George Osborne couldn’t really have expected a much better set of newspaper covers than the one before him this morning. Despite the dreary background picture – war, confusion, higher inflation, lower growth, the ruinous state of the public finances, etc – a handful of papers are leading on the goodies in his Budget, and specifically the £600 rise in the personal allowance that James mentioned last night. Judging by the movements of the grapevine, this will come into effect in April 2012, and will benefit more people than will the £1,000 rise already announced for this April. While that one was targeted at the least well-off by a reduction in the higher rate threshold, the suggestion now is that no-one earning less than £42,000 will be shunted into the higher rate before 2015.
Whatever the specifics, the usefulness of this policy to Osborne is clear. Not only does it help meet the Lib Dems’ preconditions for coalition, but it is also a prebottled tonic for easing the rising cost of living. And, don’t forget, there’s more to come in future Budgets. The coalition’s plan is to increase the personal allowance to £10,000, another £1,955 on top of the rise that will be announced today. Even though it will eventually require some £10 billion in funding, Osborne must be grateful that he has this good news story to fall back on – now, and for years to come.
With so much having been leaked and briefed in advance, it feels as though the Red Book has already been peeled back to its core. Yet, aside from the inevitable rabbit-out-of-hat trick, it will be worth keeping an eye on how Osborne covers the cost of his new measures, incluing any action on fuel prices. Until yesterday, one might have expected the cash to emerge out of lower borrowing totals – but that looks less certain now. Whether this means more spending cuts or tax hikes elsewhere, all shall be clarified in a few hours time.
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