Budget winners and losers: the tax cuts and welfare cuts

In the first budget by a Conservative government since 1996, George Osborne said: “This is a Budget that will put our country firmly on the path from a high tax, high welfare society to a lower tax, lower welfare society.”

He appeared to take the House of Commons by surprise when he announced plans for a new living wage.

The compulsory wage for over-25s will start next April at the rate of £7.20 – more than the current minimum wage for over-21s but less than the amount recommended by the Living Wage Foundation. The rate will rise to £9 an hour by 2020, the chancellor said.

Work and Pensions secretary Iain Duncan Smith shouted “fantastic” as Mr Osborne told MPs: “The Low Pay Commission will recommend future rises that achieve the Government’s objective of reaching 60 per cent of median earnings by 2020.

“That is the minimum level of pay recommended in the report to the Resolution Foundation by Sir George Bain – chair of the Low Pay Commission.”

He added: “The OBR today say that the new national living wage will have, in their words, only a ‘fractional” effect on jobs.”

While rates of income tax remain unchanged, the tax-free personal allowance will rise from £10,600 to £11,000 next year.

Welfare cuts

But Mr Osborne has made good on commitments to cut the welfare bill by £12bn.

Support for children through tax credits and universal credits will be limited to two children, affecting children born after April 2017.

The benefits cap to be cut from £26,000 per household to £23,000 in London and £20,000 in the rest of the country. Social housing tenants who earn more than £40,000 in London and £30,000 elsewhere will have to pay rent at market rates.

Working-age benefits to be frozen for four years. That includes tax credits but excludes maternity pay and disability benefits.

Rate of Employment and Support Allowance paid to people judged able to work will be aligned with Jobseekers’ Allowance for new claimants.

And 18-21-year-olds will no longer be entitled automatically to housing benefits.

Inheritance tax

The chancellor made good on the Conservative promise to take millions of people out of inheritance tax, allowing families to pass on up to £1m to their children without being taxed.

He told MPs: “The wish to pass something on to your children is about the most basic, human and natural aspiration there is.”

Other key announcements include the abolition of permanent non-dom tax status, a freeze on public sector pay growth – which will be restricted to 1 per cent a year for four years – and a commitment to spend at least 2 per cent of GDP on defence, meeting Britain’s Nato spending pledge.

Corporation tax is to be cut from 20 per cent to 19 per cent in 2017 and 18 per cent by 2020, which Mr Osborne said was a sign that “Britain is open for business”.

Missed targets

Mr Osborne told the Commons Britain’s economy is expected to grow faster than any major advanced economy for the second year running in 2015. But the OBR has downgraded its forecast from 2.5 per cent to 2.4 per cent.

And Mr Osborne will miss the deficit reduction target set out in the budget in March. Now the forecast is for Britain to be running a surplus by 2018/19, a year later than planned.