In tomorrow’s Budget, George Osborne should prioritise the poor, avoid gimmickry and move to rebalance growth

There will be few fireworks, but this could Budget could be Osborne's most decisive yet

Share

The Budget that George Osborne will present to Parliament tomorrow is, in effect, the Coalition’s last. Next year’s financial statement, less than two months before the May general election, will be a purely political affair. After five years of compromise, the Chancellor will use the occasion to present voters with an unashamedly Tory vision (contingent on a majority win at the ballot box, of course), hung with as many baubles as he can muster. This year, however, the Chancellor has neither the means nor the freedom to deviate from the current course.

The good news is the economy is assuredly on the up. The 2013 Budget was delivered amid warnings of an impending slide back into recession. Since then, we have had four consecutive quarters of expansion and, by the end of 2014, GDP is expected – finally – to recover to pre-crash levels. That said, it is too soon to be sure of consistent growth to come and too soon for the parlous public finances to be seeing much benefit. Indeed, with a deficit still running at more than £100bn, Mr Osborne cannot present plans tomorrow that are anything but scrupulously fiscally neutral without facing charges of hypocrisy, if not recklessness. Yet this limited room for manoeuvre comes with a political upside. The Chancellor can stick with his familiar refrain about the plan working but there being a long way to go – for which, read: we are fixing things, but it is not yet safe to let the other lot in.

Politically, Mr Osborne has little more wriggle room. While he has tried to blank the Opposition rhetoric about a “cost of living crisis”, the fact remains that swathes of the electorate have seen their spending power at best stagnate since 2007. Nor is the pressure all from the left. Recent weeks have seen perennial Tory support for tax cuts become public demands for the threshold of the 40p band to be raised to take the pressure off the squeezed middle classes.

The Chancellor – rightly – judged that, against a backdrop of continuing austerity, the prospect of a tax cut at the upper end would be politically impossible. Instead, then, tomorrow’s Budget will pledge to raise the personal allowance to £10,500, a move – albeit one for which the Liberal Democrats can claim most of the credit – Mr Osborne hopes will undermine Labour claims that the Tories are the party of the rich.

Tweaks to taxes and twitches to duties on, say, beer may draw the most attention, along with eye-catching, if pre-announced, plans for a new garden city and an extension of the Help to Buy scheme. But it is elsewhere that Mr Osborne’s central challenge lies. His position may be as constrained as it has ever been, but this Budget is also his last chance to have an impact before an election at which his party needs a positive economic story even more than most. And for all the rosier outlook, the character of recent improvements is far from certain.

Despite much talk of rebalancing, the engine of growth remains domestic demand, itself reliant on a roaring housing market. Exports are disappointing, investment levels are up but are still weaker than hoped, and the “productivity conundrum” foxing economists studying Britain’s statistics suggests that capacity for future growth may be limited. As such, there will be few fireworks from Mr Osborne tomorrow, but it could still be his most decisive Budget yet.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

SThree: Trainee Recruitment Consultant - Dublin

£13676.46 - £16411.61 per annum + OTE: SThree: SThree Trainee Recruitment Cons...

Ashdown Group: Marketing or Business Graduate Opportunity - Norwich - £22,000

£18000 - £22000 per annum + training: Ashdown Group: Business and Marketing Gr...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + Commission: SThree: Are you great at building rela...

Ashdown Group: Database Analyst - Birmingham - £22,000 plus benefits

£20000 - £22000 per annum + excellent benefits: Ashdown Group: Application Sup...

Day In a Page

Read Next
Labour leader Ed Miliband unveils Labour's pledges carved into a stone plinth in Hastings  

Election 2015: Smash the two-party system! Smash the voting system!

Armando Iannucci
Tactical voting is a necessary evil of the current first-past-the-post system, where voters vote against what they do not want rather than in favour of what they do  

Election 2015: Voting tactically has become more fraught in new political order

Michael Ashcroft
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before