Chancellor defends Budget

Chancellor George Osborne has been defending yesterday's Budget in a string of media interviews after accusations of hitting the elderly with reduced tax allowances and aiding the highest earners.

Among the key changes, many of which were widely speculated before the official Budget announcement was made, was a reduction in the 50p top rate of tax to 45p from April 2013, a speeding up of the increase of personal income tax allowances, an increased rate of stamp duty land tax on high value homes, and a new income tax charge on child benefits for higher earners.

Most controversial, however, was the restriction of the age related personal allowance for the over 65s, with new retirees aged 65 and over on or after 6 April 2013 seeing it removed completely.

Talking to the BBC, the Chancellor defended his decision, saying: "We were rapidly increasing the personal allowance and therefore it could overtake the so-called age-related allowances."

"It creates a much simpler system for everyone. I'm not embarrassed to say that pensioners are going to get the largest increase in the state pension from next month," he said.

Shadow chancellor, Ed Balls, aired concerns on the personal allowance changes, saying: "What George Osborne is doing is not putting the personal allowance up in line with inflation, so pensioners will actually pay more tax and people who are about to be pensioners are going to lose that allowance. Pensioners are worse off as a result of this Budget, it's a huge surprise."

He added: "The cumulative effect is to hit pensioners now, a big tax rise, families on £20,000 worse off, families on working tax credit on £17,000 massively worse off and the chancellor's decided his priority to make our economy stronger is to have one tax cut - a huge tax cut - for people above £150,000."

For businesses, the most significant boost will come from the main rate of corporation tax, which will be reduced to 24 per cent from April 2012 - rather than 25 per cent as originally planned -, and a promise to simplify the tax system for small businesses with a turnover of less than £77,000 with a new cash basis for tax calculations.

Simon Walker, director general for the Institute of Directors, welcomed the cut in corporation tax as 'a step in the right direction' but argued it should be lowered further to 15 per cent. He added that the reduction in the top rate of income tax was also not 'far or fast enough' saying that the UK remained an 'uncompetitive' place for business.

Please see our full Budget Report 2012 for a comprehensive summary of the announcements made.