Chancellor George Osborne is likely to offer sops to motorists, holiday makers and low earners and said he has no plans of a tax rise or cut government spending further.
Talking on BBC’s Andrew Marr Programme, Mr. Osborne said he can’t however, slacken the current pace of spending cuts or offer giveaways, indicating he is ready to present a fiscal neutral budget on Wednesday.
Mr. Osborne’s options are however limited, since this year’s deficit is likely to undershoot by a marginal £8 billion from the projected £148.5 billion due to higher tax collections, a report by Ernst & Young Item Club – an independent research group found out.
“I can say in the Budget this week I am not going to be asking for more tax increases or more spending cuts”, said Mr. Osborne during the interview.
“We have asked what is required of the British people in last year’s Budget and that enables us to in this year’s Budget to move on to putting in place the policies that will help Britain compete, create jobs and help growth in the future”, he added.
According to economists, the Office for Budget Responsibility is likely to cut this year’s economic growth forecast to 1.8 percent from the previously projected 2.1 percent. The forecast for next year’s growth is also likely to be scaled down to 2.1 percent from 2.6 percent, forecasted earlier.
The Labour has already criticized the government for not doing enough to kick-start the economy. Mr. Osborne will hike the taxable income threshold by £1,000 to £7,475 from April. Around 500,000 taxpayers will benefit from the government’s move straightaway. The hike can be higher since the government plans to set the threshold at £10,000 over a period of time.
Mr. Osborne however, will compensate for the shortfall by collecting an additional £800 million from bank levies and £500 million by controlling tax evasion effectively.
He will be forsaking £150 million by scrapping plans to raise air passenger duty and unconfirmed news suggest he may scrap the proposed 1p hike in fuel duty in April as well, setting back the exchequer by another £500 million. He is expected to provide £300 million for apprenticeship and other trainings and announce policies on enterprise zones to boost investment.
A recent report by the Office of Tax Simplification (OTS) had recommended merger of National Insurance and income tax, calling it the long-term objective of the government. Mr. Osborne is expected to announce plans to initiate consultations with the OTS on this matter.