Mr Speaker, making Britain one of the best places in the world to do business, also demands a modern tax regime based on three clear principles: that our system is competitive, its simple and fair.

I confirm the main rate of corporation tax will be cut by 2p to 28p next year. This is the lowest in the G7.

Working with business, we need to do more. I am announcing three reviews proposing simplification to the tax system that will let 3 million self-employed people pay their tax and National Insurance contributions more easily and 500,000 businesses reduce their paperwork by removing a separate payroll. Taken together with other measures I am proposing today, this will save British business up to £100 million a year.

The capital gains tax regime here has continued to encourage investment and enterprise. I now propose reforms to make the system more straightforward and sustainable; to ensure it sets consistent incentives for investment and enterprise; and to ensure it remains internationally competitive.

The new code of conduct for private equity firms drawn up by Sir David Walker will be published next month and will set out much needed steps for increased transparency and disclosure.

I can tell the House the changes I propose to capital gains tax also, taken together with the tax loopholes that I am closing, will ensure that those working in private equity pay a fairer share.

So from April next year I will withdraw the capital gains tax taper relief, and in its place there will be just one rate of 18 per cent - one of the most competitive single rates of any major economy.

I am also proposing measures to combat income shifting, vehicle excise duty evasion, and tackle the exploitation of National Insurance exemptions.

Mr Speaker, I believe that it is right that everyone who lives and works here should pay their fair share.

I therefore propose to close a number of loopholes which have allowed some people to avoid taxes that everyone else has to pay.

Mr Speaker, non-domiciled taxpayers already pay about £4 billion on their earnings. Any proposal for change has to be fair, workable and affordable.

I have examined proposals to impose a flat rate annual charge of £25,000 on 150,000 non-domicile taxpayers which it is claimed could raise £3 1/2 billion.

There are in fact only 115,000 registered non-domiciles. If the charge of £25,000 was imposed, only an estimated 15,000 would earn sufficient money abroad to make it worthwhile to maintain non-domicile status.

As a result, the combined effect of people paying this charge or changing their tax status would be revenue not of £3.5 billion, but £650 million a year at most. A shortfall of more than £2 billion.

And such a charge could discourage men and women - doctors and nurses, businessmen and women - from coming to this country for short-term work and who do pay tax on their earnings here, and who do contribute to the country's wealth. We don't want to turn them away.

So I will now consult with a view to early legislation on an alternative route: * as a first step introducing a charge after seven years, then a higher rate after ten; * and preventing people claiming they are out of the country when they are actually here, from disguising income as capital and from claiming in effect two allowances; * and for completeness on a flat rate charge for everyone.

These alternative measures raise an average of £650 million.

Mr Speaker, two of the great challenges for this generation are the need to tackle climate change and poverty across the world.

Alongside the Pre-Budget Report, I am publishing the next stage of the implementation of the Stern review, setting out how Britain is meeting its environmental obligations.

We are already the only country to have met our Kyoto obligations - reducing our greenhouse gas emissions by almost a fifth since 1990.

Next month when the Climate Change Bill comes before the House, we will become the first country to introduce legislation on binding carbon budgets.

I am today increasing the budget for the Department for Environment, Food and Rural Affairs to £4 billion in three years time to help us tackle climate change and protect the countryside. I confirm that includes provision of £800 million a year by 2010 for flood defences.

We now need to move further and faster on the next stage of the European Emissions Trading Scheme. As part of that we propose to significantly increasing the use of auctioning of carbon allowances, as we move further towards a low carbon future.

Mr Speaker, the single largest factor for improving energy efficiency in Britain has been the climate change levy - which, by 2010, will reduce demand for energy from business and government by 15 per cent.

I can confirm the levy will rise in line with inflation next April. As before, we will continue to return its revenue directly to business. And we will go further by extending the climate change agreements for ten years to 2017.

Building on reforms to relate company car tax to carbon emissions, I am uprating the fuel benefit charge to further strengthen the environmental incentive to drive fewer miles.

And in order to encourage business to generate their own clean electricity, we will exempt investment in microgeneration from any reassessment between rates' revaluations.

To ensure Britain is at the cutting edge of the next generation of technology for low carbon electricity, we are today setting out the key criteria for the competition for Britain's first full-scale carbon capture and storage project, that could cut emissions from coal power by 90 per cent.

Mr Speaker, I want to see European-wide agreement to a lower rate of VAT, in Britain of 5 per cent, for the most enegry efficient products. So with the French government, I am writing to the Commission and other European countries today, and asking them to support our proposal.

Today, I am also publishing the interim report by Professor Julia King, which shows by choosing the most efficient cars on the market today drivers can cut emissions and their fuel bills by up to quarter. With new technology and cleaner power we could cut carbon emissions from cars by up to 80 per cent. I will bring forward proposals at the Budget after Professor King's final report, on ways to encourage the next generation of cleaner cars and incentives for people to buy them.