First Budget Amid Record Spending Cuts

By Ben Aulakh

Chancellor George Osborne delivered his first budget on Wednesday, amid the deepest and most severe deficit reduction measures in British history.

The budget statement was delivered as £81 million of spending cuts, announced in October’s Comprehensive Spending Review, have begun to bite.

However the Chancellor attempted to reach out to motorists and small companies with a 1p cut in fuel duty, and a continuation rate of the rate relief holiday for businesses.

The planned inflationary rise in fuel duty was also delayed until October next year, while the fuel duty escalator, which adds a penny on top of price rises each year, was also abolished for the rest of this parliament.

The 1p reduction will be paid for with a supplementary charge of 12 per cent on North Sea oil and gas production, up from 20 per cent to 30 per cent overall.

The personal tax allowance for individuals will also rise from £7, 745 to £8, 105; while Mr Osborne vowed to close tax avoidance loopholes, a move which is expected to raise the government an extra £1 billion.

The Chancellor also announced predictions from the Office for Budgetary Responsibility, which estimate that the economy will grow by 1.7 per cent this year, rising to 2.5 per cent next year, and 2.9 per cent in 2013 and 2014.

The OBR also predicted that borrowing will fall from £146 billion this year to £122 billion next year, with the government expecting the deficit to have been eliminated by 2016, leaving a surplus of 0.4 per cent.

Plans were also announced for the creation of 10 ‘Enterprise Zones,’ which will include London, Manchester and Birmingham.

An extra £200 million of investment for regional railways has also been announced, with £100 million promised to councils to help repair potholes caused by the ice and snow in November and December last year.

Corporation tax will also be reduced by 2 per cent, to the lowest level of any G7 nation, while Income Tax and National Insurance Contributions are to be merged.

There was also an attempt to woo public sector workers with a pay rise of £250 for soldiers, NHS workers, prison staff, and teachers and civil servants earning less than £21, 000.