Much has been made of this being the first fully Conservative budget for almost two decades.
There’s been no shortage of hyperbole around. According to the pre-briefing we should expect “bold promises”, a budget “massive” in its scope with “very big” announcements.
We’ve heard a great deal in recent weeks about George Osborne’s supposed transformation from pragmatic tactician to a man supporters now hail as a radical reformer.
The Chancellor will want to show his zeal for unleashing enterprise and slashing what he still believes is a bloated public sector.
But we’ll also see the other side of Osborne today – a surprisingly interventionist politician, intent on building a “northern powerhouse” and actively using the state to manage industrial and social change.
This is a budget the Conservatives hope will set the terms of the political debate for the coming years. With Labour weak and introspective and the Liberal Democrats decimated, the Chancellor knows this may be his moment of greatest opportunity.
The absence of an effective opposition means the Conservative political narrative has been utterly dominant and largely unchallenged in recent weeks.
Cameron and Osborne say they want to move from “a low wage, high tax, high welfare society to a high wage, low tax, low welfare society”.
In this budget that translates as:
- Tax cuts for the middle class (raising the 40p threshold) and lowest paid (increasing the tax free allowance towards the target of £12,500).
- A welfare squeeze of £12 billion – but now happening slower than originally planned (by 2019 rather than 2018)
- Increased pressure on business to pay more than the minimum wage to the lowest paid staff.
The system of tax credits is certainly in the firing line. David Cameron has already promised to end what he calls the “ridiculous merry-go-round” of taxing low earners and then handing the money back in benefits.
There are, however, many extremely staunch and vocal defenders of the tax credit system (notably the SNP), and this won’t be at all easy for the government.
Big questions too about how ministers will encourage private companies to give workers a bigger pay cheque.
There’s also much speculation about changes to pensions. Those earning over £150K may well face restrictions on their contribution allowances.
Some economists believe recent better news on the deficit numbers gives the Chancellor more wriggle-room overall.
But, amid all the hyped-up political rhetoric, it’s easy to forget that the record of tackling the UK’s growing debt mountain in recent years has been patchy at best.
The long hard slog of deficit reduction is still the story behind the headlines.
SUMMER BUDGET 2015 – WHAT WE KNOW SO FAR
SUMMER BUDGET 2015 – WHAT COULD HAPPEN
- Increased inheritance tax threshold to £1m on main residence
- Tax credits to families with more than 2 children cut for new claimants
- Housing benefit cuts for higher earners – on more than £30k
- Extended Sunday shopping – decided by mayors and councils locally
- Increased threshold for paying the 40p tax rates – taking many out of the higher rate
- Cost of providing free TV licences transferred to the BBC from the government
- Overall benefits cap to be reduced to £23k in London, significantly lower elsewhere
- Cut to 45p tax rate for those earning over £150k
- Boost to the minimum wage, moving closer to the “living wage”
- Increase in the personal tax-free allowance to £12.5K ahead of schedule
- Changing the bank levy to address concerns about HSBC moving overseas
- Cracking down on non-doms – stealing Labour’s clothes
“Public spending austerity is only a little over half way through a 10-year consolidation, so there is considerable pain to come.”
“[The Budget] has to fulfil the Tories’ stated goals of cutting spending, cutting welfare and cutting tax whilst still claiming to be the ‘workers’ party’ pursuing a One Nation ‘we’re all in it together’ philosophy.”
“…the biggest test of Osborne’s political judgement since his ‘omnishambles’ budget in 2012”