By Jason Theodorou

Chancellor George Osborne has said that he wants to make the British economy 'open for business', as he reveals the biggest package of spending cuts and tax increases in 30 years.

Mr. Osborne said that Britain's record budget deficit would be eliminated within five years, much sooner than planned by the Labour government. He said this was necessary to ensure confidence in the UK economy, but said this was a 'progressive Budget' which would be shouldered largely by high-earners.

Although he stressed that the public sector was not to blame for the budget deficit, he said public sector workers needed to play their part. Public sector workers earning over £21,000 will see a two year pay freeze.

VAT will rise from 17.5% to 20%, an increase of 2.5 percentage points. Capital gains tax will rise to 28% at midnight tonight.

There will be a levy on banks, which will apply to the balance sheets of UK banks and building socities and the UK arm of foreign banks. Mr. Osborne said that this could save up to £2 billion a year.

Child benefits will be frozen for three years, and there would be changes to family tax credits and housing benefits.

Mr. Osborne said the economy would not be 'overly reliant on the success of one industry - financial services - but based on the success of all industries'.

The chancellor said that the UK economy was set to expand by 2.6%, rather than the 3.25% forecast by his predecessor Alistair Darling. He took his figures from the newly formed and independent Office for Budget Responsibility (OBR).

Business economist Dominic Swords told Fresh Business Thinking: 'There's an experiment taking place, seeing if the economy can work if it is led by the private sector, rather than a mix of the private and public sectors. But Mr. Osborne has not taken real measures to spur private sector growth'.

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