Fuel duty rise scrapped, beer cheer and help for house buyers - but it’s slow growth

But he also painted a gloomy picture for the economy, as the official growth forecast was slashed in half and George Osborne admitted the recovery was taking “longer than anyone hoped”.

He confirmed that September’s planned fuel duty rise has been scrapped.

He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

And he brought forward a rise in the personal allowance to 2014, meaning no income tax is paid by anyone on the first £10,000 of their earnings.

He also announced a new employment allowance which will take the first £2,000 off employer National Insurance bills for every company in the country - a move he described as “taking tax off jobs”.

Mr Osborne said the economy would grow by just 0.6% this year - down from the previous forecast of 1.2% - and would be slower than forecast next year at 1.8% compared to the 2% forecast at the time of the Autumn Statement.

But he delighted supporters by cutting Corporation Tax to just 20 per cent, one of the lowest levels of any G20 country.

The Chancellor also announced a dramatic plan to boost home ownership by underwriting 95 per cent mortgages and supporting £130 billion of loans to people who cannot afford a big deposit.

First-time home buyers were also given good news as the Chancellor outlined plans to breathe life into the ailing housing market and boost the construction industry.

A new help-to-buy scheme for those struggling to find mortgage deposits will include £3.5 billion for shared equity loans, and a Government interest-free loan worth 20% of the value of a new-build house.

The Chancellor said the scheme will be available to everyone who wants to buy a home from next year.

A new mortgage guarantee, sufficient to support £130 billion of loans, will help people who cannot afford a big deposit.

The Government will also offer interest-free loans for five years for those wanting to buy new-build homes.

The loans will be available to those who can find a 5% deposit with the loan worth up to 20% of the value of a home worth up to £600,000 and repayable when it is sold.

He insisted today’s package was a “Budget for people who aspire to work hard and get on”.

He added: “Today, I’m going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them.”

Mr Osborne delivered his Budget to a rowdy House of Commons in which the deputy speaker was forced to intervene repeatedly and some MPs apparently clutched the front page of London’s Evening Standard, which had helpfully been supplied with full details of the Budget in advance.

Mr Osborne said the economy would grow by just 0.6% this year - down from the previous forecast of 1.2% - and would be slower than forecast next year at 1.8% compared to the 2% forecast at the time of the Autumn Statement.

The sluggish growth figures mean borrowing will be higher than expected - hitting £114 billion this year compared to a previous forecast of £108 billion.

Next year borrowing will be £108 billion as against the £99 billion previously predicted, before dropping down to £42 billion in 2017-18 compared to £31 billion forecast in the Autumn Statement.

But the Chancellor predicted the deficit would continue to come down thanks to the “many tough decisions” taken by the Government.

He said the deficit had fallen from 11.2% of GDP in 2009-10, to a forecast of 7.4% this year - a fall of a third.

And he predicted it would fall further to 6.8% next year, 5.9% in 2014-15, 5% in 2015-16 and 3.4% the following year - reaching 2.2% by 2017-18.

He confirmed that the remit of the Bank of England’s Monetary Policy Committee would be updated to allow it to use “unconventional monetary instruments” to support the economy while keeping inflation stable.

He confirmed that Whitehall budgets would be cut by 1% after a £11 billion underspend this year, with protection for schools and health.

Money saved will be pumped into infrastructure projects, he said.

And he said the public sector pay cap of 1% would be extended by one year in 2015/16.

But military personnel would receive their full recommended increase in May.

On energy, the Chancellor announced a boost for the controversial shale gas industry, which collects gas using a process known as fracking.

Mr Osborne said the “generous new tax regime” would include a shale gas field allowance.

He said: “Shale gas is part of the future. And we will make it happen.”

Declaring “Britain is open for business”, the Chancellor announced a series of measures designed to boost commerce, including a 1% cut in corporation tax to 20% in April 2015.

And he confirmed more measures aimed at curbing tax dodging, claiming it was “one of the largest ever packages of tax avoidance and evasion measures presented at a Budget”.

Other measures announced today included:

• Bringing forward the £144 flat rate pension to 2016.

• Help for Equitable Life policy holders extended to those who bought with-profits annuities before 1992, with payments of £5,000 and an extra £5,000 for those on lowest incomes.

• A cap on social care costs to come in in 2017 and protect savings above £72,000.

• A new Help-to-Buy scheme for those struggling to find mortgage deposits.

Detailed borrowing figures released by the Office for Budget Responsibility (OBR), which exclude interest payments made to the Treasury by the Bank of England on Government debt bought up under the quantitative easing scheme, show the Chancellor is set to borrow £55.7 billion more over the next five years than he was planning at the time of the autumn statement.

The OBR now expects borrowing next year to come in at £120 billion, compared to the £112 billion previously forecast, falling to £108 billion, £96 billion, £67 billion, and £43 billion in subsequent years.

It confirmed that Mr Osborne would miss his target for total public sector debt to start falling as a percentage of national income by 2015/16 - the year of the next general election.

It now predicts that debt will rise to a peak of 85.6% of GDP - £1.58 trillion - in 2016/17, an increase of 6.4% on the previous forecast.

Labour leader Ed Miliband attacked a “more of the same” Budget from a “downgraded Chancellor”.

He seized on growth forecasts from the Office for Budget Responsibility which had been slashed from 1.2% this year to 0.6% and said “Britain deserves better” than it was getting from the coalition Government.

“Every Budget he comes to this House and things are worse, not better for this country,” Mr Miliband said.

“Compared to last year’s Budget: growth last year down, growth this year down, growth next year down, growth in 2015 down.

“All he offers is more of the same: higher borrowing, lower growth ... a more of the same Budget from a downgraded Chancellor.”

He added: “Britain deserves better than this.”

Mr Osborne was cheered by MPs from both the Tory and Liberal Democrat wings of the coalition.

The Lib Dems’ cherished policy of a £10,000 income tax threshold will be introduced from 2014 and Tories cheered a £2,000 allowance for firms before paying employer National Insurance contributions, a move Mr Osborne described as “taking tax off jobs”.

There was also a 1p cut in beer duty and extra support for people wanting to buy homes.

But Mr Osborne told MPs there were “no easy answers” to the country’s economic problems.

He said: “This is a Budget for people who aspire to work hard and get on.

“It’s a Budget for people who realise there are no easy answers to problems built up over many years, just the painstaking work of putting right what went so badly wrong.

“Together with the British people we are slowly but surely fixing our country’s economic problems.”