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
SPONSORED FEATURES
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

Read Next
The Attorney General launched the investigation on 20 July  

The two questions that David Cameron must ask Benjamin Netanyahu

Ruby Stockham
 

Think I'm living the high life on benefits? Here's what being disabled costs me every day

Hannah Buchanan
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones