Osborne said today that corporation tax will be slashed by two per cent from April and will then fall by one per cent in each of the next three tax years.
The cut brings the rate of corporation tax down to 23 per cent, whicch Osborne boasted was 16 per cent lower than the US and 11 per cent lower than France. It is also the lowest corporation tax rate in all of the G7 economies.
The chancellor also confirmed reports that the operation of national insurance and income tax will be merged, to “release the burden” on HM Revenue and Customs.
A total of 43 tax relief schemes will also be abolished.
But Osborne warned that the two biggest threats to economic growth were the risk of a European sovereign debt crisis and rising global commodity prices.
He added: “We have a higher deficit than Portugal and Spain but lower interest rates than Germany. Britain has lost ground, and needs to catch up.”
There was also a revised forecast for economic growth in 2011 for the UK of 1.7 per cent.
The chancellor added that the Office for Budget Responsibility expects real GDP growth of 2.5 per cent next year, then rise to 2.9 per cent in 2013 and then to 2.9 per cent in 2014; followed by 2.8 per cent in 2015.
In a bid to provide some comfort to small businesses crippled by rising fuel prices, Osborne revealed that fuel duty will be cut by 1p per litre this year, effective from this evening.
In further support to businesses, he said that £350m of business regulations will be scrapped, and 250,000 apprenticeships will be government funded.
And instead of 10 enterprise zones, where businesses will get 100 per cent discounts on domestic rates, there will be 21, giving firms new superfast broadband and the potential to use enhanced capital allowances in zones where there is a strong focus on manufacturing.
Meanwhile borrowing to fund the national deficit this year is now set to come in at £146bn, below target.
The chancellor said it will then fall to £122bn next year, then £101bn the year after, followed by £70bn in 2013-2014.