IN TODAY’S budget the Chancellor announced he would be scrap the top rate of income tax and raise the threshold for when people start paying tax.
George Osborne opened his budget statement by promising wide-ranging tax reform, new infrastructure and a more balanced economy.
He told a packed House of Commons: ‘This budget rewards work’ adding that it ‘unashamedly backs business’.
The Office of Budget responsibility expects the UK to avoid recession and is revising up their forecast for growth in 2012 to 0.8 per cent.
For 2013, growth of two per cent is forecast and unemployment is expected to peak this year at 8.7 per cent.
George Osborne said: ‘Our deficit reduction plan is on course and we will not waver from it.’
He added: ‘We reinforce our commitment to fiscal responsibility.’
The Chancellor has claimed debt is forecast to peak at 76.3 per cent of GDP in 2014/15 and borrowing is £11bn less than forecast in the Autumn statement.
An extra £100m of improvements in the armed forces is announced.
The government is said to be saving 37bn in debt interest payments compared to its predecessor.
Mr Osborne said: ‘This country became seduced by large deficits and the illusion of cheap credit.
‘Do we have the national resolve to say no we will not be left behind, we want to be out in front.’
He added: ‘We must never allow protectionist rhetoric to creep into our political system.’
The budget will be fiscally neutral, Mr Osborne has insisted. Borrowing is set to be £11bn less than the last forecast, but there will be no spending spree. The money will be used to pay down Britain’s debt.
He also plans to find an extra £10bn in welfare savings in the next spending review.
Today the Chancellor announced extra money for armed forces families and their accommodation.
In his budget statement told the House of Commons that government spending in Afghanistan will be £2.4bn lower than planned over the rest of this parliament.
He also said an extra £100 million will go towards improvements in the accommodation of armed forces personnel and their families.
There was also a promise to double the families welfare grant which is used to provide additional support to the families left behind when people deploy.
However there was no mention of plans to increase the wages of service personnel.
Mr Osborne has said the government must confront the lack of airport capacity in the south east and added that he will work with Boris Johnson on new infrastructure projects in London.
The Chancellor added that he wants to turn Britain into ‘Europe’s technology centre’ and will provide new funding for television to prevent flagship programmes being made overseas. He received a huge cheer when he said: ‘We will keep Wallace and Gromit exactly where they are’.
As part of ‘the biggest reduction in business red tape ever undertaken’ the Chancellor said Sunday trading laws will be relaxed for the London Olympics.
Public sector pay will vary from region to region ‘to make our public sector more responsive and help our private sector to grow’ the Chancellor said.
Mr Osborne said: ‘The rich should pay the most and the poor the least.’
He is announcing what he called a ‘far simpler tax system’ by taxing small firms on a new cash basis and shortly publishing a consultation on combining taxes for businesses to make them less complex.
Tax loopholes and anomalies will also be closed, he said, on some VAT products, but will be kept for others such as food and children’s clothes.
The Chancellor said: ‘You can’t earn your future if you can’t get planning permission.
‘Global businesses have diverted investments because they couldn’t get planning permission here. That’s unacceptable. We’re replacing 1000 pages of guidance with 50 and bringing in a presumption in favour of sustainable development.’
Mr Osborne said he wants ‘a tax system which is more competitive for business than any other in the world’. From next year he will introduce a new tax credit for businesses and cut the rate of corporation tax to 24 per cent from next month. It will then be cut further to 22 per cent next year to provide ‘an advertisement for investment and jobs in Britain’.
He added that he will introduce a new bank levy so they do not take advantage of the corporation tax cut.
There will be no change to alcohol duty, but tax on all tobacco products will rise five per cent above inflation, adding 37 pence on a packet of cigarettes from 6pm tonight.
A new machine games gambling tax of 20 per cent will also be introduced but there will be no change to fuel duty.
Aggressive tax avoidance is ‘morally repugnant’ Mr Osborne said, so new measures for HMRC and an agreement with the Swiss will go along with a new tax avoidance rule due to be introduced next year.
The Chancellor said age-related allowances will be simplified. Many pensioners do not understand them, he said. A new single personal allowance for pensioners will be introduced and no pensioner will lose in cash terms. He added that the government wants to simplify the pensions system because it is too complicated.
A new single-tier pension worth about £140 will be introduced. It will be based on contributions and cost no more than the current system.
Mr Osborne said ‘A 50p tax rate can only be justified if it raises significant sums of money’ and added it was ‘harming the British economy’.
He said the higher tax band raised ‘next to nothing’ and and from April next year the top tax rate will be 45p. He said that five times as much will be raised from the rich after all the measures in the budget are taken together.
Mr Osborne said child benefit will only be withdraw when someone in a household earns more that £50,000, when it will be phased out gradually, and only those with an income of more than £60,000 will lose all of the benefit.
He added that the personal tax allowance will increase to £9,205, lifting all those below that threshold out of tax. He said they are now within ‘touching distance’ of their goal of £10,000.
Earlier the Chancellor also announced a new 15 per cent charge on people who buy homes in corporate envelopes and a new 7 per cent stamp duty will be introduced on homes worth more than £2m from tonight.
The Chancellor has concluded his budget statement and said everyone would ‘share in the effort and share the rewards’.
He added: ‘This country borrowed its way into trouble and now it’s going to earn its way out.’
Ed Milliband has started his response and said: ‘Today marks the end of “we’re all in it together”’.
He added: ‘The fairness test for this budget was whether the Chancellor used every penny he could to help low and middle income earners. He has failed that test.’
The Labour leader said: ‘Every time he comes to the house he offers a different excuse but the truth is his plan has failed.
He added: ‘How can the priority for our country be an income tax cut for the richest one per cent?’
Mr Miliband said: ‘This is a millionaire’s budget that squeezes the middle.’ And repeatedly added: ‘Same old Tories’.
He also asked the cabinet to put their hands up if they would be affected by the income tax cut.
Mr Miliband goaded the Prime Minister: ‘Now he’s going to be able to buy his own horse’.
Turning to Nick Clegg he said: ‘Only the Lib Dems could be dumb enough to think a George Osborne budget is a Robin Hood Budget.’
He said: ‘This budget will be remembered by his failure of growth and jobs and the top rate tax cut.’
He concluded his response by telling the Prime Minister the budget was the death knell for Compassionate Conservatism, he added that it was: ‘Unfair, out of touch and for the few not the many’.