Chancellor expected to announce tax cuts (From Bradford Telegraph and Argus)

George Osborne to set out his plan for economic future

12:32pm Wednesday 23rd March 2011 in News

Chancellor George Osborne told Cabinet colleagues today that his Budget would set out the Government's plans to reform and rebalance the economy and help families with the cost of living.

Mr Osborne briefed senior ministers, including Prime Minister David Cameron, on the contents of his second Budget at a special meeting of the Cabinet at 10 Downing Street.

He is expected to use the statement in the House of Commons this afternoon to announce an income tax cut worth around £45 a year as he battles to offer voters some good news amid grim economic statistics.

Mr Cameron's official spokesman told reporters: "The Chancellor took the Cabinet through the Budget and set out the main aims of the Budget, which are to set out our plans for reforming and rebalancing the nation's economy and steps to help families with the cost of living."

Mr Osborne is expected to announce that the amount people can earn tax-free will rise by £600 from April next year, benefiting 25 million people and taking 250,000 out of income tax altogether.

His annual statement will also introduce help for first-time home-buyers through a £250 million Treasury-backed scheme to offer equity loans worth 20% of a property. The scheme covers purchases of new-build houses, in an attempt to safeguard thousands of jobs in the construction industry.

Available to households earning less than £60,000, they would be interest-free for five years, with borrowers paying 1.75% interest the year after and then 1% above inflation.

The income tax threshold increase - part of a key policy secured by the Liberal Democrats as part of the coalition deal with the Tories - will take it to around £8,345 from April next year.

Unlike a £1,000 rise announced in the last Budget which comes into effect next month, it will benefit those paying higher-rate 40% tax as well as those on lower incomes.

More than 750,000 earners are expected to start paying higher-rate tax from next month as a result of measures taken to offset the cost of the previous rise.

Expectations are mounting in Westminster that Mr Osborne will use the statement to float a controversial proposal to merge income tax and national insurance.

Supporters of the idea believe it would give taxpayers a clearer idea of the share of their income gobbled up by the state.

But some Conservative backbenchers are fearful that effectively changing the basic rate of income tax from 20p to 32p will be hard to sell politically, while there are also concerns about the position of pensioners, who pay income tax but not national insurance.

Motorists are hopeful that the Chancellor will scrap - or at least postpone - the 1p hike in fuel duty scheduled by Labour predecessor Alistair Darling for April 1.

Expectations are mounting in Westminster that Mr Osborne will use the statement to float a controversial proposal to merge income tax and national insurance.

Supporters of the idea believe it would give taxpayers a clearer idea of the share of their income gobbled up by the state.

But some Conservative backbenchers are fearful that effectively changing the basic rate of income tax from 20p to 32p will be hard to sell politically, while there are also concerns about the position of pensioners, who pay income tax but not national insurance.

Motorists are hopeful that the Chancellor will scrap - or at least postpone - the 1p hike in fuel duty scheduled by Labour predecessor Alistair Darling for April 1.

It is also thought Mr Osborne will help drivers in a more practical way by announcing an extra £100 million to fill the potholes left by the winter's severe weather.

He will offer a small financial sweetener to travellers by freezing air passenger duty, but will hit the well-off to the tune of tens of millions of pounds a year with a "Learjet levy" by imposing the duty on private jets.

Mr Osborne is also expected to use the statement to detail new support for apprenticeships and a £4 billion clampdown on tax avoidance.