With only 50 days between the Budget and the General Election, who can blame Chancellor Osborne for including a few judiciously designed bribes? He will be in a strong position to do so and to underline the Conservative Party's trump card-the strength of the UK's recovery.
The Office for Budget Responsibility's, (OBR), updated forecasts will also be released on 18th March and will show higher growth, and lower borrowing, compared to their previous publication, in September. Then, they suggested that real GDP growth would slow to 2.4% in 2015 and 2.2% in 2016, whereas the Bank of England expects 2.9% for both years, and consensus forecasts are for 2.6% and 2.3% respectively. I expect the OBR to move up its expectations, to become roughly in line with consensus.
Borrowing forecasts should be lower-public sector net borrowing figures for the first ten months of the fiscal year, i.e. April 2014 to January 2015, showed a £6bn improvement on the same period in 2013/14-£74bn vs. £80bn, but the OBR's September forecasts only foresaw a £6bn improvement over the course of the whole fiscal year so, with the deadline for completion of tax returns falling on a Saturday this year, there's every reason to hope that January's receipts will eventually become even more healthy. Lower payments to index-linked Gilt investors, due to lower than forecast inflation, will also bear down on borrowing.
The bottom line is that, although healthier than originally forecast, the figures do not allow Osborne to indulge in a massive pre-election giveaway budget, but will certainly allow him to come up with some vote-winning measures-maybe amounting to £7bn in total.
The targets chosen to benefit from his largesse will no doubt be selected on a basis driven shamelessly by electoral considerations, with the top priorities, in descending order of importance, being -
• Help for the lower paid to address inequality
• National Health Service
• Housing affordability
• University Fees
• The 'squeezed middle-classes'
The most likely measures to address these look like being as follows-
Help for the lower paid to address inequality
• Introduction of a 10% tax band
• Raise personal allowance-possibly adopting a target of £12,500 to be achieved in the next parliament-thus stealing a Liberal Democrat, (LibDem), promise.
• Increase threshold for National Insurance payments to the same as that for income tax
• Lower duty on alcohol
• Raise minimum wage, (might actually raise more tax)
• Continued ring-fencing, via exclusion from the general Spending Review
• Match the NHS CEO Simon Stevens' request for £8mln extra funding by 2020-thus neatly stealing another LibDem policy
• Yet more help with deposits and mortgage availability for first-time buyers
• More incentives and/or planning permission relaxation for house builders
• Help for less affluent students, in order to 'spike the guns' of Labour's proposals, which have been branded as only beneficial for richer students.
• Direct grants to universities for research, etc.
• Yet more help for this politically attractive demographic-a high percentage turns out to vote, and they tend to vote Tory when they do.
• More high yield bonds/investment products
• Raise the inheritance tax limit, so that only 'rich' people are caught. From the current £325,000 to £1m?
The 'squeezed middle-classes'
• Raise the 40% tax threshold from its current level of £41,865. Cameron has pledged to raise the threshold to £50,000 by 2020. This will appeal to many wavering Tory voters; and could be especially effective in marginal seats with strong UKIP support. This tax bracket was designed to tax high-earners, but is now capturing about 15% of workers.
All neatly accompanied with a side order of populist 'bash the rich' and 'bash big, bad business' measures, such as tax raids on so-called 'non-doms', (UK residents who have their permanent home ('domicile') outside the UK, and hence may be able to avoid UK tax), and on banks. Pudding will be a tasty rendition of a so-called 'Google tax' on multinationals that employ complex tax avoidance methodologies. Yummy!