Chancellor George Osborne, fresh from a decisive election victory, pledged to recast the country’s economy by chopping welfare spending, lowering the tax bill for workers and tackling low productivity that could undermine the recovery.
In the first solely Conservative budget for nearly 20 years, Osborne used the turmoil in Greece to argue that the world’s fifth-largest economy needed less spending and less borrowing.
“Britain still spends too much, borrows too much,” Osborne told Parliament.
“You only have to look at the crisis unfolding in Greece as I speak, to realise that if a country’s not in control of its borrowing, the borrowing takes control of the country,” he said.
The budget offers Osborne an opportunity to boost his chances of becoming Britain’s next prime minister if David Cameron steps down before the next election in 2020 as he has said he will.
In steps that drew cheers from Conservative lawmakers and a smile from Cameron, Osborne raised the amount of earnings that are exempt from income tax to £11,000 from next year and the inheritance tax threshold on family homes to the £1 million mark.
He also pledged to cut corporation tax to 19 per cent in 2017 and 18 per cent by 2020 from 20 per cent currently.
Osborne said the economy was forecast to grow 2.4 per cent this year, down from an earlier forecast of 2.5 per cent, and 2.3 per cent next year, unchanged from an earlier forecast, a rate he said was faster than other major industrialised countries.
Britain’s budget deficit of nearly five per cent of economic output in the 12 months to March is one of the biggest among rich economies.
If a country’s not in control of its borrowing, the borrowing takes control of the country
Osborne pushed the target of achieving a budget surplus into the 2019/2020 financial year from the 2018/2019 financial year as projected under his previous budget plan. Osborne, who has previously said he wants to tackle Britain’s hefty bill for tax rebates to low-paid workers, said he would freeze working-age benefits for four years.
“The benefits system should not support lifestyles and rents that are not available to the taxpayers who pay for that system,” he said.
Osborne is hoping that a recovery in earnings from the effects of the financial crisis will continue in the coming years, helping to offset the loss to incomes from tighter welfare spending.
Turning his focus to the wealthy, Osborne said Britain would abolish the permanent non-domiciled tax status which many rich foreigners had used to reduce their UK tax bill.
The share price of firms associated with the housing market – such as property website Zoopla and house builders Crest Nicholson, Foxtons and Berkeley – fell after the non-dom tax change.
Osborne also pledged to gradually reduce the bank levy rate, though he said he would introduce a new eight per cent surcharge on bank profits.