Chancellor sticks to deficit-reduction plan in austerity budget

Chancellor of the Exchequer George Osborne unveiled his third austerity budget in a row on Wednesday, pledging the government's "unwavering commitment to deal with Britain's record debts."

Osborne said that Britain remained on course to virtually wipe out its budget deficit by 2017, helping him to cut the country's top rate of income tax from 50 percent to 45 percent.

Osborne said the economy would grow slightly better than expected this year, by 0.8 percent rather than 0.7 percent as was forecast by the Conservative-Liberal Democrat coalition government in November.

The Chancellor added that Britain would avoid recession this year despite an economic downturn for the neighbouring eurozone and noted that the government would borrow a little less than predicted in the fiscal year to April 2012.

"This budget reaffirms our unwavering commitment to deal with Britain's record debts," Osborne said at the start of his budget speech to parliament.

"But because we've already taken difficult decisions this can also be a reforming budget that seeks to repair the disastrous model of economic growth that created those debts."

Osborne said it was cutting the top rate of income tax that is levied on those earning above ?150,000 per year, arguing that the current level of 50 percent was damaging the economy.

"This (50 percent) tax rate is the highest in the G20," he said.

"It is higher not just than the tax rate of America, but also of major European countries like France, Italy and Germany.

"It is widely acknowledged by business organisations and international observers as harming the British economy." The new rate comes into force in April 2013.

The previous Labour government had raised the top rate from 40 percent to 50 percent following the global financial crisis in 2008.

Osborne had reportedly faced fierce pressure from Tory backbenchers and from business leaders to slash the top rate to help stimulate economic growth.

In a move seen as appeasing the Liberal Democrats, Osborne raised the point at which all workers begin to paying income tax -- to around ?9,205 -- by closing tax loopholes for the wealthy and increasing levies on property.

The coalition government will also cut corporation tax on company profits to 24 percent from 26 percent, starting next month, rather than to 25 percent as announced last year.

The coalition government has implemented huge public spending cuts and tax rises to slash a record deficit inherited from the previous Labour administration in 2010.

Osborne is also eager to preserve Britain's valuable AAA credit rating, that keeps state borrowing costs low, and avoid a Greek-style sovereign debt crisis.

Britain was set to borrow slightly less than expected this year as a result of government austerity measures, Osborne added in Wednesday budget.

Public sector net borrowing is predicted to reach ?126 billion in the current 2011/2012 financial year ending in April, Osborne told lawmakers.

The new borrowing forecast, provided by the Office for Budget Responsibility, marked a slight improvement from the previous estimate of ?127 billion that was given in November.

Borrowing is then forecast to drop to ?120 billion in the following 2012/2013 fiscal year, before falling to ?98 billion in 2013/2014.

Source: http://news.yahoo.com/austerity-budget-tax-cut-044010033.html

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