Wednesday’s budget speech is the Chancellor’s last set piece chance in this Parliament to make a change, lay a legacy and try to win an election. Although stern warnings have gone round Whitehall as to the consequences of saying too much to the media, there have as ever been several well-laid clues as to the budget’s contents. We’ve rounded up the better-informed speculation below.
Headline economic issues
- Growth figures will be kept secret until the speech, but we expect an upgrade in the OBR estimate and a slight improvement in the deficit projection. The Chancellor will no doubt continue to affirm commitment to a balanced budget, with more to do in the next Parliament.
- The income tax threshold is due to rise to £10,600, but the Government has put out strong signals it could then go to £10,800 or even £11,000
- The Chancellor could announce greater funding for the Enterprise Investment Schemes and Seed Enterprise Investment Schemes (SEIS), which deliver tax breaks to investors who buy up new shares in small start-ups
- A review of business rates has already been launched; the longstanding Conservative concern of inheritance tax will though probably have to wait for manifesto commitments.
- The speech could include a possible re-announcement of the ‘Help to Grow’ SME lending programme through the British Business Bank
- We will also hear more about the anti-tax abuse strategy. This will probably include new penalties for facilitating evasion, some level of offshore account liability, extra costs for serial avoiders, more flexibility for HMRC, and confirmation of the planned ‘diverted profits tax’.
Alcohol and Tobacco
- The Chancellor is expected to announce a beer and cider duty cut of possibly 2p per pint, as well as a cut in duty on whisky, which could take 16p off a bottle.
- It is not predicted that there will be a cut in duty on other spirits and wine, although a freeze on wine duty has been trailed
- A similar rise to last year’s tobacco duty has been mooted, with suggestions that a packet of 20 cigarettes could cost an extra 28p
- As part of his ‘Northern Powerhouse’ vision, the Chancellor will almost certainly stress his support for HS3, including a narrowing down of the estimated budget envelope for the project (currently projected at £7-10bn). A DfT business case supporting the project is likely to follow on Thursday or Friday.
- His commitment to electrification of the railway will continue with a likely 12 northern routes to be prioritised for electrification 2019-2024.
- Mr Osborne may also commit to a review of a plan to build a Manchester-Sheffield road tunnel and other upgrades on roads around the northern Pennines.
- He is also likely to commit to further regional devolution, giving local authorities greater planning powers on the road and rail network, with a particular emphasis on the south-west of England
- An additional £1.25bn funding for mental health services was announced by Nick Clegg at the Liberal Democrat Spring Conference.
- Although details are sketchy at this point, we expect investment in certain northern health projects as part of Osborne’s regional package to help create a ‘northern powerhouse’.
- The low oil price is good news for the Chancellor in many respects but he is likely to have to adjust the tax burden in order to keep North Sea extraction profitable. He may also offer extra help to offshore wind generators.
Technology and telecoms
- The Chancellor will continue to position the government as on the side of high technology firms, with support for high-tech clusters around the country, and further high speed broadband rollout to rural areas (also a key Lib Dem concern).
Pensions and welfare
- The Chancellor has already confirmed his plan to free up pensions by allowing the buying and selling of current annuities.
- He may also tighten welfare payments including through a ‘three child’ limit on child benefit.
- In the 2014 Autumn Statement, the Chancellor trailed a Landfill Tax Consultation. There has been no concrete news on this yet, but we would expect it to be mentioned again in the Budget with a short update.