• Fuel duty cut by 1p and fuel duty escalator scrapped
• Corporation tax cut by 2p – not 1p as expected
• Annual growth forecast revised down from 2.1% to 1.7%
• National insurance and income tax may be merged

George Osborne has levied a £2bn windfall tax on Britain’s North Sea oil companies to pay for a cut in petrol duties for motorists struggling because of the soaring price of crude oil on global markets.

The chancellor said he wanted his budget to “put fuel into the tank of the British economy”.

He told the Commons he was scrapping the previous Labour government’s plans for automatic above-inflation increases in fuel duties and would instead be cutting 1p a litre from forecourt prices from tonight.

In the sort of flourish that was Gordon Brown’s trademark at the end of his budgets, Osborne announced the fuel duty cut at the climax of a 56-minute speech built around the theme of boosting growth and rebalancing the economy. The cost of “filling up a family car such as a Ford Focus has increased by £10″, he said, and he wanted to do something to help.

He said he was cutting corporation tax by 2p in the pound this year rather than the 1p reduction previously planned, and announced a shake-up of planning laws and a bonfire of regulations in an attempt to stimulate enterprise.

However, the Labour leader, Ed Miliband, said Osborne’s claim to have delivered a budget for growth was undermined by a cut in the growth forecast for 2011 from 2.1% to 1.7%.

Osborne cast his second budget since becoming the chancellor in May as an “urgent call to action” in which the government would move from “rescue to reform and from reform to recovery”, building on the deficit reduction measures of 2010.

He said it was a fiscal plan designed to create an economy built on private sector growth and the “march of the makers” rather than using government spending and debt to encourage a recovery.

He added that his budget measures would be “fiscally neutral across the period, neither raising tax nor offering giveaways”.

The chancellor presented a package of measures to boost business and make Britain more competitive, help consumer confidence and claw revenue back elsewhere.

Osborne said Britain had “lost ground” in the world’s economy and needed to catch up. His budget set “four economic ambitions” for Britain: being the most competitive tax system in the G20; being the best place to “start, finance and grow a business”, with a more balanced economy and a more educated and “flexible” workforce.

Measures included a further 1% cut in corporation tax to make clear that “Britain is open for business” and an annual £1bn clampdown on tax avoidance.

“Today’s budget is about reforming the nation’s economy so that we can have enduring jobs and growth in the future, doing what we can to protect families from the high cost of living,” he said.

Presented against a deteriorating economic backdrop of rising oil prices, public sector austerity and low consumer confidence, the budget sought to appeal to Britain’s “squeezed middle” by announcing help for first-time home-buyers, and a boost for 25 million income taxpayers by raising the threshold on the personal tax allowance to £8,075 by April 2012.

With household bills and retail prices rising, the chancellor concentrated much of the money he has to play with on cutting fuel prices as the cost of petrol and diesel reached all-time national average highs (£1.33 and £1.40 respectively) to increase consumers’ spending power and help business.

The rise in fuel duty planned for next week will be delayed until 2012, and the fuel duty escalator that adds 1p to fuel duty on top of inflation each year to be cancelled for the rest of this parliament.

A fair fuel stabiliser to help keep costs down in future is to be funded by an increased levy on oil and gas production.

Osborne told MPs that helping families with the cost of living and backing enterprise and introducing “far-reaching reforms” to help the economy grow were “one and the same thing”.

He said: “It is the central understanding of this government – and core to our strategy – that these are not two separate tasks. They are one and the same thing.

“We are only going to raise the living standards of families if we have an economy that can compete in the modern age.

“So this is our plan for growth. We want the words ‘made in Britain’, ‘created in Britain’, ‘designed in Britain’, invented in Britain’ to drive our nation forward.

“A Britain carried aloft by the march of the makers. That is how we will create jobs and support families. We have put fuel into the tank of the British economy.”

But his package received short shrift from Miliband, who told him his economic strategy for Britain was “hurting, not working”.

Miliband challenged Osborne’s claim to have delivered a budget for growth, saying the government’s cuts were damaging the economic recovery.

“Every time he comes to this house, growth is downgraded,” he said. “One fact says it all, and he couldn’t bring himself to say it: growth down last year, this year and next year. It’s the same old Tories – it’s hurting, but it isn’t working.”

