Britain cut its economic growth forecast today and said inflation would remain above target this year and next in a budget that stuck to ambitious deficit-busting goals, Reuters reported.

George Osborne, the country’s finance minister, said the corporation tax would be cut by two percentage points to 26 percent from April, rather than by the 1 point originally planned. A levy on banks will be increased to pay for the cut.

Osborne cut his growth forecasts to 1.7 percent in 2011, and 2.5 percent in 2012, citing figures from the government’s independent fiscal watchdog. In November, growth was estimated to be 2.1 percent this year and 2.6 percent in 2012.

Policymakers at the Bank of England face a dilemma, with inflation running at more than double their 2 percent target while the economy is still in a fragile state and needs the support of record low interest rates, Reuters said.

Osborne said soaring oil prices meant inflation would remain between 4 and 5 percent this year before dropping to 2.5 percent next year.