Budget 2014: What to expect from the Chancellor?
As ever, we go into this Budget with a number of leaks, lots of speculation, some desperate hope, and an over-riding sense that George Osborne is going to need all the smoke and mirrors in Westminster. He is in the business of winning votes and pleasing pundits, but he doesn't have much cash to play with, so this will be a case of giving with one hand, and then taking away with the other- and hoping nobody notices.
So what will be in the 2014 UK Budget?%VIRTUAL-SkimlinksPromo%
Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, says: "Despite the better economic prospects, the public finances remain dire. Underlying borrowing will still be about £110bn in FY2013, nearly 7% of GDP. There is no room for net 'giveaways' and we expect, therefore, a neutral Budget."
Tom Stevenson, Investment Director of Personal Investing at Fidelity adds: "His challenge at this stage in the electoral cycle is to bank votes at the lowest possible cost to the Exchequer."
The good newsThe over-riding consensus is that this is going to be sold to us as the Budget which helps 'hardworking families' with the cost of living. The giveaways are therefore likely to come in two main forms. The most widely predicted one is another change in the threshold at which we start paying income tax (the personal allowance). Osborne has made no secret that this is a priority, so when it comes to giveaways (timed to kick in just before the general election next year) we're likely to see this threshold raised by another £500.
The second giveaway (which has been widely discussed) is a tax relief on the cost of childcare from autumn 2015. This came up in the last Budget, but at that point the Treasury was suggesting that only the first £1,200 a year would be tax-effective. Osborne is expected to increase this to £2,000 - and will apply to families who don't receive tax credits and earn under £150,000 each.
It's worth highlighting that this is simply a replacement for the existing tax break on employer-funded childcare through vouchers. Stevenson points out: "The winners will be those in self-employment and those whose employers previously offered childcare vouchers. But don't be fooled, this will essentially be a cost-cutting exercise, although it will be promoted differently. The government is also likely to invest more in nursery provision as a way to trumpet its support for 'hard-working families."
Speculation has also surrounded the 40p tax bracket, with pressure from the Conservatives to get rid of it altogether or to raise it in order to appeal to the traditional party faithful. However, Osborne has stated that his priority is the personal allowance, so this is less likely.
HousingChanges to housing policy have already been announced, with an extension of the Help to Buy equity loan scheme until 2020 and a further £6 billion of funding. The aim is to help 120,000 more households to buy a new-build home.
Osborne has also announced an investment of £200 million to build a new garden city around the high speed rail station in Ebbsfleet in Kent, to provide 15,000 new homes on brownfield land.
There remains pressure for the Chancellor to reform the stamp duty regime, but little hope that this will take place any time soon.
BusinessThere's also likely to be a strong strain of business support, which is expected to include help for medium-sized companies that want to build exports. Lea is also predicting that the £250,000 tax-free investment allowance for companies may be extended.
There is also pressure to ease business rates, but so far no consensus as to whether Osborne will surrender to the pressure.
And for the frivolous-sounding extra we can probably turn to bingo. Last year's good news was all about duty on beer. Now we can expect the tax on bingo to be cut.