Pre-election give away?
George Osborne will deliver his final Budget of the Parliament on Wednesday and with more money to play around with than previously thought, will he be tempted into offering voters a bribe ahead of 7th May?
The Chancellor has previously dismissed any talk of pre-election giveaways, promising Andrew Marr on Sunday that there will be “no giveaways, no gimmicks” in this week’s Budget. However, two potential sources of income have presented themselves since he last set out his spending plans for 2015/6 in last year’s Autumn Statement:
- Commentators have pointed out that there may be as much as £5 billion more to use than previously expected due to lower inflation, higher tax receipts and economic prospects boosted by the fall in oil prices.
- Speculation has risen that the coalition may announce their own raid on pension savings, along similar lines to the plans announced by Labour to fund decreasing tuition fees.
What will the Chancellor use this money for, if indeed he chooses to?
Most of the speculation has focussed on increasing the threshold at which National Insurance is paid or further raising the tax-free allowance. The Daily Mail has estimated that 1.2 million low paid workers would benefit from his National Insurance proposals. These policies would present a real problem for Labour – with Osborne being able to present the Conservatives as a tax cutting party on the side of low income workers. The political capital to be made is all the greater following Labour’s recent tuition fees announcement which many in the party fear will only benefit well off graduates – as The Times has reported, a number of Labour sources fear Osborne “is preparing to punish what they regard as a mistake” by the Labour leader.
Following on from last year’s Autumn Statement, there could be further announcements designed to benefit savers. It has all but been confirmed that the Budget will let even more people buy back their annuities, with already-retired people being able to do so from next month. It is also rumoured that inheritance tax will be cut, either in the Budget or in the Conservative manifesto. Apparently several options are under consideration, with the front runner being raising the threshold from £325,000 to £1 million. These measures would be a sure-fire way to continue to appeal to the grey vote.
Tax cuts for low earners are likely to appeal to the Chancellor’s coalition partners but the Liberal Democrats have recently highlighted the contradictions inherent in pursuing a policy of austerity only to offer giveaways at the end of the Parliament. Danny Alexander recently told the Telegraph that he wanted to prevent the Chancellor from pulling a “rabbit out of the hat” and revealed he was extremely hesitant for any Budget giveaways. That being said, it is hard to believe the Tories have not got at least one rabbit to reveal on Wednesday in exchange for the Liberal Democrats’ announcement over the weekend of more funding for mental health services for children, an area they have championed for a long time.
With the exception of his 2012 ‘omnishambles’ Budget, Osborne has consistently used set piece speeches to neutralise opposition attacks or to create ‘wedge issues’ to distinguish the Tories and divide their opponents. There’s no reason to believe this year’s budget will be any different so, with or without a spending splurge on Wednesday, expect some tricks up Osborne’s sleeve designed to create welcome headlines as we move into the election campaign proper and uncomfortable faces on the opposition benches.