There will be no “spectacular giveaways” in George Osborne’s final Budget before the general election, Business Secretary Vince Cable has said.
Mr Cable was speaking after an early-morning Cabinet meeting at which Conservative and Liberal Democrat ministers signed off a package expected to include a hike to £11,000 in the income tax personal allowance and moves to scrap unpopular annual tax returns.
Mr Osborne’s sixth Budget statement is being unveiled against the backdrop of new figures showing numbers of jobless falling by more than 100,000 to 1.86 million – the lowest since summer 2008 – while employment soared to a record of almost 30.1 million.
Welcoming the figures from the Office for National Statistics (ONS), Prime Minister David Cameron said: “The highest employment rate in our history is not a dry fact. It means more people with the security of a pay packet and a brighter future.”
Mr Cable stressed that Mr Osborne’s Budget has been agreed across both Conservative and Liberal Democrat sides of the coalition.
But he highlighted growing divergence between the two sides of the Government as he revealed the Lib Dems will set out “a separate budget trajectory” for the next parliament tomorrow, featuring higher tax rises than envisaged by their Tory partners.
The Chancellor is expected to use an improvement in economic forecasts to hammer home the message that his “plan is working” – urging the public not to return to “chaos” under Labour.
Some £2 billion will be allocated to raising the personal tax allowance from £10,600 to £11,000, in line with the Conservative and Liberal Democrat aim for it to hit £12,500 by 2020.For comprehensive coverage of what the Budget means for you, see Thursday’s CourierHe will also highlight plans to scrap annual tax returns and replace them with “digital tax accounts”, allowing millions of people to manage their affairs in real time using smartphones or computers.
Alongside the widely trailed move to allow pensioners to trade in poor-value annuities for cash, Mr Osborne will unveil more funding for border security, targeted measures for loans to PhD students from deprived backgrounds, and pension protection for widows of police officers and firefighters who choose to marry again.
After pledging at the weekend that there would be “no gimmicks or giveaways” in the financial package – and with Lib Dem sign-off needed for his plans – any extra spending is likely to be balanced by a fresh crackdown on tax avoidance or a levy on banks.
Any leeway from upgraded economic growth predictions could be offset against the fresh round of austerity cuts required to eradicate the deficit by Mr Osborne’s timetable of 2017-18.
Speaking after the Cabinet meeting, Mr Cable told Sky News the Budget was “very much a joint exercise” by Tory and Lib Dem sides of the Government.
“I have just come from the Cabinet where both parties signed off on this as a joint effort,” said the Lib Dem
“It is not going to be a spectacular giveaway Budget. It would be utterly irresponsible if it were, because the overall budget position is still very tight.”
The Chancellor will use passages of his Commons speech to flesh out what the Conservatives would do if they are still in government after May 7.
Party strategists are hoping he can give them a platform to break the effective poll deadlock with Labour, and put them on track for outright victory.
He is expected to woo the middle classes with a promise to take more people out of inheritance tax, as well as stressing commitments to raising the higher rate tax threshold to £50,000 in the next parliament.
Mr Osborne will say: “The critical choice facing the country now is this: do we return to the chaos of the past?
“Or do we say to the British people, let’s work through the plan that is delivering for you?
“Today we make that critical choice: we choose the future.
“We have a plan that is working – and this is a Budget that works for you.”
Mr Cable said the Lib Dems will “make very clear we have a different approach to tax and spend” to the Tories.
“In terms of the Budget, we do argue for being prudent and maintaining budget discipline – something we have helped to deliver. But nonetheless we would have a significantly higher share of tax relative to spending cuts, because we believe public services are important and we want to support them.”
The new digital tax accounts will be automatically populated with all the details HM Revenue & Customs holds – such as PAYE on employment and pension income – saving the chore of entering them.
Users will be able to log on to see what they owe, and set up direct debits to settle the bill.
Those who prefer to keep filling out a paper return will be able to carry on doing so.