Pay Rise For UK With Compulsory Living Wage

George Osborne has announced a new £9 an hour living wage saying: "Britain deserves a pay rise."

The Chancellor said the move would mean a direct pay rise for two and a half million people and that those currently on the minimum wage would see a £5,000 wage increase by 2020.

To help small firms meet the cost of a new minimum wage, Mr Osborne said he would cut their national insurance contributions.

Delivering his first all-Conservative Budget in 20 years, Mr Osborne said his "plan for working people" would see the minimum wage rise to £7.20 in April and increase to £9 by 2020.

As he made the announcement, Welfare Secretary Iain Duncan Smith, who is in charge of the Government's troubled welfare reform programme, was seen punching the air and cheering.

As a further reward for workers, Mr Osborne announced he would increase the amount people have to earn before paying income tax to £11,000.

And he announced he would link the rise in the personal allowance to the minimum wage so the poorest paid in society would never have to pay income tax.

However, he also made £12bn cuts to the welfare system, slashing tax credits and cutting in-work benefits for families with more than two children.

He scrapped housing benefits for 18-21 years olds, froze working age benefits for four years, and slashed the income threshold at which families can receive the in-work benefits, which cost the country £30bn a year, by almost half from £6,420 to £3,850.

He also announced families with more than two children will no longer be entitled to extra state handouts and capped the amount of benefits families can receive at £20,000, or £23,000 in London - down from £26,000.

Mr Osborne said that in 1980 working age welfare accounted for 8% of public spending but today it was 13% and he added that Britain spent more on family benefits in Britain than Germany, France or Sweden.

There were rewards for the middle classes with an announcement that Inheritance Tax would no longer be paid on properties up to £1m - a move expected to benefits one million properties.

And Mr Osborne raised the threshold for the 40p tax rate from £42,385 to £43,000 from 2016.

However, he also scrapped permanent "non-dom" status that allows people to avoid paying tax in the UK saying: "British people should pay British taxes."

Mr Osborne said that those who had lived in Britain for more than 15 years would lose their entitlement to non-dom status from April.

The measure to scrap the controversial status will raise £1.5bn for the Treasury. And he said a further £5bn would come from tackling tax evasion and avoidance.

Interim Labour leader Harriet Harman immediately attacked the Chancellor's pledges, accusing him of balancing the books on the backs of the poorest in society.

Other Budget measures include:

:: A further £8bn for the NHS.

:: Reduce bank levy rate over six years

:: Road tax reform - new cars to be taxed on emissions from 2017. Will pay for new roads fund

:: Apprenticeship levy - to create three million more apprenticeships

:: Student grants scrapped and replaced with loans from 2016-17 - to be repaid by graduates when they earn over £21,000 a year. Tuition fees to rise in line with inflation

:: Further powers for Manchester and new powers for the West Midlands

:: £30m for an Oyster card service for cities including Sheffield, West Yorkshire, Liverpool

:: Corporation tax to be cut from 20% to 19% in 2017 and 18% by 2020 - a 10% drop since the Conservatives came to power

:: 30 hours free child care for three and four year olds from September 2014

In delivering his Budget, Mr Osborne set the direction of the Government for the next five years and his statement will be seen as a blueprint for his leadership bid ahead of 2020.

David Cameron has said he will will not stand for another term and tipped Mr Osborne, Boris Johnson and Theresa May as his successors.

Mr Osborne said that for the second year running, Britain has been forecast to have the strongest economic growth of any major advanced economy in the world, with the Office for Budget Responsibility predicting a 2.3% growth in 2016.

He said the budget deficit was running at half the 10% the Conservatives inherited but that the cuts must continue because the economic progress was "at risk if we do not finish the job".

Responding to criticism he was cutting too deeply, too quickly, Mr Osborne said that the Government would look to cut the deficit at the same pace as in the previous parliament: "We shouldn't go faster. We shouldn't go slower."

Mr Osborne said the process of getting the deficit down could be "smoother" because of stronger tax receipts and greater asset sales.

And he said the country was on course to be in "doing the responsible thing and raising more money than it spends" by 2019-20 adding: "Britain has turned a corner and left the age of irresponsibility behind".