George Osborne’s Budget is to be debated by MPs after his announcement of a National Living Wage sparked a political row.
One Labour leadership contender, Liz Kendall, said the measure was a “con”, while another, Yvette Cooper, said it “falls short” of being a living wage.
Paid to over-25s, it will start at £7.20 and rise to £9 an hour by 2020.
Making the surprise pledge, Mr Osborne said: “Britain deserves a pay rise and Britain is getting a pay rise.”
BBC political editor Nick Robinson said the living wage pledge, as well as announcements on apprenticeships and the taxation of so-called non-doms, represented “a ruthless raid on Labour’s manifesto”.
As the Commons begins to debate the content of the Budget, influential think tank the Institute for Fiscal Studies will give its verdict.
Mr Osborne also scrapped student grants and froze working-age benefits but increased the overall tax take to slow the pace of welfare cuts.
Other measures included:
- An increase in the inheritance tax threshold to £1m for married couples by 2017
- Working-age benefits to be frozen for four years – including tax credits and local housing allowance, but excluding maternity pay and disability benefits
- Maintenance grants for students – paid to students with family incomes below £42,000 – to be scrapped and converted into loans from 2016/17
- Scrapping housing benefit for under-21s
- Corporation tax cut to 18% by 2020
- Restrictions on tax breaks for “buy-to-let” landlords
- A commitment to meeting the Nato target of spending 2% of national income on defence
- Fuel duties frozen for the remainder of this year
- New car tax bands with a standard charge of £140 – and new cars will not need MOTs for the first four years, rather than three
- A fresh clampdown on public sector pay, which will be limited to 1% a year for the next four years
- Pensions tax annual allowance to be tapered away to a minimum of £10,000 from next year
- Confirmed that the BBC has agreed to absorb the £650m cost of providing free television licences for over-75s
Mr Osborne unveiled a downgraded growth forecast for the UK this year, of 2.4%, and pushed back the date at which the UK’s public finances would move into surplus by a year to 2019/20.
The Office for Budget Responsibility said public spending would be £83bn higher over the next five years than Mr Osborne said in his March Budget – and the £24.6bn tax cuts announced in the Budget would be dwarfed by £47.2bn in tax rises, including the car tax changes and increasing the tax on insurance premiums from November.
Welfare cuts would add up to £35bn over the next five years.