Osborne defends budget as UK debt to grow

Labour leader Jeremy Corbyn said the Budget was the "culmination of six years of his failures" and had "unfairness at its very core"

Osborne defends budget as UK debt to grow

altogetherfool, Flickr

British Chancellor George Osborne has defended his credibility following his eighth Budget as the highly regarded Institute of Fiscal Studies prepares to give its verdict on his announcements.

He said it was "not fair" to suggest he had only introduced the sugar tax to distract from the dire state of the nation's finances.

Mr Osborne was forced to admit he had broken one of his fiscal rules and Government debt will rise as a proportion of GDP this year - while economic growth forecasts have been revised down sharply.

But he has insisted the country can still be in surplus by £10bn by 2019/20 - despite a £55bn black hole in the nation's finances after growth and income revisions.

Mr Osborne told Sky News: "People can judge me and this Government by what's happened to the British economy. Five years ago the British economy was in a total mess, in crisis, today it's growing more strongly than other major economic countries."

Labour leader Jeremy Corbyn said the Budget was the "culmination of six years of his failures" and had "unfairness at its very core".

One of the more high-profile announcements was a sugar tax on soft drinks, which will raise £520m for school sports and longer school days.

At the same time the Chancellor said fuel duty would be frozen for the sixth year running along with the levy on beer, cider and whisky.

Chef Jamie Oliver, a vocal campaigner for a sugar tax, said the Chancellor's announcement that he will tax the soft drinks industry was "amazing news".

But Gavin Partington, director general of the British Soft Drinks Association, said the move was "extremely" disappointing.

Defending the Government's austerity drive, the Chancellor said this had enabled the Government to give tax cuts to millions of families with the personal allowance rising to £11,500 next year and the higher 40p rate going up to £45,000.

Unveiling changes to business taxes Mr Osborne announced corporation tax would fall to 17% by April 2020.

On education, Mr Osborne announced maths could be made a compulsory subject for students until the age of 18.

In a move that outraged Tory eurosceptics, Mr Osborne also used his set-piece speech to argue the UK will be "stronger, safer and better off" inside a reformed EU.

The Chancellor warned against putting at risk the hard work taken to make the economy strong again by quitting the bloc.

The ISA limit will be increased to £20,000 a year while lifetime ISAs will be introduced from April 2017 for people aged under 40, which would be topped up by the Government by £1 for every £4 saved until they reach the age of 50.

Insurance premium tax is to be increased by 0.5% to generate £700m for flood defences.

In help for the oil and gas industry, which has been hit by falling global prices, Mr Osborne said he was "effectively abolishing Petroleum Revenue Tax".

In a sideswipe at the Scottish nationalists, he said: "We are only able to provide this kind of support to our oil and gas industry because of the broad shoulders of the United Kingdom."

Mr Osborne said he would introduce additional spending cuts totalling £3.5bn by 2020 - lower than the £4bn expected.

Forecasts for UK economic growth have been downgraded. In 2015 it has been reduced from 2.4% to 2.2%, from 2.4% to 2% in 2016, from 2.5% to 2.2% in 2017, from 2.4% to 2.1% in 2018 and from 2.3% to 2.1% in both 2019 and 2020.

Meanwhile, forecasts for national debt as a proportion of GDP have been revised upwards in each of the coming years - from 81.7% to 82.6% in 2016/17 and in subsequent years through to 2020/21 when it rises from 71.3% to 74.7%.

The deficit - the amount the Government spends above what it brings in - is forecast to fall next year to 2.9%. In 2017/18, it falls to 1.9%, then it falls again to 1.0% in 2018/19.

This compares with forecasts for public sector net borrowing in the November 2015 Autumn Statement of 2.5% in 2016/17, 1.2% in 2017/18 and 0.2% in 2018/19.