Budget 2012: Chancellor - We must stick to the course

He said: "We will earn our way in the world by providing new growth friendly planning rules." However, he warned of the risks posed by the Eurozone crisis and Iran. He said the Office for Budgetary Responsibility expected the UK economy to avoid a recession.

The OBR's growth figure for 2012 is 0.8 per cent and 2 per cent next year, and 2.7 per cent in 2014. According to the OBR, unemployment will peak at 8.7 per cent this year before falling back.

Inflation is expected to fall to 1.9 per cent next year - just below the Government's 2 per cent target. The deficit is also falling. "We must stick to the course," said Mr Osborne. "There will be no giveaways today."

"Some would have been tempted to spend the windfall. "I do not propose to spend it. Instead, I have used it to pay off debt. "We will also maintain our control on welfare spending. "The passing of the Welfare Reform Act two weeks ago was an historic moment. "I pay tribute to my Right Honourable Friend the Work and Pensions Secretary and to all my coalition colleagues for supporting him against determined opposition from those who defend unlimited welfare. "But even with the Act, the welfare budget is set to rise to consume one third of all public spending.

"If nothing is done to curb welfare bills further, then the full weight of the spending restraint will fall on departmental budgets. "The next Spending Review will have to confront this.

"So I am today publishing analysis that shows that if in the next Spending Review we maintain the same rate of reductions in departmental spending as we have done in this review, we would need to make savings in welfare of £10 billion by 2016.

"We will also address the rising costs of an ageing population, and the burden this places on future generations. "We will be publishing a White Paper on social care. I’ve also said that we would consider proposals to manage future increases in the state pension age, beyond the increases already announced. "I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity."

One area where future government spending is expected to be lower than planned is Afghanistan. Mr Osborne also announced a £100m improvement in Forces' accommodation.Forces serving overseas will also receive 100 per cent relief on the average council tax bill, and the families welfare grant will be doubled.

Among the transport infrastructure announcements was a plan to extend the electrification of the Trans-Pennine route.

The Get Britain Building Fund, which provides finance for construction, is to be expanded. The Finance Partnership is to be expanded by 20 per cent and the Enterprise Finance Guarantee will also be expanded.

The UK must ‘‘confront’’ the lack of airport capacity in the south east, said Mr Osborne. Announcements are due later this summer.

The Government is to support £150 million of tax increment financing to help councils promote development and provide an extra £270 million for the Growing Places fund.

Ultra-fast broadband and wi-fi is to be pioneered in ten of Britain's biggest cities, including Bradford.

New tax breaks and incentives for the film, animation and video games industry were also announced.

To roars of approval the Chancellor joked: "I intend to keep Wallace and Gromit here, where they belong."

Sunday trading laws to be relaxed for eight weeks around Olympics, starting on July 22. The Government is considering enterprise loans for young people to start their own business.

The Government is publishing independent review on local pay rates for public sector, with some departments given the option to move to local pay for civil servants whose freeze ends this year.

Consultation on simplifying tax for small firms with a turnover of up to £77,000.

Plans published today to remove VAT loopholes and anomalies, but will keep exemptions for food, children's clothes, books and newspapers.

Age-related allowances for pensioners to be simplified over time, starting in April 2013, creating a single personal allowance for all but ensuring no pensioner loses in cash terms.

New single tier pension for future pensioners to be set around £140 and based on contributions.

Personal tax statement to be sent to 20 million tax-payers from 2014.

New "above the line" research and development tax credit to be introduced next year.

Immediate 1% cut in the headline rate of corporation tax, which will bring it to 24% from April. Two further cuts in 2013 and 2014 will reduce corporation tax to 22%.

Bank levy to be increased to 0.105% from January 2013 so that banks will not benefit from additional corporation tax cuts and the levy will raise £2.5 billion a year.

No change to duty rates on alcohol.

Duty on all tabacco products to rise by 5% above inflation from 6pm today - the equivalent of 37p on a packet of cigarettes.

New Machine Games Duty for gambling industry with a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings.

New gambling tax regime will impose tax at the place of consumption, to discourage online gambling moving off-shore.

Fair fuel stabiliser will mean that above inflation rises in fuel duty will only return if price of oil falls below £45 a barrel.

No further changes to existing plans for fuel duty.

Vehicle excise duty to rise by inflation, but frozen for road hauliers.

The Government is to introduce a General Anti-Avoidance Rule for UK tax system to prevent "morally repugnant" tax evasion. Legislation in 2013 Finance Bill.

Stamp duty on residential properties over £2 million which are bought via a company will increase to 15%, taking effect from today to close the loophole.

Stamp Duty on properties worth over £2 million increases to 7% from midnight tonight.

New cap on tax reliefs set at 25% of total income for anyone claiming more than £50,000 in a year, but no significant change to pensions relief.

HMRC report finds 50p tax rate has caused "massive distortions" and raised just one-third of the £3 billion it was forecast to raise.

Top rate of income tax reduced to 45p from April 2013.

Changes to taxes on the rich announced today means the Treasury will receive "five times more money each and every year from the wealthiest in our society", said Mr Osborne.

Child benefit will only be withdrawn from higer rate tax-payers if someone in the household has an income of more than £50,000. To avoid a "cliff-edge" effect, child benefit will be withdrawn at 1% for every extra £100 earned over £50,000.

An additional 750,000 families will keep some or all of their child benefit and only those earning £60,000 or more will lose all of it.

Tax-free personal allowance to rise by £1,100 from April 2013 to £9,205, making 24 million people £220 a year better off.

Higher rate earners to benefit from rise in personal allowance.

Mr Osborne said: "This country borrowed its way in to trouble. No we are going to earn our way out." He sat down at 1.29pm.