Budget Day: what the papers say Osborne has in his red box

CHANCELLOR George Osborne will unveil his Budget today as the country faces yet another grim economic outlook, with the Office of Budget Responsibility expected to downgrade growth forecasts yet again.

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While cutting £2.5bn in spending from all but the ring-fenced government departments, Osborne has little wriggle-room but is expected to bring forward relief for those on lower incomes. Here are some of the measures he is expected to announce:

Tax allowance: The Guardian says Osborne will cast himself as a champion of the low-paid, announcing he will move forward existing plans for a tax-free allowance of £10,000 to 2014 (the current limit is £9,440). This will please the Lib Dem half of the Coalition as it was a manifesto pledge of theirs. A planned rise in fuel duty, due for September, will be delayed or even scrapped altogether.

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Business: The Daily Telegraph says there is "little doubt" that corporation tax, already set to fall to 21 per cent from 28 per cent, will be lowered still further, to 20 per cent. The paper calls the reduction "symbolic" as it will generate only £500m revenue. Business rates may also be reduced.

House building: BBC political editor Nick Robinson says we should stand by for "a boost to house-building or, rather, yet another government attempt to stimulate the construction sector, which shrank by almost eight per cent last year". Osborne will probably extend the NewBuy scheme, which helps first-time buyers get on the property ladder.

VAT: Expect no change in the rate of Value Added Tax, says the Telegraph. Given the "brouhaha" over the so-called pasty tax last year, Osborne is unlikely to tinker with it – even though there are some "anomalies" within the standard rate of 20 per cent. Food and drink will remain zero-rated while confectionery will stay at 20 per cent.

Alcohol: Robinson predicts that Osborne will scrap the so-called "beer tax", the automatic increase of two per cent above inflation of alcohol duty, which The Sun newspaper has been campaigning against. If he makes that move, he will probably balance it with an increase of duty on cheap but strong alcoholic drinks, says Robinson.