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Osborne to Extend Tax Breaks to British Voters in Budget Statement George Osborne to Offer Tax Breaks to British Voters in Budget Statement
(about 4 hours later)
LONDON — With British elections approaching, George Osborne, the chancellor of the Exchequer, was expected to use a budget statement on Wednesday to claim credit for economic recovery and to offer some relief to hard-pressed voters. LONDON — With British elections approaching, George Osborne, the chancellor of the Exchequer, was expected to use a budget statement on Wednesday to claim credit for the economic recovery and to offer some relief to hard-pressed voters.
With an upturn in tax receipts and a dip in inflation prompted by a fall in oil prices, Mr. Osborne has slightly more leeway than expected to reduce the amount people pay in taxes or to curb spending cuts.With an upturn in tax receipts and a dip in inflation prompted by a fall in oil prices, Mr. Osborne has slightly more leeway than expected to reduce the amount people pay in taxes or to curb spending cuts.
His statement to Parliament outlining spending plans is expected to be a landmark before elections on May 7, and gives the governing Conservative Party a chance to outline its main policies to voters. His statement to Parliament outlining spending plans was expected to be a landmark before elections on May 7, and gives the governing Conservative Party a chance to outline its main policies to voters.
Mr. Osborne argues that his cuts in public spending laid the foundations for an economic rebound in Britain — one that would be put at risk if voters were to elect the opposition Labour Party, which was in power at the time of the financial crisis. The economy grew 2.6 percent in 2014. Mr. Osborne argues that his cuts in public spending laid the foundations for an economic rebound in Britain, one that would be put at risk if voters were to elect the opposition Labour Party, which was in power at the time of the financial crisis. The economy grew 2.6 percent in 2014.
Labour counters that living standards for most Britons remain squeezed, that few normal voters are benefiting from the recovery, and that another Conservative government would make further deep cuts to public spending.Labour counters that living standards for most Britons remain squeezed, that few normal voters are benefiting from the recovery, and that another Conservative government would make further deep cuts to public spending.
In drawing up his budget, Mr. Osborne has been constrained by the fact that the government is a coalition and that his spending plans require the approval of the centrist Liberal Democrats party. To sidestep that problem, he may make clear that some policies are aspirations for a future Conservative government. The Liberal Democrats intend to outline separately how they would try to manage the economy if they gained political influence after the elections. In drawing up his budget, Mr. Osborne has been constrained by the fact that the government is a coalition and that his spending plans require the approval of the centrist Liberal Democrats. To sidestep that problem, he may make clear that some policies are aspirations for a future Conservative government. The Liberal Democrats intend to outline separately how they would try to manage the economy if they gained political influence after the elections.
Behind the rosy picture on growth, there are some problems. The country’s budget deficit of 5.5 percent of gross domestic product is high, as is borrowing. At the same time, low productivity remains a constant, disappointing feature of the British economy.Behind the rosy picture on growth, there are some problems. The country’s budget deficit of 5.5 percent of gross domestic product is high, as is borrowing. At the same time, low productivity remains a constant, disappointing feature of the British economy.
When the economy failed to grow as expected early in his tenure, Mr. Osborne was forced to rethink his deficit-reduction targets and to temper his austerity policies. However, he has promised more spending reductions if the Conservatives win the election.When the economy failed to grow as expected early in his tenure, Mr. Osborne was forced to rethink his deficit-reduction targets and to temper his austerity policies. However, he has promised more spending reductions if the Conservatives win the election.
In a pre-budget analysis, Robert Wood, chief Britain economist for Berenberg Bank, predicted small changes. “The Conservative Party campaign is laser-focused on the economy, on ‘competence versus chaos’ as its slogan puts it,” he wrote. “It can hardly spray cash around with abandon while also arguing that voters should return a Conservative government because the fiscal job remains unfinished.” In a pre-budget analysis, Robert Wood, chief economist for Britain at Berenberg Bank, predicted small changes. “The Conservative Party campaign is laser-focused on the economy, on ‘competence versus chaos’ as its slogan puts it,” he wrote. “It can hardly spray cash around with abandon while also arguing that voters should return a Conservative government because the fiscal job remains unfinished.”
“The room for chunky tax cuts is fictional anyway,” he added. “It should be emphasized that the government budget deficit is currently running at 90 billion pounds a year,” or about $133 billion.“The room for chunky tax cuts is fictional anyway,” he added. “It should be emphasized that the government budget deficit is currently running at 90 billion pounds a year,” or about $133 billion.
Mr. Wood predicted that one of the concessions would probably include an increase in the amount workers can earn before they start to pay tax. Another strong possibility is a reduction in the taxes paid by companies extracting oil from the North Sea, he said. Those companies have complained bitterly about the impact of the fall in oil prices.Mr. Wood predicted that one of the concessions would probably include an increase in the amount workers can earn before they start to pay tax. Another strong possibility is a reduction in the taxes paid by companies extracting oil from the North Sea, he said. Those companies have complained bitterly about the impact of the fall in oil prices.
Nick Beecroft, senior market analyst at Saxo Bank, wrote in an analysis that “the figures do not allow Osborne to indulge in a massive pre-election giveaway budget, but will certainly allow him to come up with some vote-winning measures — maybe amounting to £7 billion in total.”Nick Beecroft, senior market analyst at Saxo Bank, wrote in an analysis that “the figures do not allow Osborne to indulge in a massive pre-election giveaway budget, but will certainly allow him to come up with some vote-winning measures — maybe amounting to £7 billion in total.”
Mr. Osborne has already announced plans to change the system for pensions, a politically sensitive policy area because retirees are, statistically, more likely to vote than young people. Mr. Osborne has already announced plans to change the system for pensions, a politically delicate policy area because retirees are, statistically, more likely to vote than young people.
Last year, he scrapped rules that would have forced those finishing work to convert pension savings into annuities, which guarantee a cash income for life.Last year, he scrapped rules that would have forced those finishing work to convert pension savings into annuities, which guarantee a cash income for life.
This year, Mr. Osborne has said he will allow those who already have annuities to sell them without facing large tax bills, as they do now.This year, Mr. Osborne has said he will allow those who already have annuities to sell them without facing large tax bills, as they do now.
In a statement before the budget presentation, Ed Balls, the Labour Party’s spokesman on the economy, argued that “after five years of the Tories, working families are worse off and our National Health Service is going backwards.”In a statement before the budget presentation, Ed Balls, the Labour Party’s spokesman on the economy, argued that “after five years of the Tories, working families are worse off and our National Health Service is going backwards.”
“The Tories are planning more extreme spending cuts after the election, which go way beyond balancing the books and will put our N.H.S. at risk,” he added. “The Tories are planning more extreme spending cuts after the election, which go way beyond balancing the books and will put our N.H.S. at risk,” he added, referring to the Conservatives.