George Osborne today announced plans to cut petrol duty by 1p per litre from six pm tonight and introduce a ‘fair fuel stabiliser’ to keep prices down over the longer term as part of a Budget he claimed would “reform Britain’s economy”.
Mr Osborne also announced plans to:
* Increase the amount people can earn without paying tax to £8,105 next year - representing a tax cut of £326 a year.
* Leave alcohol duties unchanged while increasing taxes on tobacco by 2 per cent above inflation.
* Freeze air passenger duty but impose it at a higher level for private jets.
* Spend £250 million on a new shared equity scheme which will help 10,000 first-time buyers purchase a newly built property, but who cannot afford the deposits.
* Allow people to leave 10 per cent of their income to charity when they die instead of paying it in tax.
* Find an extra £100 million for the repair of winter potholes in roads.
* Introduce new tax avoidance measures to save £1 billion a year.
* The total cost of Libyan operations will paid for out of Treasury reserves.
Much of Mr Osborne’s hour long speech was dedicated to outlining a range of tax and business reforms which he said would help business grow and encourage new investment in Britain.
These included cutting corporation tax by 2 per cent and eventually reducing it to 23 per cent – the lowest in the G7 as well as a proposal to merge income tax and national insurance contributions.
At the same time Mr Osborne painted a gloomier picture of the UK's economy than he had done previously and admitted the recovery would move at a slower pace than he had thought.
Based on figures from the Office for Budget Responsibility – the body the Tories created to provide independent economic forecasts - Mr Osborne said GDP growth estimates for 2011 had been cut from 2.1 per cent to 1.7 per cent, while 2012 was revised down to 2.5 per cent from 2.6 per cent.
However, he said in the longer term the outlook was more optimisitc as estimates for 2013 were held and forecasts for 2014 and 2015 were revised upwards to 2.9 per cent from 2.8 per cent and 2.8 per cent from 2.7 per cent respectively.
The Chancellor also revealed the rate of inflation, currently at 4.4 per cent, is not expected to drop back to the Government's two per cent target until 2013 - contrary to the Bank of England's belief it will fall back by 2012.
But the most surprising announcement was on fuel duty.
A new Fair Fuel Stabiliser to be introduced, funded by increasing the supplementary charge on North Sea oil and gas production from 20 per cent to 32 per cent from tomorrow.
The Stabiliser means the inflation rise in duty planned for next week will be delayed until next year while the April 2012 inflation rise will also be put back until the following summer.
The fuel duty escalator which adds an extra 1p on top of inflation every year will also be axed for the rest of the parliament.
However experts said the amount raised by the Treasury from the new tax would be greater than the amount passed on to motorists.
Mr Osborne also announced a raft of measures he said would make the UK the best place in Europe to start, finance and grow a business.
He confirmed a shake-up in planning regulations which will make all bodies involved in planning give priority to growth and jobs.
There will also be 21 new Enterprise Zones created where firm will be liable to tax relief and other benefits.
He confirmed the creation of a Green Investment Bank and pledged another £2 billion of funding, on top of the £1 billion already committed. However it will not be properly functioning as a bank for another few years as it will not be allowed to borrow on the money markets. Instead it will have to rely on central Government for funds.
On education he announced a doubling of the number of planned new University Technical Colleges from 12 to 24.
There will be a new squeeze on non-doms who have been accused of avoiding their fair share of tax using their special tax status.
The last government introduced a £30,000 charge for those who had lived here for seven years.
Mr Osborne said he was increasing the charge to £50,000 for non-doms who have been in the country for 12 years, a move he said would raise over £200 million in the coming years.
Mr Osborne's second budget was greeted by cheers on the coalition benches but was damned by Labour leader Ed Miliband,
He said: “It is the same old Tories. It is hurting but it isn't working”