Other measures to protect the money in people’s pockets in Osborne’s budget include:

• Raising the income tax personal allowance by £630 next year, which comes on top of the £1,000 rise next month and lifting the threshold at which income tax is payable to just over £8,105 from April next year, a real terms increase of £48 a year (or £126 in cash terms) for those earning up to £115,000 a year.

The 550,000 taxpayers who earn more than £115,000 will lose £45 a year because they no longer have a personal allowance.

The latter measure will see a further 250,000 people taken out of income tax altogether, in a move that brings the coalition a step closer to its promise of delivering a £10,000 tax threshold by the 2015 general election.

• A £250m shared equity scheme for new homes, funded from the bank levy, to help 10,000 families. Those with a household income of less than £60,000 a year who can put down a 5% deposit on a new home will be eligible for an equity loan worth up to 20% of the value of the property jointly funded by the government and housebuilders.

The loan will be interest-free for five years and only be repayable when the house is sold.

In a budget designed to shift away from spending cuts to reduce the national debt to growth-enhancing measures, Osborne also published his growth strategy for business.

His bid to boost the private sector includes:

• The removal of £350m worth of regulation on businesses.

• A three-year moratorium on new domestic regulation for all businesses employing fewer than 10 people.

• New planning rules to require planners to prioritise growth and jobs with a new presumption in favour of sustainable development, while retaining existing controls on green belt land.

• Small business relief extended to October 2012, at a cost of £370m.

• Funding for 21 new enterprise zones.

• Funding for 40,000 new apprenticeships for unemployed young people.

The chancellor presented gloomy figures based on data from the Office for Budget Responsibility (OBR) which confirmed that the recovery would move at a slower pace than previously forecast.

He said GDP growth estimates for 2011 had been cut from 2.1% to 1.7%, while 2012 was revised down to 2.5% from 2.6%.

He stressed that the long-term outlook was more upbeat as estimates for 2013 were held and forecasts for 2014 and 2015 were revised upwards to 2.9% from 2.8% and 2.8% from 2.7% respectively.

Osborne also revealed that the rate of inflation, currently at 4.4%, is not expected to drop back to the government’s 2% target until 2013, contrary to the Bank of England’s belief it will fall back by 2012.

But the chancellor said the government was on track to deliver a balanced structural budget and falling national debt by the end of parliament.

“Our fiscal mandate is to achieve a cyclically-adjusted current balance by the end of the rolling five-year forecast period – which is currently 2015-16,” he said.

“We have supplemented that with a fixed target for debt: so that debt should be falling as a proportion of GDP by the year 2015-16 as well.

“I can report to the house that the OBR confirm that on their central forecast we will meet both these objectives – a balanced structural current budget and falling national debt by the end of the parliament. Indeed, the forecast remains that we will meet both these objectives one year earlier.”

On tax, Osborne announced plans to make Britain’s tax system more competitive and simpler:

• Corporation tax will be reduced by 2% from April 2011 – rather than 1% as previously announced – and to fall by 1% in each of the next three years to reach 23%. In a bid to offset the effect of the reduction on banks, the bank levy rate will adjusted next year.

• “No less than 43 complex tax reliefs” would be abolished as part of a simplification of the tax system, Osborne said.

As part of the move, he confirmed widely trailed speculation that he would consult on scrapping the divide between income tax and national insurance as part of a drive to simplify taxation for business.

He said this would be a way for people to see more clearly how much they are being taxed, rather than to raise them, and make the system “fit for the modern age”.

Osborne balanced giveaways with fresh tax-raising measures, which included:

• The charge on non-domiciled taxpayers to increase from £30,000 for those here for seven years to £50,000 for those in the country for 12 years, raising more than £200m.

• A clampdown on the “injustice” of tax avoidance. Osborne said three forms of stamp duty land tax avoidance would be closed, capital gains rules for companies would be tightened and the practice of disguised remuneration, which sees highly paid employees offered tax-free, lifetime loans that are never repaid, would come to an end.

“In total, on the numbers audited by the independent OBR, the tax avoidance measures in this budget raise around £1bn a year – that’s £4bn over the parliament,” he added.

“We are doing more today to clamp down on tax avoidance than in any budget in recent years. And that gives us more resources, in a fiscally neutral budget, to help those families who do pay their taxes, but who are struggling with the daily cost of living.”