The chancellor, George Osborne, described his budget as one that would reform and rebalance the economy while helping families with the cost of living.
Speaking in the House of Commons this afternoon, he announced a cut in income tax and an increase in the tax-free allowance. He also announced a cut in fuel duty and tried to make the most from a series of otherwise grim economic statistics.
Mr Osborne had sought to present today’s statement as a "Budget for growth". But earlier in the week, a double whammy of bad economic news made it more difficult for him. Official statistics put inflation at a two-year high of 4.4 per cent, while borrowing rose to £11.8 billion in February. However, the chancellor claimed that the size of borrowing would be slightly less than expected at £146bn.
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He opened his speech by stressing that this would be a budget which took the economy “from rescue to reform and reform to recovery”. He went on to confirm that his budget would be “about reforming the nation's economy, so that we have enduring growth and jobs in the future”. Mr Osborne described the prospects for growth and inflation as prepared by the Office for Budget Responsibility. The OBR forecast growth of 1.7 per cent for 2011, 2.5 per cent next year rising to 2.8 per cent in 2015. It also expects inflation to remain between 4 per cent and 5 per cent for most of this year, dropping to 2.5 per cent next year and 2 per cent in two years' time. However, Mr Osborne said he had written to the Bank of England’s governor, Mervyn King, to confirm that the Monetary Policy Committee inflation target will remain 2 per cent. The chancellor forecast that the national debt would amount to 60 per cent of national income this year and then peak at 71 per cent, before falling to 69 per cent by the end of the spending review period. He said that borrowing would fall to £122bn next year, then £101bn and falling to £29bn by 2015/16. He then announced that the budget abolishes 43 complex reliefs. On tax reform, he said that the UK had one of the most complex tax codes in the world. So he promised to simplify it, cutting more than 100 pages from the tax code “at a stroke”. The chancellor then announced that the government would consult on the merging of national insurance and income tax, something many businesses had been calling for. But he said that, because of the complexity, it would take “a number of years” to sort it out. Mr Osborne then announced that, from April, corporation tax will be reduced by 2 per cent, more than the 1 per cent previously announced. He said that it will be the lowest in the G7, adding: "Britain is open for business". He also said he would adjust the bank levy to ensure it is not a net gain for banks. The chancellor had good news for small business in particular, promising a three-year moratorium on “new domestic regulation”. He promised that the Enterprise Investment Scheme would be made more generous, with tax relief under this scheme going up from 20 per cent to 30 per cent. He added that entrepreneurs’ relief would go up to £10 million. Mr Osborne then said he would reform the tax rules covering foreign companies, adding “I want Britain to be the place international business go to, not the place they leave.” The chancellor said that the small business rate relief holiday was being extended by one year to October 2012, at a cost of £370m. He then promised that, in England, there would be 21 “enterprise zones”, not ten as previously reported. He added that local authorities there would be allowed to keep “business rate growth” in their zones. Mr Osborne went on to insist that the UK would become the first country in the world to introduce a carbon price floor for the power sector. Green taxes, he said, would increase as a proportion of total tax revenue and he went on to commit an extra £2 billion to the Green Investment Bank, which will start work earlier than planned, in 2012. The chancellor turned to pensions. He confirmed that the state pension age would be regularly increased, according to a pre-arranged mechanism. He said there would be a single-tier state pension introduced, worth around £140 a week. He said that the government accepted the recommendations of the Hutton review of public sector pensions, adding that he wanted the proposals also to apply to MPs. He added that he hoped there would be all-party support for this. On income tax, Mr Osborne announced that the personal tax allowance would go up by £630 to £8,105 next April. He said that this meant that over one million people will be taken out of tax altogether. He insisted that no additional people would be “pulled into the higher rate tax band”. He promised a change to inheritance tax, cutting the rate for people who leave 10 per cent of their estate to charity. He predicted that charities would raise £300m from this. Mr Osborne said that he wanted to make leaving 10 per cent of your estate to charity the new norm. Mr Osborne then turned to a range of duties. He promised no changes in the rates of alcohol duty and that tobacco duty would increase by 2p above inflation. He announced that, for air travel, the passenger tax would remain. There had been proposals to replace it with a plane tax, but all of the available options he considered were illegal under international law. The chancellor produced one major surprise at the end of his speech. Fuel duty had been due to go up by 1p a litre above inflation next week, but Mr Osborne says a government has to "listen and respond" when oil prices rise. So he announced that fuel duty would be cut by 1p a litre from tonight. He went on to announce a “fair fuel stabiliser” to be introduced from Thursday, raising an extra £2bn. The money raised would be used to abolish Labour's proposed fuel duty increases.Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day
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