Chancellor George Osborne has cut his official growth forecast in half, but insisted the UK would avoid a "triple dip" recession.
He said growth in 2013 would be 0.6% - half the 1.2% he predicted four months ago in his autumn statement.
He used his Budget to cut corporation tax by 1% to 20%, and cancelled this autumn's planned fuel duty rise. Mr Osborne said his Budget was for "those who want to work and get on".
He said it was taking longer than expected but "we are, slowly but surely, fixing our country's economic problems".
He began his Budget statement by telling MPs in a packed House of Commons: "Today, I'm going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them."
The Government has taken positive steps to address the housing crisis, but the measures announced may not go far enough to allow smaller builders to deliver the energy-efficient new homes Britain so badly needs, warns the Federation of Master Builders (FMB).
Brian Berry, Chief Executive of the FMB, says: “We needed a ‘Budget for Housing’ to address the acute shortage of affordable, energy-efficient homes in the UK. The Help to Buy package is aimed at stimulating the underperforming mortgage market, which could provide a boost to all firms involved in house building, renovation and repair. But changes to the FirstBuy scheme will be of limited assistance if it remains too costly and complex for smaller developers, who deliver a third of all new homes.
“Britain’s SME builders are in need of relief after years of shrinking workloads and rising costs. More than three-quarters of our members recently told us that the most important thing the Government could do to revitalise the home repair, maintenance and energy-efficiency markets would be to cut VAT. This would also provide a level playing field when competing with builders who choose to avoid charging VAT.”
Berry adds: “Small builders have so far seen little benefit from the Funding for Lending scheme, as a quarter of our members tell us they are having to turn down work as they still can’t secure vital financial backing from lenders to buy plant or hire staff. Unless it starts functioning properly, and as long as lenders continue to discriminate against those in the construction industry, our members will be unable to provide the jobs and output the Coalition needs private enterprise to deliver.”
Berry continues: “The Chancellor clearly understands the benefits that increased capital investment can bring for the wider economy. However, when seeking to stimulate construction and housing he must pay particular attention to the central importance of smaller, local firms in delivering growth.”
Berry concludes: “If Ministers want an industry-wide boost to jobs and growth while delivering desperately needed new homes and meeting energy-efficiency targets, we need bolder measures such as cutting VAT on domestic repair and maintenance work, and reducing the regulatory burden which discourages so many small developers from even contemplating building new homes.”
Allan Wilén, Economics Director, Glenigan, said: "While public sector spending is being tightened as the Government presses on with its deficit reduction plans, the Chancellor is diverting planned expenditure toward capital spending.
"Discouragingly the promised extra £3 billion a year of capital funding will not be available until the 2015/16 financial year which coincides with the next General Election in May 2015. As was witnessed with the Building Schools for the Future Programme a change in administration can lead to a change in spending priorities. This is especially disappointing given that the industry has been looking for the rapid deployment of 'shovel ready' schemes.
"In contrast the additional support unveiled for the housing market should provide a more immediate lift to the industry's fortunes and to the UK economy. The Help to Buy programme promises additional support for house purchasers that should boost housing market turnover and new house construction. In addition five-fold expansion of the Build to Rent programme to £1 billion should also help to drive new housing activity and draw in institutional investors into the housing sector."
Key announcements include:
- September's fuel duty rise scrapped
- Limit at which people start paying tax to be raised to £10,000 in 2014 - a year earlier than planned
- Shared equity schemes extended, with interest-free loans up to 20% of value of new-build properties
- Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014
- Forecast growth of 0.6% in 2013, downgraded from 1.2% in December
- But Office for Budget Responsibility predicts UK will escape recession this year
- Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.
- Borrowing of £114bn this year, set to fall to £108bn, £97bn and £87bn in following years
- Deficit cut by a third since May 2010
- Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16
- Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.1% in 2015-16
- Most government departments to see budgets cut by 1% in each of next two years
- Schools and NHS will be protected
- £11.5bn in further cuts earmarked in 2015-16 Spending Review
- 1% cap on public sector pay extended to 2015-16 and limits on "progression" pay rises in the sector
- £3bn extra for new transport and infrastructure projects every year from 2015-16 until 2020, total of £15bn
- Corporation tax to be cut by 1% to 20% in 2015
- New employment allowance to cut national insurance bills cut by £2,000 for every firm
- 450,000 small firms will pay no employer national insurance
- Government procurement from small firms to rise fivefold
- Tax relief for investment in social enterprises
- Stamp duty axed on shares traded on growth markets like Aim.
- Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes
- Tax incentives for ultra low-emission cars
- Pottery industry in Midlands to be exempt from climate change levy
- Tax allowances for investment in shale gas.
