The first Conservative Budget in almost 20 years included expected tax and welfare cuts, but also a ‘national living wage’ of £7.20 an hour.
Chancellor George Osborne announced that from April next year, a national living wage of £7.20 an hour will be introduced, essentially a new national minimum wage for those over 25. This will rise to more than £9 an hour by 2020.
At the same time, the tax-free personal allowance will be increased from £10,600 to £11,000. The higher-rate threshold for paying 40 per cent tax will increase from £42,385 to £43,000 in 2016/17.
Corporation tax will also be cut, first to 19 per cent and then to 18 per cent in 2020.
But working-age benefits will be frozen for four years from 2016/17, while the household benefit cap will be reduced to £20,000 and child tax credit will be limited to two children for those born from April 2017.
However, from September 2017, working families with three and four-year olds will receive 30 hours of free childcare – up from the current 15 hours.
Students will also be impacted, with maintenance grants for those from poorer backgrounds to be abolished from 2016/17, to be replaced by loans.
On the transport front, road tax will be reformed to bring in a flat rate of £140 a year for most cars from 2017, except in the first year when tax will remain linked to the CO2 emissions. The first MOT for a vehicle will come after four years, not three.
Cities and counties in the north will be given more control over local transport through £30million of funding for Transport for the North over three years.
Public-sector pay will increase by one per cent a year for four years from 2016/17.
Introducing his budget, Mr Osborne said: “This is the new settlement. A Budget that sets out a plan for Britain for the next five years to keep moving us from a low-wage, high-tax, high-welfare economy; to the higher-wage, lower-tax, lower-welfare country we intend to create.”