UK Politics

Budget 2013: George Osborne halves growth forecast but insists plan is working

Media captionGeorge Osborne : "I am going to level with people"

Chancellor George Osborne has insisted his economic medicine is working, despite being forced to slash growth forecasts for the UK in his Budget.

In a package of measures aimed at "those who want to work and get on" he cut corporation tax to 20% and froze petrol duty rises.

He also cut beer duty by 1p a pint and axed future above inflation rises, and unveiled measures to help housebuyers.

Labour said it was a "more of the same Budget from a downgraded chancellor".

Ed Miliband said Mr Osborne had broken the deal he made with the British public when the coalition came to power, that all the pain of austerity would be worth it when the "good times" returned.

"Three years on, what does he say? Exactly what he said three years ago," said the Labour leader.

"We still need four more years of pain, tax rises and spending cuts.

"In other words, after all the misery, all the harsh medicine, all the suffering by the British people, three years, no progress, deal broken."

Mr Osborne admitted it was taking longer than expected but insisted "we are, slowly but surely, fixing our country's economic problems".

He told MPs: "This is a Budget that doesn't duck our nation's problems. It confronts them head on. It is a Budget for an aspiration nation."

BBC Political Editor Nick Robinson said it was "a very political speech from a man in a very tight economic straitjacket".

In other Budget measures:

  • Mr Osborne said the UK would avoid a "triple dip" recession with growth in 2013 of 0.6% - half the 1.2% he predicted four months ago in his autumn statement
  • The UK's national debt will rise to 85% of GDP and not start coming down until 2017/18 - two years later than predicted when the coalition came to power
  • A new scheme starting next year aims to help about 75,000 people buy their own homes through shared equity, mortgage guarantees and interest free loans
  • Corporation tax will be cut from 21% to 20%, with the small company and main rate merged
  • A 1% public sector pay cap will be extended by an extra year to 2015/16
  • A petrol tax rise planned for the autumn has been scrapped
  • The alcohol duty escalator, which saw tax go up 2% a year above inflation, is axed for beer and 1p is cut from the price of a pint of beer

Figures from the Office for Budget Responsibility suggest the government's efforts to cut the deficit - the difference between money spent and earned in a year - have stalled and it will remain stuck at about £120bn for three years.

And Business Secretary Vince Cable refused to predict when the "age of austerity" might end - although he thought it "unlikely" to last until 2020.

Media captionEd Miliband: "A more of the same Budget from a downgraded chancellor"

It all meant Mr Osborne had little room for manoeuvre when it came to tax giveaways - but he found some extra cash by squeezing public spending further and other measures.

This allowed him to bring forward the introduction of a £10,000 income tax threshold by a year, to 2014 - in a move that pleased the Lib Dems, who campaigned on the issue at the last election.

Tory backbenchers cheered the announcement that small businesses would get a £2,000 allowance before paying employer National Insurance contributions, a move Mr Osborne described as "taking tax off jobs".

He ignored pre-Budget calls by Vince Cable and others to borrow more to boost growth with a big building programme.

But he did announce £2.5bn of spending on infrastructure paid for by a fresh public spending squeeze. Details of where the axe will fall will be announced in June when the government unveils its spending review.

He also announced that the Bank of England Monetary Policy Committee had been given an updated broader remit, but keeps its 2% inflation target.

Labour leader Ed Miliband mocked the chancellor's failure to make any reference to Britain's loss of its Triple A rating with credit agencies during his hour long budget speech.

He also asked the chancellor how details of the Budget came to be published via a tweet from the Evening Standard before the speech had been delivered.

Ahead of the Budget the government announced plans for some parents in the UK to be able to claim back up to £1,200 a year for each child - or 20% of childcare costs - from 2015.

Mr Cameron said the plans, expected to cost £1.4bn, would be a "boost direct to the pockets of hard-working families" but it has been criticised in sections of the press for penalising stay-at-home parents.

The Scottish National Party described Mr Osborne's statement as a "miserable Budget" which "just continues along the austerity path that is clearly failing".

Plaid Cymru said the £2.5bn in infrastructure spending was just a "fraction" of what was actually needed.

Green Party MP Caroline Lucas said it was "yet another Budget that treats the public with contempt, continuing to peddle the myth that our national debt and deficit increased due to excessive public spending rather than bank bailouts".

UKIP leader Nigel Farage dismissed Mr Osborne's statement as a "Budget for headline writers" that failed to tackle "the serious problems in our economy".

Meanwhile, members of the UK's largest civil service union, the Public and Commercial Services Union, are staging a 24-hour strike on Wednesday in a dispute over pay, pensions and working conditions.

Government departments, driving test centres, museums and job centres are among workplaces hit, while meetings at the Welsh assembly have been rearranged because Labour and Plaid Cymru members will not cross a picket line.

A rally was being held at Westminster while Mr Osborne delivered his Budget.