Budget: Osborne's speech in full

Mr Deputy Speaker, this Budget rewards work.

Britain is going to earn its way in the world.

There is no other road to recovery.

This Budget supports working families and helps those looking for work.

It unashamedly backs business.

And it is on the side of aspiration: those who want to do better for themselves and for their families.

This Budget reaffirms our unwavering commitment to deal with Britain's record debts.
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.

A model that saw manufacturing almost halve as a share of our national economy, while the national debt doubled.

Mr Deputy Speaker, this is how Britain will earn its way in the world: with far reaching tax reform.

With a simpler tax system, where ordinary taxpayers understand what they are being asked to pay.

With a tax system that is more competitive for business than any other major economy in the world.

A tax system where millions of the lowest paid are lifted out of tax altogether, while the tax revenues we get from the wealthiest increase.
But reforming tax is only part of the story.

We will earn our way in the world by saying to all businesses - large and small: We will provide you with the modern infrastructure; new growth-friendly planning rules and employment laws; the kinds of schools and universities and colleges our future workforce needs.

And in return, you, British businesses, have the self-confidence to: invest, expand, hire, innovate and be the best.

We earn our way in the world if we stop being afraid to identify Britain's strengths and reinforce them, backing industries, like aerospace, energy and pharmaceuticals, creative media and science.

A deliberate strategy to create a more balanced national economy, where financial services are strong, but they are not the only string to our bow.

Mr Deputy Speaker,

Stability comes first.

And the Report from the Office for Budget Responsibility reminds us today of the risks to stability.
Despite the welcome action by the European Central Bank, the impact of the sovereign debt crisis on the European economy has been significant.

Italy, the Netherlands, Belgium and others are now in recession - and Germany's economy shrank in the last quarter.

In today's Report, the OBR are sharply revising down their forecast for euro area growth this year by 0.8% to - 0.3%.

Their forecast for world economic growth is also revised down over the next two years - by 0.2% and 0.3% respectively.

Of course, Britain is not immune from these developments in our largest export markets.

And the OBR say today that "the situation in the euro area remains a major risk to our forecast".
Another risk they identify is a "further spike in oil prices", and there is no doubt that the high oil price - driven both by real demand and the Iranian situation - is of great concern across the world.

It means that the OBR's overall assessment of the outlook and risks for the British economy is "broadly unchanged" since last November's report.

Despite these headwinds, there are, however, some more positive signs.

The OBR expect the British economy "to avoid a technical recession with positive growth in the first quarter" of this year.

They say that the British economy has "carried a little more momentum into the new year than previously anticipated".

Indeed, the Office for Budget Responsibility is slightly revising up in their growth forecast for the UK this year to 0.8%.

They then forecast 2% next year;
2.7% in 2014;

And 3% in both 2015 and 2016.

The OBR's forecast unemployment rate is the same as it was last autumn.

They expect it to peak this year at 8.7 per cent before falling each year to 6.3 per cent by the end of the forecast period.

But they have revised down their estimate of the claimant count, which they now expect to be around 100,000 lower in each of the next four years than they previously forecast - peaking at 1.67 million this year rather than the 1.8 million they forecast in November.

And they forecast one million more jobs in the economy over five years.
Inflation is expected to fall throughout the period, from 2.8% this year to 1.9% next year, and then 2% by the end of the forecast period.

I am today writing to the Governor of the Bank of England to reaffirm the CPI inflation target of 2%.

The Government's credible and responsible fiscal policy allows the independent central bank to pursue an activist monetary policy consistent with targeting low inflation.

I confirm that the Asset Purchase Facility will remain in place for the coming year.

Fiscal forecasts

So employment is growing, inflation is coming down.

And so too is the deficit.
When this Government came to office, the budget deficit stood at over 11%.
The state was borrowing one in four of every single pound it spent.

Today, I can report that the deficit is falling and is forecast to reach 7.6% next year.
The share of national income taken by the state will have fallen from almost 48% when we took office to 43% next year.

We must stick to the course.

So there will be no deficit funded giveaways today.
But because we've taken difficult decisions, nor do we need to tighten further.

Over the five year period, this is a fiscally neutral Budget.
This is achieved through a modest reduction in both taxation and spending.

So, Mr Deputy Speaker, let me turn to those fiscal forecasts.

The whole House will be pleased to know that these have improved a little from the forecasts I presented in November.

Borrowing this year is set to come in at £126 billion, £1 billion lower than I forecast in the autumn.

And over £30 billion a year lower than its peak the year before we came to office.

Borrowing will then fall to £120 billion next year, if you exclude the transfer of Royal Mail pension assets.

It will then fall to £98 billion in 2013-14;

Then £75 billion;

Then £52 billion;

Reaching £21 billion by 2016-17.

So in total, borrowing is £11 billion less than I last forecast in the Autumn.

This will be used to pay down debt.

In my first Budget, I set the Government the fiscal mandate of achieving a cyclically-adjusted current balance by the end of the five year horizon.

The OBR confirm today that we are on course to achieve that mandate, and have eliminated the structural current deficit by 2016-17.

They also confirm that we are also on course to reach our target for debt to be falling as a percentage of national income by the end of the Parliament in 2015-16.

Public Sector Net Debt is now set to peak at 76.3% in 2014-15, almost 2% lower than previously forecast - before falling the following year.

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• Topics
• Economics / Markets
• George Osborne
• Budget 2012