The Budget 2015: Osborne announces a new 'National living wage'

Mr Osborne said that 2.5 million people "will get a direct pay rise"

Treasury sources say it was "up to them" if 'living wage' employers actually dropped their current rates to pay the new 'national living wage' of £7.20.

Osborne pledged to create a "higher wage, lower tax, lower welfare" Britain as he unveiled the first Tory-only Budget for nearly 20 years.

The Chancellor pointed to the Greek crisis as evidence that a "bold new settlement" is needed, saying Britain was still "borrowing too much and spending too much".

"This is the new settlement from a one nation government," he said. "This is a big budget for a country with big ambitions."

Mr Osborne said the UK economy today is "fundamentally stronger than it was five years ago", with living standards rising strongly.

He said higher tax receipts meant he could implement a "smoother" path to recording a surplus in the government finances, but stressed that he would not back away from tackling the deficit.

"You only have to look at the crisis unfolding in Greece as I speak to realise that if a country's not in control of its borrowing, the borrowing takes control of the country," Mr Osborne said.

"Britain still spends too much, borrows too much, and our weak productivity shows we don't train enough or build enough or invest enough."

Mr Osborne said: "This will be a Budget for working people.

"A Budget that sets out a plan for Britain for the next five years to keep moving us from a low-wage, high-tax, high-welfare economy; to the higher-wage, lower-tax, lower-welfare country we intend to create.

"This is the new settlement. From a one-nation government, this is a one-nation Budget that takes the necessary steps and follows a sensible path for the benefit of the whole of the United Kingdom."

Mr Osborne said the Government would record an absolute surplus of 0.5% of national income in 2019-20 - a year later than previously predicted.

He stressed that no year would see departmental cuts as deep as those imposed in the last parliament.

"Many difficult but necessary decisions are required to save money and this will be done with moderation but determination," Mr Osborne said.

"This is a one nation Government that does the best thing for the economy and the right thing for the country."

The Chancellor said £37 billion of fiscal consolidation was needed during this parliament, including £12 billion of welfare cuts. He confirmed that he was looking to raise another £5 billion from cracking down on tax avoidance.

Acknowledging a well-received Labour policy from the election campaign, Mr Osborne announced that permanent non-dom tax status was being abolished.

"British people should pay British taxes in Britain, and now they will," he said.

Mr Osborne said abolishing non-dom status altogether would "probably cost the country money", but his plans would bring in an extra £1.5 billion in revenue.

"Many of these people make a considerable contribution to our public life and to tax revenues," he said. "But there are some fundamental unfairnesses ... It is not fair that people who are born in the UK to parents who are domiciled here, can later in life claim to be non-doms and live here.

"It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax.

"From now on they will pay the same tax as everyone else.

"And most fundamentally, it is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else."

After a consultation, from April 2017 "anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains".

Mr Osborne announced reforms to vehicle excise duty, reducing the number of bands to three - zero, standard and premium. He said "every single penny" of revenue will be ringfenced for road projects.

"From 2017, for brand new cars only, we will introduce new VED bands," he said. "The duty in the first year will be set according to emissions, like today, but updated for new technology.

"Thereafter there will be three duty bands - zero emission, standard and premium.

"For standard cars - that covers 95% of all cars sold in the UK - the charge will be £140 a year.

"That's less than the average £166 that motorists pay today.

"There will be no change to VED for existing cars - no one will pay more in tax than they do today for the car they already own."

Fuel duty will remain frozen this year, he said.

Mr Osborne said new cars and motorbikes will not need MOTs for the first four years, rather than three.

Promising a plan to boost the UK's lagging productivity, the Chancellor said a key part would be a new charge on big business to help fund another three million apprenticeships.

"Firms that offer apprenticeships can get more back than they put in," he said. "Britain's great businesses training up the next generation.

"The money will be directly controlled by employers and we'll work with business on how to do this, it's exactly the sort of bold step we need to take if Britain is going to raise its game."

In a controversial move, Mr Osborne confirmed that student grants will be replaced by loans to save £1.6 billion.

"We have removed the artificial cap on student numbers so we don't have to turn away people from our universities who want to go and have the right grades," he said.

"But we can't afford to do this unless we tackle the cost of student maintenance grants - that is set to almost double to £3 billion over this decade.

"There's also a basic unfairness of asking taxpayers to fund the grants of people who are likely to earn a lot more than them."

He added: "If we don't tackle this problem then our universities will become underfunded and our students won't get places - and I'm not prepared to let that happen."

Mr Osborne said he was making good on the Tory pledge to take millions of people out of inheritance tax.

"The wish to pass something on to your children is about the most basic, human and natural aspiration there is," he said. "From 2017, we will phase in a new £175,000 allowance for your home when you leave it to your children or grandchildren.

"It sits on top of the existing £325,000 threshold which will be fixed until the end of 2020-21.

"Both allowances can be transferred to your spouse or partner."

Confirming the relief would be tapered away for homes worth more than £2 million, Mr Osborne added: "The result for families is this.

"You can pass up to £1 million on to your children free of inheritance tax."