In Review

Budget 2015: Osborne 'shoots Labour foxes' ahead of election

Ed Miliband no longer has an economic narrative after Osborne's Budget speech, say commentators

Budget 2015 predictions: what does Osborne have up his sleeve?

18 March

George Osborne will today deliver his final Budget speech before the general election, with further pension changes expected to woo older voters.

The Chancellor has insisted there will be "no giveaways, no gimmicks", but analysts have suggested that the growing economy and low inflation give him some room for manoeuvre.

He will be looking to champion the government's commitment to balancing the books, while trying to entice the electorate to vote his party back into office, with only a limited ability to legislate for change before Parliament is dissolved at the end of the month.

Osborne will begin his speech after Prime Minister's Questions, usually at around 12.30pm. Here are some of the predicted announcements:

Spending cuts

Osborne is looking at reducing the scale of his planned spending cuts over the next five years now that the medium-term outlook for public finances has improved, says the Financial Times. With an expected surplus of almost £30bn by 2019/20, Osborne has a newfound flexibility that could help counter Labour's claims that the Tories will take state spending back to the levels of the 1930s. 

Personal tax

Bill Dodwell, Deloitte's head of tax policy, predicts that the personal allowance will be raised to £12,500 over the course of the next Parliament. The Daily Telegraph says the government looks likely to raise the personal allowance threshold for 2015/16 from £10,600 to £11,000 to come into force before the election.

Analysts say increasing the allowance is one major policy on which both Coalition parties agree. However, Sian Steele, PwC tax partner, says that if this proves too expensive raising the threshold at which the 40 per cent tax rate kicks in might appease some middle earners instead.

Tax returns

The days of the annual tax return could be over. Osborne is expected to announce a new digital tax account that automatically collates tax information from employers, banks and investment firms throughout the year.

Welfare

The Daily Mail predicts a new welfare cap as Osborne sets out more than £12bn in benefits cuts. Child benefit could be restricted to three children for new claimants and under-25s could lose the right to housing and employment benefits if they refuse offers of work, training or education, says the newspaper.

Savings

Last year, Osborne announced a radical shake-up of Isas, increasing the amount of tax-free saving from £11,520 to £15,000 a year. Emma Simon at the Daily Telegraph suggests there might be smaller amendments this year, such as allowing Isas to be transferred to any beneficiary, not just spouses or civil partners, free of tax. The government has also said it plans to allow savers to invest in "peer-to-peer" lending though an Isa. 

But The Independent claims the biggest "rabbit" in the Chancellor's Budget will be to scrap tax on any savings income for anyone who pays up to the basic 20p rate of tax. People paying the higher 40p tax rate will still have their savings taxed.

Pensions

Up to five million existing pensioners are expected to be given the ability to swap their fixed annual payments for a fixed lump sum, says the BBC. It follows the extensive pension reforms announced last year that allow working people to cash in all or part of their defined contribution pension when they retire. There is also speculation that higher tax reliefs on pensions might be introduced.

Housing

The Conservatives have already committed to the construction of 200,000 affordable houses across the UK as part of their manifesto, but some analysts believe Osborne may go a step further in his budget by introducing new planning measures aimed directly as addressing the housing shortage. The Chancellor may also look to raise cash by announcing the withdrawal of private residence relief on houses worth more than £2 million. Currently UK residents pay no tax on the profits from the sale of their primary residence, but under the proposed policy anyone selling a home worth more than £2 million would have to pay capital gains tax. If introduced, the measure would also offer some political protection against Labour's proposed mansion tax.

Immigration

Immigration has already emerged as a central theme of the 2015 election campaign. With Conservative party strategists anxious not to lose voters to Ukip, some analysts believe that Osborne could announce a tax on foreign workers or introduce restrictions on non-UK residents' ability to claim the UK personal tax allowance.

National Insurance

An attractive option to help low-paid workers would be to increase the amount people can earn before they have to pay National Insurance, as this has become a "far greater burden" on low earners than income tax, says PwC's Sian Steele.

Devolution

Devolution is predicted to be a major theme of the Budget speech, with speculation that Osborne might assign more economic decision-making powers to the regions. He has already said that "building a Northern powerhouse" and connecting regions around the country will play an important role in the Budget.

Industry levies and tax breaks

Several experts are expecting the introduction of a tobacco levy, with some predicting that it might lay the foundations for introducing similar levies in other industries in the future. Meanwhile, other sectors such as oil and gas might receive tax breaks.

Tax avoidance

A 'Google tax' crackdown on multinational companies avoiding paying tax in Britain is also likely to be a key theme in Osborne's speech. More powers for HMRC to combat tax avoidance are expected to be announced.

Inheritance tax

Ian Thomas, from Ernst & Young, thinks there will be an increase in the amount of money people can inherit before they are taxed, suggesting that the threshold might be raised to £1m by 2020. "Reforming inheritance tax wouldn't cost much, since hardly anyone actually pays it, but the question is whether the Liberal Democrats would countenance it – especially since it's unlikely they'd get any electoral credit," says Jonathan Eley at the Financial Times.

Recommended

What will Sue Gray’s report reveal?
Boris Johnson
Today’s big question

What will Sue Gray’s report reveal?

When will the Elizabeth line open?
The Elizabeth line entrance at Liverpool Street station in London
In Focus

When will the Elizabeth line open?

Caroline Watt: where is Rebekah Vardy’s missing agent?
Rebekah Vardy arrives at the Royal Courts of Justice
Profile

Caroline Watt: where is Rebekah Vardy’s missing agent?

The mystery of the sanction-busting plane
Grant Shapps
Why we’re talking about . . .

The mystery of the sanction-busting plane

Popular articles

The mysterious Russian oligarch deaths
Vladimir Putin has previously deployed ‘extreme measures’ to crush opposition
Why we’re talking about . . .

The mysterious Russian oligarch deaths

Is Vladimir Putin seriously ill?
Vladimir Putin
Why we’re talking about . . .

Is Vladimir Putin seriously ill?

Depp v. Heard: what the latest battle has revealed
Amber Heard
In Depth

Depp v. Heard: what the latest battle has revealed

The Week Footer Banner