this weekend, I want the Government to do all we can to help them. We are already changing the planning rules to help town centres compete. To get the vacant shops that blight too many town centres to open again, I am introducing a new reoccupation relief that will halve the rates for new occupants.
But we can do more, and I want to thank my honourable friends the Members for Wolverhampton South West, Nuneaton, Hastings and Rye and many others for their campaign. Like them, I also want to help those who have struggled hard on our high streets—often working long hours for not enough in return. So I can announce today that for the next two years every retail premise in England with a rateable value of up to £50,000 will get a discount on their business rates. This discount will be worth £1,000 off their bills.
This is what we offer: business rates capped; for the smallest firms, no rates at all; and help for the high street, with £1,000 off for small shops, pubs, cafés and restaurants across our country. The people in these businesses epitomise the hard-working values this Government support, and we are backing British businesses all the way.
And we are backing British families. Next April, the personal allowance will reach £10,000. This Government are delivering an income tax cut worth up to £700 a year to over 25 million hard-working people. Under the last Government, council tax doubled. We are now helping councils freeze it for the whole of this Parliament. Tax-free childcare is being introduced and free school meals are on their way. But there is more we are doing to help.
This autumn Statement confirms that from April 2015 we will introduce a new transferable tax allowance for married couples. Available to all basic rate taxpayers, it enables people to transfer £1,000 of their personal allowance to their wife, husband or civil partner. It is just a start. And I confirm today that we will introduce a new uprating mechanism that ensures the new married couples tax allowance is automatically increased in proportion to the personal allowance. Four million families will benefit, many of them among the poorest working families in our country. This measure, along with the others we take today, ensures that across this Parliament our policies are progressive, showing that we are all in this together, with the very rich paying the most.
We are also helping families with their energy bills, not with a transparent con by pretending that we can control the world oil price, but instead by focusing on the thing that Government can and should control—the levies and charges that previous Energy Secretaries piled on bills. This week we deliver on the promise made by the Prime Minister to roll back those levies. The result: an average of £50 off family bills. We are doing this in a way that supports the lowest income families, reduces carbon, supports investment in our energy infrastructure and, as the document shows, does not add a penny to the tax bills that families pay. My political philosophy is clear: instead of penalising people with more taxes and more regulation, give them incentives by reducing their taxes and their bills. As I have often said, going green does not have to cost the earth.
That brings me on to fuel duty. We inherited from the previous Government the hated fuel duty escalator that would have inflicted hardship on families and small firms alike. Instead of those rises, we abolished the escalator, and we have cut and then frozen fuel duty. I have had further representations from many honourable friends, from the Member for Blackpool North and Cleveleys, to the Member for Argyll and Bute, and of course the Member for Harlow, who is a champion of the people he represents.
I said earlier this autumn that if we could find the money, I would like to go on freezing duty. Today I can report that because we have taken difficult decisions to control the public finances, I can deliver on that promise. Next year’s fuel duty rise will be cancelled. Instead of petrol taxes going up by 2p a litre, they will stay frozen. That means that, compared with the previous Government’s plans, petrol will be 20p a litre less. That is £11 less every time you fill up—a saving for drivers over this Parliament of £680, and double that for a small business with a van.
Cancelling fuel duty rises has been a major priority of the Government—a £22 billion demonstration that we are on the side of hard-working people in this country. A married couples allowance; £50 off energy bills. We are helping those who drive a car and we are helping those who get the train, too. Fares next January were going to go up by 1% above inflation. We are going to keep average fares flat in real terms.
We on the government Benches know that there is one thing more than any other that has supported families through these difficult times, and that is being in work. At the heart of our economic plan is support for the creation of more jobs. That is why we opposed the last Government’s plan to increase the jobs tax. That is why we reversed the most damaging part of that increase in the very first Budget after we came to office. That is also why in the last Budget I introduced the employment allowance, which eliminates the jobs tax for half a million small businesses. And that is why we will go further still. We are going to abolish the jobs tax on young people under the age of 21. Employer national insurance contributions will be removed altogether on a million and a half jobs for young people. We are not going to leave young people behind as the economy grows. We are going to have a responsible recovery for all.
The cost for a business of employing a young person on a salary of £12,000 will fall by over £500. For someone on £16,000, that is over £1,000 off. I want to commend my honourable friends for Braintree and Carlisle and the Million Jobs campaign for highlighting this issue. The change requires legislation. It will come into force in April 2015, and it will not apply beyond the upper earnings limit.
This country is working through its long-term plan: bringing down the deficit and dealing with the debt; spending less on welfare and making the big decisions on infrastructure; living within our means and cutting tax on business; making work pay and letting people keep more of what they earn; and with confidence in the next generation, as they make their way in education and in the workplace. This Statement shows that the plan is working. It is a long-term plan for a grown-up country. But the job is not done. By doing the right thing, we are heading in the right direction. Britain is moving again. Let us keep going.”