Budget preview: Osborne's expected pre-election pledges

17th Mar 2015 16:15

On Wednesday, George Osborne announces his pre-election Budget, with several industries expected to see major proposals to woo voters and businesses.The Chancellor will deliver his budget speech to the House of Commons at 12:30, around a week before parliament adjourns ahead of May's general election.As Osborne has already announced his spending plans for 2015/6, this budget amounts to little more than the chancellor saying 'this is what I would do if we retain power at the election', but upbeat comments and upgrades to growth forecasts in the face of lower oil prices and falling unemployment, could boost the FTSE 100 and sterling in the short term.Predictions of the content of the Budget differ wildly, though there are certain to be pledges to please voters and businesses.Balancing the chancellor's potential for giveaways is the fact that he has promised to balance the books by 2017/8, which will require £30bn in either spending cuts or tax rises in the first years of the next parliament.Osborne recently promised "no giveaways, no gimmicks" in the Budget, though the strength of this statement has already been undermined by strong suggestions of a relaxation of pension rules.Oil and gas boost expectedOsborne has already vowed to take action to support the oil and gas industry, which has been hit by the severe fall in the oil price.There have been strenuous calls for a reduction in tax, including a reversal of the chancellor' 2011 increase in the supplementary charge from 20% to the current 30%."A cut in tax for the oil and gas sector seems all but certain," said analysts at Capital Economics.As well as a tax break for North Sea oil companies, accountants Baker Tilly have suggested further measures might include an investment allowance to boost exploration and stave off the risk of expensive decommissioning.Housebuilding and propertyWith Halifax estimating that revenues from the Stamp Duty increase have increased by more than 20% in 2014/15 to a record £8bn, the chancellor has plenty of leeway to offer something to appeal to voters and industry.New planning measures are certainly expected, aimed directly at addressing the housing shortage, with some analysts predicting Osborne will announce plans to build 45,000 new homes in 28 areas across the country, mostly on brownfield sites north of London.In order to counter the political capital of Labour's mansion tax, Osborne could introduce capital gains tax on house sales over a certain amount, such as £2m, which would also boost coffers for other giveaways.Leisure sectors eye tax changesSector watchers are concerned that the Conservatives might look to create more money for giveaways by increasing taxation on the gaming and tobacco industries.The introduction of a tobacco levy has been predicted, with some analysts suggesting this might prepare the groundwork for similar levies in other industries in the future.While going the other way, City Index wondered if there may be further cuts to alcohol duty on the horizon, boosting pubs and the likes of SABMiller, Diageo, Carlsberg and AB InBev.Tax - corporations and personal thresholdsThe budget is widely predicted to see a rise in the income tax threshold from £10,600 to £11,000. Many commentators say that the 40% tax threshold could rise from £41,865 to £50,000 too, while rumours have also emerged that the top rate of tax will be reduced from 45% to 40%.Osborne is also expected to include a 'Google tax' crackdown on loopholes used by multinational companies to avoid tax, inspired by the furore over perceived avoidance by Google, Amazon and Starbucks in the recent past.Following the tax evasion scandal to have erupted around HSBC, the chancellor may look to capitalise on the momentum with some extra measures here.Another populist change to appeal to the Tory heartlands, although it may not appear in the budget due to Liberal Democrat objections, is a scheme to allow parents to leave homes worth up £1m to their children without paying inheritance tax. According to Treasury papers seen by the Guardian, IHT bills on properties worth up to £2m would also be cut by £140,000 under the plans.For smaller businesses, there is a good chance of a "radical" review of businesses rates.Pension and welfareThe chancellor has briefed that his speech will include measures to allow almost 5m pensioners to sell their annuity contracts in exchange for cash lump sums, extending the relaxed pension rules introduced last year.Deloitte has predicted potential pension reforms: "There has been speculation we might see a further cut in the annual and lifetime pension allowances - to £30,000 and £1m respectively. This would raise significant funds but would clearly affect many more individuals - potentially those earning over £50,000."The Chancellor wants to impose an extra £12bn in welfare cuts after the next general election, although this is being contested by work and pensions secretary Iain Duncan Smith.