Britain's Chancellor of the Exchequer George Osborne has delivered his first budget in the House of Commons, cutting spending, increasing taxes and introducing a levy on banks in a drive to cut a record budget deficit to almost nothing in five years.
Read about the budget as it unfolded
The Conservative Chancellor said government spending would fall by around 25% over four years and announced VAT sales tax would go up to 20% from 17.5% next year, with a new £2bn levy on banks introduced at the same time.
Nearly 1m of the poorest paid people will be taken out of the income tax net altogether by raising its starting point.
The headline rate of corporation tax will drop by one percentage point to 27% next year and then keep falling.
'This emergency budget deals decisively with our country's record debts. It pays for the past and it plans for the future,' Mr Osborne said.
'Yes, it is tough, but it is also fair,' he told parliament.
Mr Osborne said that the structural deficit, the level of borrowing which can only be cut by tax hikes and spending cuts, would be eliminated within five years.
'We are on track to have debt falling and a balanced structural current budget by the end of this parliament in 2014-15,' he added.
The lion's share, 77%, of the deficit reduction measures will stem from lower spending, with the remainder coming from higher taxes.
The British government will meanwhile freeze public sector pay for two years, and slash child and housing benefits.
As a result of the new budget measures, British economic growth forecasts were downgraded to 1.2% this year and 2.3% next year.
That compared with prior estimates for expansion of 1.3% and 2.6%.
Irish reaction
Elsewhere, Minister for Enterprise, Trade and Innovation Batt O'Keeffe has said Mr Osborne's decision to increase the VAT rate will stimulate the Irish economy and create jobs.
Mr O'Keeffe said: 'The move will increase consumer demand and generate retail sales at a time when we need every possible support to create jobs and build for economic recovery.
'The increased VAT rate in the UK, allied with falling value of the euro against the pound sterling, will discourage cross-border shopping and incentivise more of our consumers to spend their money in this jurisdiction.
'The move will severely curtail the loss in revenue to our economy as a result of cross-border shopping which was estimated to be worth up to €600m.'
