Chancellor George Osborne has defended his Budget, saying the Government had to tackle the nation's economic problems, which "could be a lot worse".

Referring to the current crisis in Cyprus, he said: "It's a difficult situation, but it could be a lot worse. You only have to watch your news bulletins to see other countries, not far from here, who have not confronted their problems and who are worried about getting money out of the bank.

"It's a difficult situation. It's a difficult neighbourhood.

"We have made a lot of mistakes as a country, over many years, building up these debts. But my determination is not to run away but to confront them head on."

Mr Osborne put his strongest emphasis on measures to encourage jobs, home-ownership and small businesses.

He brought a planned increase in income tax thresholds to £10,000 forward to 2014, which Tory aides said meant that everyone who paid the 10p tax rate under Labour will next year be taken out of the tax altogether.

Shadow chancellor Ed Balls said only the rich were better off following Mr Osborne's Budget.

He said: "He told us two years ago he would get the economy growing, get rising living standards and get the deficit down.

"Borrowing is up, the national debt is rising, the economy is absolutely flat and everybody in our country is worse off year by year, apart from the rich. It's not working."

1. Newly built homes

If you want to buy a newly built home and you don't have much money for a mortgage deposit, the Government may help you.

As long as you have enough money for a 5% deposit, the Government will give you an interest-free loan for 20% of the home's value. Then you'll only have to borrow a 75% loan from the bank or building society. That may mean you can get a lower rate on your mortgage.

The Government's loan will be interest-free for five years. This offer is only available for homes that are selling for £600,000 or less.

2. New mortgage guarantee

The Government's mortgage guarantee should help a wider range of home buyers, not just for newly built homes.

The guarantee will be for loans where there is only a small deposit - also known as high LTV (loan-to-value) loans.

High LTV loans are riskier for lenders. That's because there's a greater risk they won't get their money back in the end.

So interest rates are normally higher for these loans and some home buyers have struggled to get any loan whatsoever.

The Government is now saying that it will pay up if a lender can't get all its money back from a high LTV loan - this would normally be because a sale of a home doesn't raise enough cash to pay off the loan.

This guarantee will reduce the risk for lenders, so it should mean that more potential buyers will be able to get mortgages and interest rates for High LIV loans should be lower too.

What could be possibly wrong?

So why am I not keen on this scheme? After all, more people should be able to get their foot on the housing ladder.

My concern is that the scheme's 'unintended consequences' may be more serious than many folk now realise. This has certainly been the case with the Funding for Lending scheme which has pushed down interest rates on savings accounts.

I fear that 'help-to-buy' may give an unwelcome boost to house prices. More mortgages means more buyers and more demand, pushing up prices. And that's not good news for first-time buyers.

The best way to help first-time buyers is to increase the supply of new homes which will drive down prices. I grew up in the green belt and a big part of me is reluctant to build homes on farmland, but I think it's the only way to restore sanity to our property market.

Building more homes on brownfield sites in towns and cities will help too.

For too many years, Governments supported the mortgage market through mortgage interest tax relief. Effectively that meant the Government would pay some of your mortgage interest bill. This tax relief helped to push up house prices and distorted our economy.

Economists railed against this relief year-after-year but our politicians didn't have the guts to abolish it until the late 90s.

But now we're returning to Government support for the mortgage market. I predict future chancellors will find it just as hard to remove these new support measures.

And anyway, the mortgage market is already very healthy for a large number of borrowers - they're benefitting from super-low interest rates.

Granted, it's a different story for folk with small deposits. They can struggle to get loans and often have to pay relatively high interest rates. Yes, Osborne's new scheme will help some of these people buy a home more quickly than would otherwise be the case, but it will also boost house prices. And I don't think that's in the interest of first-time buyers now or in the future.

We need more new house building and less Government support for the mortgage industry.

 

"The devil is in the detail", or so the old adage goes. And that's never more true than at Budget time. Chancellor George Osborne may have spoken to Parliament for the best part of an hour, but there are usually plenty of things he didn't mention tucked away in the Budget book.

The Bank of England can let inflation go... temporarily

There was talk in the speech about the Bank of England's "new remit", but what the red book says is that the Bank of England's Monetary Policy Committee may "therefore wish to allow inflation to deviate from the target temporarily".

