Britain braced for a budget that 'will move from rescue to recovery'

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Saleha Way

AIt now costs about £70 (Dh420) to fill the average car with petrol in the UK. The taxman accounts for most of the cost but the unrest in the Arab world, which is driving up international oil prices, is not helping.

George Osborne, the chancellor of the exchequer, is expected to help ease the financial pressure on motorists this afternoon when he unveils this year's budget, described by the coalition government as the most "pro-enterprise in a generation".

Rising oil prices had "hit people's pockets hard", Mr Osborne wrote in a popular tabloid at the weekend. "I will do what I can to help." The statement has been taken as a signal he will scrap the planned rise in fuel duty, which would have added 5 pence a litre to the pump price. The move will be a relief to small businesses in particular, many of which have said they will not be able to absorb another fuel duty increase in the midst of the current economic struggle.

Many economists believe a rise in tax revenues and the tighter grip on spending have given the chancellor about £10 billion to play with. But with the Office for Budget Responsibility likely to revise down its 2.1 growth forecast during the budget announcement and with borrowing restricted by Mr Osborne's £111bn austerity measures, he is not likely to announce substantial giveaways.

The chancellor is expected to announce a budget that aims to underpin the recent growth in private-sector jobs by encouraging enterprise through a simpler tax system and reduced regulations. A growth review will be released alongside the budget.

"We have taken Britain out of the fiscal danger zone. Now we have to move from rescue to recovery and reform," he told the BBC on Sunday. With tax rises and spending cuts all announced in last year's emergency budget, Mr Osborne said he was now free to concentrate on growth and jobs.

One of the most urgent areas he is looking to tackle is youth unemployment, which has reached a record of 20.6 per cent. He is expected to announce a £300 million emergency package - partly paid for by the levy on banks - which will include funding for 50,000 new apprenticeships and 8,000 work placements for unemployed youngsters.

To encourage enterprise, in particular by those thrown on to the scrap heap with the public-sector job cuts, the government is also expanding its New Enterprise Allowance scheme, launched in the deprived Merseyside area of north-west England last month.

Unemployed people seeking to set up their own business will be given £2,000 under the scheme, which the government hopes will create up to 40,000 businesses by 2013.

Mr Osborne has also said his budget would set up 20 enterprise zones across Britain to boost growth in rundown areas. They would be given tax incentives and faster planning decisions.

Planning is also likely to be reformed, unleashing a potential house-building boom that will not only stimulate growth and jobs but also build stock sufficiently to help calm the housing market.

The chancellor is also expected to take hundreds of thousands more of low earners out of income tax by raising the personal allowance for the second time.

The opposition Labour Party has accused ministers of being "in denial" about growth. Mr Osborne's strategy was not working, the shadow chancellor Ed Balls, told the BBC. "The question for George Osborne in the budget is will he actually get jobs and growth into our economy. So far we have seen precious little."

Perhaps the most controversial budget reform is the expected cut in tax paid by big corporations on their foreign earnings in an attempt to stop the exodus of companies to lower-tax regimes.

In recent years, several businesses, including the advertising giant WPP, have domiciled themselves in low-tax countries such as Ireland and Switzerland to escape what they see as an onerous tax burden.

Mr Osborne is also believed to be considering calls from business to simplify the tax system by merging income tax and national insurance, although Treasury sources indicate such a change would take years to implement.

However, businesses appear to have realistic expectations of what can be expected from the budget.

"Businesses would like the 50 per cent tax rate to go, but that's a political no-no, even though it arguably doesn't bring in that much revenue," says the economist Ruth Lea. "Whatever we would like to see by way of tax cuts is simply not affordable," she says.

business@thenational.ae