George Osborne slashes growth prediction as he reveals the British economy will shrink again (VIDEO)

Dec 5 2012 By Cheryl Mullin

The Chancellor said most benefit increases would be pegged at 1% for the next three years – a real terms cut.

The higher rate income tax threshold would also be increased by just 1% in 2014-15 and 2015-16, so the income at which people start paying the 40% rate will go up from £41,450 to £41,865 and then to £42,285.

Mr Osborne told MPs: “I want to be completely clear with people. This is an increase; in fact, it is the first cash increase in the higher rate threshold in this Parliament.

“But it is not an increase in line with inflation, and so it raises one billion pounds of revenue by 2015-16.”

He also announced another cut in corporation tax rate by a further 1% to 21%, compared with 40% in the US, 33% in France and 29% in Germany.

He said: “This is the lowest rate of any major western economy. It is an advert for our country that says: come here; invest here; create jobs here; Britain is open for business.”

He confirmed that the planned increase in fuel duty would be suspended, saying: “It means that under this Government we’ll have had no increase in petrol taxes for nearly two and a half years.”

And he announced more help for working people with an increase in the amount they can earn before paying any income tax from next April – currently due to be £9,205 – by a further £235.