Wednesday could be the day we finally get to see George Osborne’s true colours. After five years of having to placate his coalition partners, the chancellor is expected to let rip with a radical budget of spending cuts - along with some tax giveaways.
That's not to say he can simply do what he likes though. Osborne will have had to work hard to find the right combination of tax and spending changes that will please his backbenchers and grassroots, comply with his own plans for deficit reduction and not upset the general public - even if the next General Election is almost five years away.
The Conservatives pledged before the election not to raise VAT, national insurance or income tax, and Osborne’s unlikely to reverse recent cuts in corporation tax – but that doesn’t mean he couldn’t introduce new ones. He is also expected to restrict tax relief on pensions contributions for those earning more than £150,000 in order to fund an inheritance tax cut, and could change the rates or terms of capital gains tax or stamp duty to raise some extra cash.
Companies will be hoping for a reaffirmed commitment to review the business rates system. The Times reports today that Osborne is also considering announcing a review of the bank levy, an annual charge based on big institutions’ balance sheets. That might seem surprising after he increased it to 0.21% in March, but he’s thought to be keen on appeasing HSBC, which has been mulling moving its headquarters away from the UK.
One of the most widely trailed elements expected in this budget is a tranche of big cuts to the welfare system. Tax credits are likely to be slashed, benefits for under-25s could be set for the chop and there’s even talk of taxing disability benefits. The household benefit cap, which restricts the total amount that a family can claim, is expected to be lowered to £23,000 for families in London, and even less for those outside the capital.
Unprotected government departments are likely to be asked to bear another round of cuts. According to the Telegraph, 110,000 of the 440,000 jobs in the civil service could be lost by 2020. Those reportedly in the firing line include the Department For Energy and Climate Change, the Department for Work and Pensions and HMRC.
There will probably be more details of Government plans for greater fiscal devolution for Scotland, Wales and Northern Ireland. He might not announce anything new but it would also be unsurprising to see Osborne talking up his big plan to devolve more spending powers to English local authorities.