Friday, March 13th, 2015
With the polls now oscillating between narrow Labour & Conservative leads, the reality seems to be that both parties are now locked in a dead heat.
The build up to this situation has been an interesting one to follow. Only last year, you’d have been condemned as insane for claiming the Conservatives could win a majority. Ed Miliband was just as unconvincing then as he is now but he was leading a Labour party that were polling around 40% whilst the Conservatives fended off a revolt stoked by an insurgent UKIP.
Which brings us to now. Having watched the Labour poll lead collapse, it is clear that the electorate don’t like what they’ve seen and have already decided before the campaign begins that they don’t want a government led by Ed Miliband. The only issue awaiting resolution is whether they want to hand the Conservatives a majority. The verdict on this will hinge on whether they can be convinced that the Conservatives have the right vision for the next 5 years and will make people feel better off. Other than the launch of the election manifestos that will be the centrepiece of the campaigns, next week’s budget- not the TV debates- will be the game changer and could go some way to persuading the unconvinced.
The Budget is especially significant because having taken the difficult decisions at the start of the Parliament to reduce spending- combined with a sprinkle of good fortune from low oil prices- George Osborne now has a chance show that austerity hasn’t just been some dry bookkeeping exercise to ‘balance the books’.
As a result of the decisions made, George Osborne is estimated by Goldman Sachs to have up to £8bn spare this year and £12bn next year whilst still meeting his targets to balance the budget in the next Parliament. That’s money he could spend (or, ideally, dedicate to cutting tax) and it would be incredibly surprising if he didn’t use it.
He could use this windfall to deliver a number of things, such as:
- Bringing forward plans to raise the personal tax allowance to £12,000 which would cost £6bn a year.
- Cut the duty on spirits, beer and wine.
- Extending the research & development tax credit or make the Annual Investment Allowance permanent.
It’s also been widely reported that there will be a review announced in to business rates which could potentially see taxation shifted away from property in favour of taxing sales.
One thing we do know is that the tone of The Budget will present a clear backdrop against which the election will be fought. In this regard, the Conservatives have carved out a new ‘centre ground’ that is focused on jobs, improving living standards and prioritising fairness in the welfare system by ensuring people are better off in work than on benefits. This is territory firmly occupied by the Conservatives. For this reason, it’s unlikely that Osborne will opt to announce any cuts or spending that don’t fit in with this narrative and as such cuts to Inheritance tax (IHT) are unlikely, although a commitment to raise the IHT threshold may well feature in the Conservative party manifesto.
In essence: expect a budget that outlines plans to allow people to keep more of their earnings and continues to support businesses to create jobs. With unemployment (20%), tax (8%) and the economy (30%) all featuring prominently in the eyes of the voters as being among ‘the most important issues facing Britain today’, it’s not hard to understand why. If George Osborne can pull a rabbit out of his hat in The Budget, he could win it for the Conservatives in May. No pressure.
Luke Springthorpe is Parliament Street’s Head of Policy. Follow Luke on Twitter