Consultation on allowing Child Trust Funds to move to Junior ISAs

The Labour Government's flagship Child Trust Fund (CTF) scheme was one of the first things scrapped by the Coalition. It introduced Junior ISAs instead. As a result, the parents of those children who had money invested in cash or stocks and shares CTF accounts have, in many cases, seen their returns fall as providers have pulled the shutters down. Meanwhile, more competitive Junior ISAs have been launched. Following a series of campaigns, the Government will now consult on allowing CTFs to be switched into Junior ISAs.

Right To Buy period

The qualifying period for council tenants who want to buy their own homes will be reduced from five years to three. The Government is pledging to replace council homes that are sold on a one-to-one basis. The Right To Buy process will also be simplified.

Social housing

Landlords of tenants in social housing who earn over £60,000 a year will be allowed to charge them market rent. Tenants will also be required to declare their income.

Broadband spending cut?

There will be a "reprofiling of funding for broadband programmes", which in plain English sounds like a cut to this plan.

Employee share scheme

The Chancellor did briefly mention in his speech that this scheme would become "more generous". The detail is that employees will not pay Income Tax and National Insurance on the first £2,000 of any shares they receive. And this scheme is due to launch in September 2013.

More Bank of Daves?

Dave Fishwick, owner of Burnley Savings and Loans and featured in the Channel 4 documentary Bank of Dave, has famously struggled to get a banking licence. The Budget book says that the "authorisation process for becoming a bank will be quicker and easier and there will be a comprehensive series of changes to the capital and liquidity rules to level the playing field for new banks". Whether that will lead to a rash of new 'challenger' banks remains to be seen.

Residential property in private pensions

The Government is to "explore" whether the conversion of unused commercial property in urban areas into homes could be helped by allowing people to add them to their Self Invested Personal Pensions (SIPPs) and Small Self Administered Schemes (SSASs). Pensions experts have already warned that this could leave people's retirement incomes far too exposed to property, given many people already see their current home as part of their pension.

 

The Chancellor should have taken a tougher stance on increasing duty on tobacco products, health campaigners have said.

But health charity Ash (Action on Smoking and Health) said George Osborne should have increased duty to 5% to encourage smokers to kick the habit.

Chief executive Deborah Arnott said: "This is disappointing. If the Government had increased tobacco tax by 5% as we requested it would have increased Government revenues and helped more smokers to quit smoking.

"Cigarettes are still more affordable than they were in the 1960s and there is a danger that smokers will simply trade down to cheaper brands rather than stop smoking."

The Roy Castle Lung Cancer Foundation said any increase in the price of tobacco would help people quit.

Eileen Streets, director of tobacco control at the charity, said: "We believe raising taxes on tobacco helps encourage smokers to quit and in turn dramatically improve the health of our nation.

"We know the cost of cigarettes is one of the main reasons people decide to quit and now the Government has announced that duty rates on tobacco products will increase by 2% there is no better time to quit.

"We are pleased with this as not only will quitting improve individual's health but also improve finances."

 

MPs are to drill down into the detail of the Budget after George Osborne's statement for an "aspiration nation".

Research for consumer group Which? carried out immediately after the Budget found 89% of voters backed the rise in the personal tax allowance to £10,000 and 87% supported moves to scrap the fuel duty rise.

But the survey found a third of the public now feels less confident about the prospects for the economy over the coming year while 28% are less confident about their personal finances. The poll also shows 59% believe the Government should rethink its economic plan and 44% expect their personal finances to worsen in the next 12 months.

Hours after the Chancellor sat down peers inflicted a major defeat on the Government over its "shares for rights" plan, detailed in the Budget document, with former Civil Service head Lord O'Donnell linking the plans to slavery and Tory former Cabinet minister Lord Forsyth of Drumlean branding the plans "ill-thought through, confused and muddled".

Mr Osborne attempted to divert attention from the economic gloom as growth forecasts were slashed and official forecasters warned that deficit reduction had "stalled" with eye-catching give-aways. A penny has been knocked off the price of a pint of beer and September's planned 3p rise in fuel duty has been scrapped.

