Here's what we know so far
Speculation about what could be George Osborne’s final Budget announcement is mounting. A tax break on inheritance is expected to be a key part of the Tory manifesto, but has been vetoed by the Lib Dems and is now unlikely to appear tomorrow.
So what can we expect from Osborne’s announcement? Here’s what we know so far:
More choice for pensioners
Tomorrow Osborne will give the five million pensioners with existing annuities the opportunity to cash them in and take advantage of the new system, in what many are viewing is an attempt by the Conservatives to win over elderly voters. His reforms mean pensioners will be able to choose between the traditional annuities system and using their pensions like bank accounts, from which they can withdraw whenever they choose. From 6 April this year, the cap on withdrawal amounts will be removed, leaving pensioners free to take out as much money as they like. One advantage of the new system over annuity is that any leftover funds can be passed on to descendants, as well as giving people a variable income.
However critics of the reforms have expressed concerns that savings could dwindle if, for example, the market crashes, or if people live longer than they expect to and thus run out of money. There are also worries that people might spend less sensibly if they are given full access to their savings.
Help for the North Sea oil industry
As oil prices continue to slide, Osborne is expected to provide some relief for the North Sea oil industry. Oil and Gas UK have warned that without significant tax breaks and field development grants, investors and oil companies will start to look elsewhere. The sector pays very high levels of tax compared to other industries, with a corporation tax rate of 30 per cent and an additional ‘supplementary tax ‘ of 30 per cent.
These tax increases were introduced in 2011 when the price of a barrel was more than double what it is now. Although reaching out to ‘big oil’ might seem an unlikely move before an election, it could possibly garner support in Scotland where more jobs and businesses depend on the sector.
Increase in the National Minimum Wage
Osborne will announce an increase in the National Minimum Wage (NMW) from £6.50 to £6.70 an hour. The changes would benefit over 1.4 million workers, and also give apprentices a 57p pay rise. The Low Pay Commission recommended a 7p per hour increase for apprentices; John Cridland, director general of the CBI, today expressed concern over the ‘politicisation’ of the Commission.
The NMW is a key topic for all parties as the election approaches; Labour have promised to raise it to £8 an hour, UKIP have pledged no tax on the NMW and the Greens have called for it to rise to £10 an hour. The planned increase is a vital move if the Conservatives are to keep up with other parties in the eyes of workers.
Higher personal allowance
The chancellor is expected to raise the personal allowance below which workers cannot be taxed beyond the £10,600 figure he pledged in the Autumn Statement to £11,000. It is designed to raise the lowest paid out of the income tax system, and will be a useful image-boost for the Tories.
IPPR estimate that the move will cost around £2.1 billion a year. With the increase as it stands at £10,600, some 24.4 million people will pay less tax from next month.
Transport for a Northern Powerhouse
Osborne is thought to be planning a multimillion pound boost to the north of England, in a bid to address the UK’s geographically imbalanced economy. The chancellor is expected to give the go-ahead to a new high-speed rail link (HS3) between Manchester and Leeds which will reduce journey times between the two northern cities to half an hour.
Osborne has expressed plans in the past to create a ‘Northern Powerhouse’ to rival London’s economy, and better transport links are crucial to bolster the north’s infrastructure. However HS3 is opposed on the same grounds as HS2 by campaigners who say it is a waste of money that will ruin the countryside.
Ruby Stockham is a staff writer at Left Foot Forward. Follow her on TwitterLike this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.