Budget backed by business community

George Osborne's first Budget as chancellor has achieved his twin objectives of reining in public spending and creating an atmosphere conducive to long-term growth, the CBI's director-general has said.

Showing overwhelming support for the Con-Lib coalition government's fiscal policies of increasing VAT, cutting business taxes and slashing welfare expenditure, Richard Lambert claimed that Osborne was close to achieving his 80:20 ratio of spending cuts to tax increases.

Commenting on the chancellor's smaller-than-expected increase in capital gains tax, Lambert said: 'He has struck a sensible balance ... limiting the impact of the increase on entrepreneurial activity and business investment.'

However, the Budget was lambasted by acting Labour leader Harriet Harman, who claimed that the poor were simply footing the bill for banking excesses.

She reserved her most severe scorn for the Lib Dems, who she claimed had reneged on their campaign pledge to shelve a planned Tory VAT 'bombshell'.

The Child Poverty Action Group also condemned Osborne's Budget, claiming the disappointing fiscal policies outlined were far from progressive. The charity said the new Budget could result in the UK missing its 2020 goal of ending child poverty.

'The increase in VAT is a regressive measure which will impact hardest on poor families,' the organisation claimed.

In a boon for booksellers, the chancellor has decided to exempt books from the increase in VAT.

There were fears that the coalition government would abolish the zero per cent rate of VAT on children's clothes, food and books - but the fears proved unfounded.

Speaking to the Bookseller, Simon Juden, chief executive of the PA, said: 'I am delighted that the chief secretary and chancellor have recognised the extraordinary benefit the whole country derives from supporting books and other printed matter by retaining their zero rating.'