George Osborne today eased the pain on hard-pressed motorists as he cut fuel duty by 1p-a-litre in a budget designed to kick-start the floundering economy.
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In his “vision for growth” budget, the Chancellor said he was putting “fuel into the tank of the British economy” as he announced a £2bn tax raid on North Sea Oil profits.
With the average cost of petrol hitting an eye-watering 133.46p a litre - and diesel at 140.01p a litre - the Chancellor was under intense pressure to bring relief to motorists and not add to the transport costs of struggling businesses.
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To loud cheers from coalition MPs, Mr Osborne announced that Labour’s planned fuel tax rise was being delayed and instead duty will be CUT by 1p-a-litre from 6pm tonight.
He went on announce that the government’s controversial fuel duty escalator, which sees annual fuel tax increases, will be cancelled. It will only be restored if the oil price drops to below $75 per barrel.
Mr Osborne insisted the government was sticking to its tough £81bn cuts programme, adding: “This is not a tax raising budget but nor can we afford a give away.”
But in a major shot-in-the-arm for business, he announced that Corporation Tax would fall by 2% in April - 1% more than previously planned.
Corporation Tax will then fall by 1% each year for three years until it reaches a new rate of 23%.
A major thrust of Mr Osborne’s first March budget was to help families struggling to cope with crippling increases in the cost of living as inflation hits 4.4 per cent and wages stay static.
In a widely leaked announcement, the Chancellor increased the amount people can earn without paying tax by £630 to £8,105 next year.
This will lift 250,000 low earners out of paying income tax and benefit anyone earning less £115,000 a year.
When combined with a previously announced tax threshold change, the measure will mean that basic rate tax payers will be £126 a year better off in real terms from next spring – or £326 in cash terms.
Mr Osborne also pledged that no one earning less than £42,375 will be pushed into the higher tax band before 2015 - a move designed to protect the so-called “squeezed middle” form extra income tax,
The Chancellor said he was using cash raised by the government’s bank levy to pay for a new £250m fund to help first time buyers and resurrect the construction industry.
Ten thousand people buying newly built homes will receive 20% of the cost of the deposit from the government and the builder in low interest loans.
The number of first-time buyers fell to a record low of 347,000 in 2010.
And in a “historic” move, Mr Osborne announced a consultation on merging National Insurance and Income Tax.
“Our purpose is not to increase taxes, it is to simplify them,” he said.
But in a stark sign of the economies fragility, it was announced economic growth had been downgraded from 2.1% to just 1.7% this year, while the government is still expected to borrow £122bn next year