A cut in fuel duty and support for small firms and first-time buyers are welcomed by business groups.
In his Budget announcement to the House of Commons yesterday, Chancellor of the Exchequer George Osbourne announced a 1p per litre cut in fuel duty from 6pm tonight, saying rising fuel prices had "hit businesses hard, especially small businesses".

The fuel duty escalator that adds an extra penny on top of inflation every year was also cancelled, with increased taxes on oil and gas production in the North Sea set to raise £2bn in additional revenue.

Growth forecasts for 2011 were revised by the Office for Budget Responsibility (OBR) from 2.1% to 1.7%, thanks to a weaker-than-expected fourth quarter last year, the rise in world commodity prices and higher-than-expected inflation in the UK.

GDP is expected to grow 2.5% next year, rising to 2.9% in 2013 and 2014, followed by 2.8% in 2015.

However, inflation is expected to remain between 4-5% for most of this year, before dropping to 2.5% next year and then to 2% in two years' time.

Mr Osbourne said: "Last year's Budget was about rescuing the nation's finances, and paying for the mistakes of the past. Today's Budget is about reforming the nation's economy, so that we have enduring growth and jobs in the future."

He said the UK's tax code, now the longest in the world, must be simplified, with 43 complex reliefs set to be abolished.

The Government will also consult on merging Income Tax and National Insurance, currently operating as two different taxes, "imposing unnecessary costs and complexity" on employers. The purpose is "not to increase taxes, it is to simplify them", said Mr Osbourne, but he added that the process would take years to complete.

A 2% reduction in corporate tax, offset by an adjusted bank levy, and a cull of costly business regulations are also aimed at making Britain "the best place in Europe to start, finance and grow a business," said the Chancellor.

British Retail Consortium director general Stephen Robertson commented: "We look forward to the promised reductions in regulatory burdens. They must be applied to legislation that has real impacts on business, not just to long-disused rules, so that significant cost reductions result."

He added: "Lots of questions have yet to be answered but merging income tax and national insurance would be good if it reduced administrative costs for businesses. For example, by removing the requirement for employers to register separately to pay each of the taxes. But, while the Chancellor has the right intentions, he should be pursuing a more ambitious timetable."

Mr Osbourne called small businesses "the innocent victims of the credit crunch", and said banks had agreed a 15% increase in the availability of credit to small firms. The current business rate relief holiday for small businesses has also been extended to October 2010.

Help was also extended to first-time buyers with the launch of new shared equity scheme First Buy, to provide equity loans to more than 10,000 first-time buyers to buy a new-build house.

Head of research at Hamptons International Adam Challis said she was, "encouraged by this initiative, which could help up to 10,000 first-time buyers. First-time buyers are vital to a healthy residential market, as they normally represent a significant part of the housing market, but slumped to only 17 percent of all loans in 2010.

"This programme is also targeted at new build properties, meaning that there will be additional benefits to the house building sector. The number of house completions fell below 150,000 across the UK in 2010, 60 percent of the estimated need."

Mr Osbourne said manufacturing in Britain is growing at a "record rate", and is "crucial to the rebalancing of our economy". The Government will fund 21 new Enterprise Zones across the UK in urban areas of highest need, including Birmingham and Solihull, Greater Manchester and Sheffield.

Businesses in areas where there is a strong focus on manufacturing will get up to 100% discount on rates, new superfast broadband and the potential to use enhanced capital allowances.

A further Zone will be located in London, said Mr Osbourne.

He also revealed ambitions to be "the greenest government ever", and said the Government's Green Deal will be introduced next year to reduce homeowners' energy bills. A further £2bn will be injected into the Green Investment Bank, leveraging an additional £15bn of private sector investment in green projects over this Parliament.