George Osborne has announced a £1,100 increase in the personal tax allowance next April, and cut the top rate of tax to 45p, in a budget which he said would help Britain to “earn its way in the world”.
Osborne said the rise in the threshold to £9,205, which takes the coalition closer to its goal of a £10,000 allowance, was the largest in history and would help 24 million low-paid workers.
The chancellor also tried to neutralise political controversy about his decision to ditch the 50p top rate, by introducing a clutch of new tax measures aimed at the rich, including a 7% stamp duty rate for properties worth more than £2m, and a cap on the tax allowances top earners can claim.
Osborne said the 50p rate had distorted the economy by encouraging tax avoidance, and cutting it to 45p would only cost the exchequer £100m. “It raises at most a fraction of what we were told, and it may raise nothing at all.” He insisted the rich would pay five times more tax as a result of all the measures taken together.
Osborne’s third budget took place against the background of an economy struggling to recover from the deepest recession in a generation.
The chancellor announced that the independent Office for Budget Responsibility now expects economic growth to be slightly higher, at 0.8% this year, up from 0.7% in its autumn forecasts. However, next year, it is projecting 2% growth, weaker than the 2.1% it expected in November.
Stressing that he would stick to the government’s aggressive austerity programme, which Osborne said had enabled the Treasury to borrow at the cheapest rates in its history.
The budget statement was also peppered with help for struggling firms, as the chancellor insisted he was “unashamedly” pro-business.
He announced a larger-than-expected cut in corporation tax to 22p over the next three years, styling himself as the champion of British business, in a budget he said would help the country “earn its way in the world”.
The Chancellor also made reducing corporation tax, to signal Britain’s competitiveness to foreign investors, his first tax-cutting priority. The rate was already due to decline to 25% this year; it will now fall to 24%, and there will be a further two 1p cuts in the years ahead.
He also set out a battery of supply-side reforms, from simplified planning rules to public funding for ultra-fast broadband and support for the videogames industry, which the Treasury hopes will help kickstart economic recovery.
“Do we have the national resolve to say, ‘no, we will not be left behind, we want to be out in front’?” the chancellor asked, as he announced a new government target to double exports, to £1tn.