Heads up – the Budget has been and gone, so this sneak-preview is outdated. Catch up on what was actually announced
The British economy may be on the path to growth, but there remains a monstrous mountain of debt to pay off.
Despite five years of cuts and reforms, the government has borrowed over £200bn more than it planned to at this stage.
At the 2010 budget, George Osborne said: “The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget”.
But after government borrowing remained high, the official line changed so that instead of bringing borrowing as a percentage of GDP down to zero by this year as promised, the aim would instead be to half it.
Meanwhile, despite rising employment, income tax receipts remain low indicating that wages remain depressed.
All of these factors indicate that Osborne is going to have a hard time coming up with methods of freeing up money for any big surprises on Wednesday.
This difficulty will be compounded by Osborne’s coalition partners, the LibDems, who will be looking to block any ruses the Tories can use to woo the public ahead of the election.
So what will Osborne announce tommorow? There are no prizes for guessing how many times Osborne will utter his mantra “the long term economic plan is working,” but the rumour mill is grinding away with what the chancellor is going to surprise us with. Here’s a selection of possibilities:
1. Slashing inheritance tax
According to several media reports, Osborne is hoping to make a splash by announcing an overhaul to the inheritance tax system.
Currently, inheritance tax is paid if a person’s estate is worth more than £325,000 when they die. The tax is then levied at 40% for anything above this threshold. It may however be reduced to 36%if 10% or more of the estate is left to charity.
There is speculation that Osborne could use the Budget to raise the threshold from £325,000 to £1m. The Tories have hinted at an overhaul several times in the past. The only problem Osborne faces in including it in the Budget is getting the Lib Dems to agree with the changes.
2. Rise in income tax threshold
Osborne is set to increase the income tax threshold from £10,600 to £11,000. This would mean that some people earning low wages will not have to pay tax. Also, this is expected to give over 27 million people a £200 tax cut.
The 40% tax threshold is also expected to rise from £41,865 to £50,000. There is also talk of the top rate of tax being reduced from 45% to 40%.
3. Pensions reforms
About five million pensioners are likely to be able to get their pensions up front as a cash sum, without a big tax charge.
Currently, those who are retiring can take their pensions savings up front. This scheme is likely to be extended to five million pensioners who have already retired and bought annuities.
4. Tech and broadband boost
The chancellor is set to announce plans to connect Britain’s remotest communities with superfast broadband as part of government’s pledge to provide fast internet to 95% Britons by 2017. According to The Times, people who have waited longest will be the first to get superfast internet.
Other rumours suggest that Osborne will pledge more support for technology clusters across the UK. He’s particularly keen to develop a “Northern powerhouse” which will boast tech hubs and enterprise zones.
5. Building new homes on brownbelts
Osborne is also expected to dabble in addressing the UK’s chronic housing shortage, by freeing up land on brownfield sites. According to the BBC, it is estimated that the chancellor could announce a scheme to build as many as 45,000 new houses in brownfield areas.
6. Booze and fags giveaway
Great news for those of us with vices, we’re likely to see a cut in the rate of tax on booze and cigarettes in this year’s budget.
We’re probably going to get 1p or 2p off a pint of beer or cider – thanks to some Tory MPs who are hugely behind the move – and 16p off a bottle of spirits. Wine duty probably won’t get a cut but is likely to be frozen.
Meanwhile, a box of 20 cigarettes could fall by 28p.