Budget 2015 preview

Cameron visit to Taunton
Cameron visit to Taunton

In his Budget speech, George Osborne is trying to achieve an awful lot.

Of course, somewhere on the list is the desire to announce sensible financial measures that he thinks are good for the country.

However, he also wants to offer some treats for his traditional voters, win over undecided voters, demonstrate his fiscal prudence, and given that he is said to have political ambitions beyond the role of Chancellor, there's every chance that he wants to make a splash with what could be his last ever Budget.

All these motives are like to trigger a number of highly political moves.

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Appealing to Conservative voters

There's no better time to remind voters why they backed you in the first place than just before the General Election - especially if you are concerned that may be on the brink of defecting to UKIP.

With this in mind, we can expect measures to reinforce the grey vote, which forms the backbone of Conservative voters in this country. This could include a measure that Steve Webb, the Pensions Minister, floated in January - to enable pensioners to sell their annuity in return for a lump sum. It could be positioned as allowing current pensioners to take advantage of the pension freedoms introduced this April.

Potential announcements could also include offering to issue more Pensioner Bonds after the election if the Conservatives regain power. This has proved an incredibly popular move, and could make a Conservative government more appealing to some retirees.

Measures are also likely to be introduced to appeal to business leaders - in a timely reminder that the Conservatives are traditionally the party of business. This could include offering tax breaks for things like investment and research, more support for exports, measures to support businesses in the 'Northern Powerhouse', or more funding for apprentices.
Buying new voters

To win the election, it's not enough to win the support of those who usually vote for you anyway, so another key aim of the Budget will be to introduce policies with mass appeal. We can therefore expect lots of talk of government efficiency and clampdowns on tax avoidance and tax evasion - including the kinds of tax planning carried out by multinational companies.

There's also likely to be some sort of announcement on income tax. We are already expecting the personal allowance tax threshold to go up in April, but if Osborne was to announce an increase above this level, it would be the kind of measure that everyone stands to benefit from. Another potential move is raising the threshold at which National Insurance is paid, which would have the same kind of far-reaching effect, with the added benefit of not just being more of the same.

Leaving a legacy

Osborne has been keen to introduce profound changes in his announcements - including the dramatic changes to pensions and the reform of stamp duty. He is also fond of the surprise announcement, catching pundits out on the day. The Treasury has been playing down the likelihood of this happening so soon before the election, but there's still every chance that this Budget will contain another major piece of reform - out of the blue.

Balancing the books

Osborne will not want to damage his reputation for doing what is tough over what is most popular, so all of this will have to be paid for. Better economic growth than expected has already helped fill the coffers, but he's likely to need to add to it.

One of the most widely touted suggestions is that he will cut higher-rate tax relief on pensions. This could mean restricting everyone to basic rate relief - or more likely restricting relief for those on the very highest incomes. This could be coupled with a lower lifetime limit and annual allowance - both of which he can position as only benefiting the very wealthy in any case.

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