Presenting his second budget to Parliament, Osborne says that the economy would grow by 1.7% in 2011 and 2.1% next year. November estimates put growth at 2.1% and 2.6% respectively.
Inflation, he adds, would remain above target at between 4 and 5% this year before dropping to 2.5% in 2012. Rising oil prices were blamed.
To stimulate growth in the economy, Osborne announced that corporation tax will be cut by 2 percentage points to 26% from April, up from the 1 point originally planned. A levy on banks will pay for it.
Osborne, in a bid to bolster faltering consumer confidence amid concern over price rises, also announced a 1p per litre cut to fuel duty, while the 4p per litre rise planned for April was scrapped. It will be paid for by a £2bn tax on North Sea oil and gas.
Measures to cut the regulatory burden on start-ups were also promised, while the number of enterprise zones, which offer discounted business rates, will be increased from 10 to 21.
The Government remains committed to clearing the bulk of the budget deficit by 2015, Osborne says, despite admitting that public borrowing will not fall as steeply over the next four years as was hoped.
Rafts of measures were unveiled in an emergency budget in June last year designed at cutting public spending, including freezing spending on marketing.
Osborne told MPs: “Last year’s emergency budget was about rescuing the nation’s finances, and paying for the mistakes of the past.
“Today’s Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future.”
Labour leader Ed Milliband, however, says the reduced growth forecast was proof that the focus on cutting the deficit was not working.
Business body the CBI welcomed the budget, adding that it “will help businesses grow and create jobs”.
- 1p per litre cut to fuel duty
- Tobacco duty to increase 2% above inflation
- 4p per litre rise in duty planned for April scrapped
- No personal tax increases
- 50% top rate of tax to stay
- Corporation tax to be cut by 2 percentage points
- Alcohol duty escalator to stay meaning price rises likely
- 21 enterprise zones to be created
- Measures to help 10,000 first-time buyers get on the property ladder