Osborne offers some relief for taxpayers

UK BUDGET 2011:BRITISH CHANCELLOR of the exchequer, George Osborne, struggling with mounting inflation, low economic growth and national debt worries, concentrated yesterday on offering minor relief to low- and middle-income earners, with cuts in fuel duties, increases in tax allowances, along with some eye-catching taxes on oil companies.

However, Mr Osborne’s economic strategy of filling the gaps left by deep cuts to government spending with higher levels of activity in the private sector is now utterly dependent upon economic growth recovering strongly from 2013, two years out from the next scheduled general election, the Institute of Fiscal Studies warned last night.

In his speech to the House of Commons, the chancellor said he had been able to avoid any further increases in taxation for the majority because of tough action taken in two budgets last year, while the decision to increase the basic income tax threshold to £8,105 (€9,322) will save most taxpayers £126 per year.

Announcing a 1p cut in fuel duties, he postponed until next year a rise due to come into force next week that would have added 5p to the price of a litre. Instead North Sea companies now enjoying bumper profits will have to pay a £2 billion levy if international oil prices remain high, to keep prices down for motorists.

Illustrating the challenges facing him, the office of budget responsibility warned that economic growth this year and next will be lower than expected, while borrowing over the next five years will be £47 billion higher than previously predicted because of inflation-fuelled rises in welfare and lower tax revenues.

The budget would boost growth, he said, because of measures to encourage small businesses, including rates relief and tax write-offs for investment, along with the creation of nearly two dozen enterprise zones, while corporation taxes will be cut by 2 per cent this year, and not by the 1 per cent previously declared.

Wealthy foreigners living in the UK permanently classed as “non-domiciles” will have to pay a £50,000 annual charge if they have lived for more than 10 years in the UK, though they can qualify for exemptions if they invest in UK businesses; while owners of executive jets will be forced to pay air passenger taxes in future.

Ten thousand first-time buyers will get interest-free loans to help with deposits, though the housing charity, Shelter, last night said just 1 per cent of those “struggling to get on the housing ladder” would benefit, “leaving them more likely to win the lottery than to be helped through this small-scale scheme”.

Main Points

CORPORATION TAX

Corporation tax cut by 2 percentage points to 26 per cent this year, with a promise to reduce it to 23 per cent by 2014-15.

ENTERPRISE ZONES

21 “enterprise zones” to be created in deprived areas, where tax rates would be lower than normal.

OIL

1p cut from petrol pump prices, aided by a new £2 billion tax on oil companies.

CIGARETTES

Up to 50p added to the retail cost of a pack of cigarettes.

FIRST-TIME BUYERS

£250 million pledged to help 10,000 first-time buyers to purchase newly built houses and apartments in England.

MORTGAGE RELIEF

The previous government’s scheme to help unemployed homeowners with mortgage arrears to be extended.

NON-DOMICILES

Rich “non-doms” will have to pay a £50,000 annual charge if they have lived for more than 10 years in the UK.