UK budget cuts corporation tax, hikes borrowing and knocks penny off a pint
UK CHANCELLOR George Osborne has warned that the UK economy will grow half as fast as expected this year as he admitted recovery was taking longer than hoped.
And he turned to the Bank of England to help boost the fragile economy, stating it may have to use "unconventional monetary policy instruments" as he unveiled the budget to a rowdy House of Commons. That is likely to push down the value of the pound still further, making it harder for Irish exporters to the UK.
The Conservative Party chancellor said gross domestic product will grow by just 0.6pc, down from the 1.2pc projected in December. Next year will see growth of 1.8pc, down from the 2pc predicted in the government's autumn statement.
The sluggish growth figures mean borrowing will be higher than expected, making the target for slashing the deficit set by the government much more difficult.
But the chancellor also unveiled measures to boost investment, including £3bn on infrastructure spending.
He also took aim at Ireland by slashing the corporate tax rate from 21pc next year to 20pc by 2015, following on from a 10pc rate on profits from patents due to come in next month.
Mr Osborne said the measures would make the UK "one of the most internationally attractive places to innovate."
"This is a Budget that doesn't duck our nation's problems," Mr Osborne said.
"It confronts them head on. It is a Budget for an aspiration nation. It is a Budget for a Britain that wants to be prosperous, solvent and free."
The chancellor predicted that the deficit would continue to come down thanks to the "many tough decisions" taken by the government.
He said the annual budget deficit had fallen from 11.2pc of GDP in 2009-10 to around 7.4pc this year – a fall of a third. He predicted it would reach 2.2pc by 2017 or 2018.
In good news for British consumers and Irish companies such as C&C, the price of beer has been cut with a planned 3p rise in beer duty scrapped and replaced with a 1p cut.
"We're taking a penny off a pint," he said.
Mr Osborne said the inflation target would remain at 2pc but added that he was launching a review of Bank of England's mandate and said it might need to use unconventional monetary policy instruments".
Other key budget measures included:
• Public sector pay cap of 1pc extended for another year.
• Measures to help house buyers including equity loans and mortgage guarantee to lenders.
• Capital gains tax relief for businesses who sell to their employees.
• Departmental budgets cut by 1pc, but schools and health budgets will be protected.
• Abolishing stamp duty on shares traded on growth markets such as the Alternative Investment Market, taking aim at Europe's planned financial transactions tax.
• Name and shame promoters of tax avoidance schemes.
• Tax-free childcare.
• From 2014, no income tax on the first £10,000 of a salary.
• Cancelling fuel duty increase.
Mr Osborne warned that further instability in the eurozone would hit Britain's economy hard.
But the Budget measures, which were leaked on the internet by the 'London Evening Standard' minutes before being officially announced, were condemned by Labour leader Ed Milliband.
He claimed Mr Osborne was the wrong man in the wrong place at the worst time for the country.
And he pointed out that no mention was made of Britain losing its prized AAA credit rating from Moody's.
"The chancellor has failed the test for the British people," Mr Milliband said.
"All he has to offer is more of the same Budget."
Accountants Ernst & Young said by slashing corporation tax, the chancellor was announcing that Britain was open for business.