Basic income tax rate cut in Brown's eleventh budget

Chancellor Gordon Brown has announced a 2% cut in the basic income tax rate from April 2008 in his eleventh Budget.

However, he has also scrapped the 10p lower band, which has prompted critics to claim that most people will not be any better off.

The Chancellor also announced that corporation tax would be reduced from 30p to 28p.

There was bad news for motorists, with a 2p rise in fuel duty - although this has been delayed for six months - while road tax for the most polluting cars will rise to £300 this year and £400 next year. However, road tax for the least polluting cars will be reduced from £50 to £35.

Duty on beer will rise by 1p a pint, while cider will increase by 1p per litre. Duty will also increase on wine and sparkling wine - by 5p and 7p, respectively - however, duty on spirits has again remained frozen.

Duty on cigarettes will also increase by 11p, while VAT on nicotine patches and similar products will be slashed from 17.5% to 5%.

Mr Brown also announced that capital investment in schools, hospitals, security and defence and infrastructure would rise to £48 billion next year.

The Chancellor announced an extra £8 billion for the NHS in England over the coming year, as well as a rise in health spending across the whole of the UK to £10 billion.

An additional £86 million for intelligence and counter-terrorism was also announced for the coming year.

Mr Brown said: "This a Budget to expand prosperity and fairness for Britain's families - and it is built on the foundation of the longest period of economic stability and sustained growth in our country's history."

However, Conservative leader David Cameron said that Mr Brown "has wasted money on an industrial scale". He said: "You are the Chancellor who has put the tax burden up; the Chancellor who has taken one tax down but put 99 taxes up.

"Your great experiment in tax and spending has failed. You are an out of date politician wedded to state control."

Liberal Democrat leader Sir Menzies Campbell said that the Budget was "a Budget of missed opportunities". He said: "The Chancellor had the chance to use this final budget to show that he was listening to the voices of the people of Britain.

"He had the chance to build a fairer Britain through tax cuts for the low paid - but in fact he has increased income tax for the lowest paid. He had the chance to create a greener Britain by taxing pollution - but he shunned it. And he had the chance to shape a prudent Britain by saving billions of pounds on government waste - but he avoided it.

"Instead he has spurned all of these opportunities. He has concentrated on his own political succession."

This Budget is widely expected to be Mr Brown's last. He is the favourite to succeed Tony Blair as Prime Minister when Mr Blair steps down later this year.

(KMcA/JM)