But the Chancellor put his strongest emphasis on measures to encourage jobs, home-ownership and small businesses. He brought a planned increase in income tax thresholds to £10,000 forward to 2014, which Tory aides said meant that everyone who paid the 10p tax rate under Labour will next year be taken out of the tax altogether.

Labour leader Ed Miliband attacked Mr Osborne as a "downgraded Chancellor" offering "more of the same - higher borrowing, lower growth".

Forecasts published by the Office for Budget Responsibility (OBR) showed it had halved its prediction for GDP growth for this year from 1.2% to 0.6% and trimmed next year's forecast from 2% to 1.8%. And the independent body said that the decline in borrowing seen in the first years of the coalition Government "now appears to have stalled". The OBR predicted a small increase in GDP in the first quarter of this year, meaning that the UK will avoid an unprecedented triple-dip recession.

Public sector net borrowing forecasts were revised upwards in every year to 2017/18, adding a total of £55.7 billion to the amount the Chancellor is expecting to borrow over the next five years compared to his plans at the time of the December Autumn Statement. Debt will not fall as a share of national income until two years after Mr Osborne's original 2015 target and will peak at 85.6% of GDP (£1.58 trillion) in 2016/17, an increase of 6.4% on the previous forecasts.

Workers will not pay any tax on the first £10,000 of their wages from next year - 12 months earlier than planned.

From April, the allowance will go up as planned to £9,440 - a £200 boost for 24 million taxpayers, George Osborne said. It will also mean 2.7 million working age adults have been taken out of income tax altogether in the new financial year.

The basic and higher rates of income tax will remain the same and the Government has stuck by its decision to reduce the top rate of tax on earnings over £150,000 from 50p to 45p next month.

Mr Osborne said: "When we came to office, the personal income tax allowance stood at under £6,500. In two weeks time, the allowance will reach £9,440 with the single largest cash increase in its history."

He added: "From 2014, there will be no income tax at all on the first £10,000 of your salary - £10,000 of tax-free earning. That's £700 less in tax for working families than when this Government came to office.

"Almost three million more of the lowest paid will pay no income tax at all. It's a historic achievement for this government and for hard-working families across the country."

Campaign group the TaxPayers' Alliance said the personal allowance increase would help to ease the burden of high living costs.

Matthew Sinclair, chief executive, said: "George Osborne has announced welcome relief for people struggling with the high cost of living.

"The cut in beer tax, the freeze in fuel duty and the higher personal allowance will all ease the pressure on family budgets. Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board."

 

Chancellor George Osborne has unveiled the first overhaul of the Bank of England's remit in nearly a decade under plans for "monetary activism" in the face of sharp growth downgrades and higher borrowing.

But the changes came as a disappointment to some economists, who had been hoping for more radical action.

The remit review also came against a grim backdrop of lower growth and higher-than-expected borrowing revealed in the Budget as the independent tax and spending watchdog the Office for Budget Responsibility delivered another painful set of forecasts.

The OBR said the UK would narrowly avoid a triple dip recession by eking out growth of 0.1% this quarter, but it halved its growth predictions for the year as a whole to 0.6%, while it said the Government would have to borrow nearly £60 billion more than expected by 2017/18.

In the year to March, the OBR now expects the Government to borrow £86 billion, £108 billion in the 2013/14 year, £97 billion in the following year, falling to £87 billion, £61 billion and £42 billion in the following years to 2017/18.

It ruled once more that Mr Osborne will breach his rule that the ratio of net debt to gross domestic product (GDP) will be falling by 2015/16. Debt as a ratio of GDP will now not fall until 2017/18 - two years later than planned.

The Bank's new remit explicitly allows the Bank to be flexible in its targeting and Mr Osborne has asked the Bank's Monetary Policy Committee (MPC) to report back on the use of so-called "intermediate thresholds", such as economic stability measures, in its August inflation report.

Policymakers will also be able to provide forward-looking guidance on rates and inflation.

Mr Osborne said Bank governor Sir Mervyn King and his successor Mark Carney, who takes over in July, had agreed to the new remit and for the MPC to use "unconventional monetary instruments".