UK Politics

Budget 2011: George Osborne cuts fuel duty

Chancellor George Osborne has cancelled next month's planned 4p rise in fuel duty in what he has billed his "Budget for growth".

A further 1p will be cut from pump prices immediately - all paid for by a £2bn tax on oil companies.

But he did not halt planned rises in alcohol and tobacco tax - 4p on a pint of beer and 15p on a bottle of wine.

The chancellor was forced to downgrade his growth forecasts - prompting mockery from Labour leader Ed Miliband.

"Every time he comes to this House growth is downgraded," said Mr Miliband to cheers from Labour MPs.

Mr Osborne said he wanted his Budget to "put fuel into the tank of the British economy" - and, in a flourish reminiscent of his Labour predecessor Gordon Brown, waited until the end of his speech to unveil the bigger than expected fuel duty cut.

He told MPs "the cost of filling up a family car such as a Ford Focus has increased by £10" and he said he wanted to ease the burden on hard-pressed families.

Labour pointed out that January's VAT rise had already added 3p to the price of a litre of petrol this year.

Mr Osborne set out a series of measures to boost enterprise - including a further cut to corporation tax, which will go down by 2% rather than 1% in April.

He also more than doubled the number of planned Enterprise Zones - from 10 to 21 - to bring discounted business rates to some of the most deprived parts of England.

But the chancellor's hands were tied by last year's Spending Review and his post-election Budget, which locks Britain into spending cuts to tackle its record budget deficit.

And he had to balance any giveaways with tax raising measures - including a crackdown on tax avoidance - in what aides were calling a "steady-as-she-goes" package.

He also revealed that he now expected Britain's economy to grow at a slower rate than previously expected this year with the Office for Budgetary Responsibility cutting its growth forecast for 2011 from 2.1% to 1.7%.

The chancellor said he would not increase tax on wine and beer above what was already announced by the previous Labour government - adding 4p to a pint of beer, 15p to a bottle of wine and 54p to spirits.

Cigarette smokers saw a jump of up to 50p on a packet of 20 from 1800 GMT as the chancellor stuck to Labour's previously announced plans to raise tobacco duty by 2% above inflation.

Mr Osborne continued the changes to tax thresholds introduced last year by increasing the amount people can earn before paying tax by about £600 from April 2012.

He also pledged £250m to help 10,000 first-time homebuyers purchase newly built flats and houses in England.

The buyer would have to put up 5% of the cost, while the government and home builder would both put up 10%, in a move aimed at boosting the construction industry.

A scheme to help out-of-work homeowners with mortgage arrears, introduced by the previous government, will also be extended.

There will also be sweeping changes to the planning system - to make it more difficult for local people to block "sustainable development" and easier for builders to convert commercial property into housing.

During his speech, which lasted just under an hour, he said Britain's record budget deficit was not shrinking faster than expected, as some had predicted.

"The size of the task of repairing Britain's finances is unchanged," said Mr Osborne.

He also sent a signal to right-wing critics in his own party who have been calling for the 50p top tax rate to be scrapped, saying it would "do lasting damage to our economy if it were to become permanent".

Labour leader Ed Miliband mocked Mr Osborne's claim to have delivered a Budget for growth, saying the government's cuts were damaging the economic recovery.

He said: "One fact says it all and he couldn't bring himself to say it: Growth down last year, this year and next year.

"It's the same old Tories - it's hurting but it isn't working."

The Institute for Fiscal Studies calculates that measures due to come into place in April 2011 will be equivalent to a loss of £200 per household on average. However, that figure rises to £480 per household if the January rise in VAT is included.

At the same time as Mr Osborne made his statement to the House of Commons, the Treasury published its long-awaited "strategy for growth".

TUC General Secretary Brendan Barber welcomed some of Mr Osborne's measures - such as a boost for apprenticeship and the fuel duty cut - but said that, overall, it had been a "no-change Budget".

"Today's measures do nothing to end the basic error of imposing deep, rapid and unfair spending cuts on an economy where unemployment is rising and growth faltering," he said.

The Budget was welcomed by most business groups, who said it would create jobs - but there was anger from oil and gas producers, who claimed the tax hike on their product would damage a vital UK sector.

Malcolm Webb, chief executive of trade body Oil and Gas UK, said: "This change in the tax regime will decrease investment, increase imports and drive UK jobs to other areas of the world."

And Scottish finance minister, the SNP's John Swinney, accused the chancellor of using North Sea oil revenues to fuel his Budget, while giving Scotland "far too little in return".

Plaid Cymru said there was little in Mr Osborne's budget to help ease the "destructive effect" on Wales of the spending cuts announced last year.

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