The Budget: What To Expect From Osborne

Written By Unknown on Jumat, 13 Maret 2015 | 22.11

If you're expecting the forthcoming Budget to make a big difference to your pockets, you may well end up a little disappointed.

Pre-election Budgets tend to be short on measures and long on promises. After all, if there is a new Government elected in May, it will almost certainly table an emergency Budget to implement its own plans.

Often pre-election Budgets serve as a quasi-manifesto, providing a set of fiscal measures you might be able to expect if the governing party gets re-elected.

However, this time around, the Government is, of course, a coalition, and given neither party wants to pre-commit to another term of joint government, the document itself will probably be quite vague about what comes after 2015.

That said, there are certainly areas where we are expecting some movement. There may well be another increase in the tax-free allowance and some anti-tax avoidance measures to clamp down on companies like Starbucks and Google, who have been accused of shifting profits around the world to cut their tax bills.

If previous Budgets are anything to go by, the Chancellor may freeze or cut duty on beer prices (as compared to his predecessor but one, Gordon Brown, who preferred to ease duties on Scotch).

Moreover, the Chancellor has a little more money than expected left in his accounts. Thanks to weaker inflation and lower oil prices, the budget deficit this year may be as much as £5bn smaller than expected.

The question is whether Mr Osborne uses that money to pay off the national debt or to provide extra tax cuts (or, less likely, spending rises).

Certainly, an instant eye-catching tax cut would be an excellent pre-election boost for the Conservatives.

Finally, there's the question of whether the Chancellor will ease up on his austerity plans after the election.

At present, Mr Osborne is targeting a whopping £23.1bn surplus in 2019/20 - far bigger than is necessary even based on his fiscal targets (which just aspire to eliminate the deficit,  not to pull it into surplus).

That ambition will involve swingeing spending cuts, reducing the size of the state to the lowest level since the 1930s.

Those 1930s headlines were deeply unhelpful for the Tories following the Autumn Statement in December, so the Chancellor may well want to scale back the ambition of the spending cuts. Particularly since these are such long-term forecasts that no-one seriously expects them to be met with great accuracy.

Finally, although expectations are low, it would be odd for the Chancellor not to attempt to pluck some kind of rabbit out of his fiscal hat. That's what he's tended to do in the past - can he really resist the temptation so close to an election?


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