On Wednesday the Chancellor of the Exchequer George Osborne is set to outline the first all-Conservative budget in 18 years. In 1996, the Conservative budget saw an increase in inheritance tax cementing its rise by 40% of the last couple of years. There were also massive increases in spending on education, healthcare and combating crime. None of this is expected to be repeated this time round.
Similarities between 1996 and now:
Looking ahead to this budget the similarities between it and the last all-Conservative budget in 1996 are undeniable. The UK had failed to win Eurovision! Clinton (Bill) was running for President! And FIFA were being accused of corruption! However the most telling similarity between 1996 and now is that the UK was in the middle of deciding its future with Europe. In 1996 as Kenneth Clarke (the then Chancellor) kept emphasising the UK was on track to meet the Maastricht criteria, allowing us to join the single currency (the Euro). Despite these similarities should we be expecting a similar budget? No. In 1996 the budget announced high increases in public spending, and it occurred among the backdrop of an upcoming General election.
What can we expect in the budget?
In this upcoming budget it has already been announced by Osborne that there will be “£12bn of savings in welfare”. This is expected to come from cutting the benefits cap to £23,000 in London, and approximately £20,000 outside of London. Perhaps the most high profile change expected is that Osborne will demand that the BBC will have to pay the £650 million needed to fund the free TV licences for over-75s. This is on top of the 1,000 jobs the BBC have had to cut recently due to the £150 million budget gap in its licence fee income. Despite this removing about one-fifth of the BBC’s budget there is some good news for the BBC as Osborne has stated that despite these cuts he hopes the BBC continue with “fantastic programmes like Strictly”, so overall a good budget for the over-75s!
Osborne has already announced certain tax changes that are expected to be confirmed in this budget, such as the limiting child tax credits to two children. Furthermore it is expected that the Tories will use this budget to implement some of the taxation changes outlined in their manifesto, most notably increasing the inheritance tax threshold for homes to £1 million. Expect the Labour Leadership candidates to jump on these latest taxation changes, as Osborne begins taking the us out of Austerity.
“taking the us out of Austerity”
There isn’t expected to be much change to the education budget this year, as this budget will primarily mean no increase in spending in this area. It is possible that Osborne may outline some of the new apprenticeship schemes that were promised in the Conservative election manifesto to create 3 million new apprenticeships. However for anxious parents and teachers this budget will be more about what is not mentioned, no cuts to school funding and the continued ring fencing of the £18 billion promised in the last term for new school buildings.
Like education don’t expect to hear any massive changes in the defence budget. Despite pressure from the SNP it is expected that the Trident nuclear weapons programme will be retained. Furthermore it is expected that Osborne may announce the introduction of their manifesto promise not to reduce army personnel numbers below 82,000.
Don’t expect much mention of the NHS from Osborne in this budget. In their manifesto the Conservatives promised to “spend at least an additional £8 billion by 2020”. It would be surprising for any implementation of this policy for the next couple of years as Osborne focuses on cuts. With the Labour leadership elections in full swing expect many of the leadership candidates to discuss the failure for the Conservatives to introduce further policies to increase the budget of the NHS.
What will this Budget tell us about the next five years?
In some ways this budget will tell us more about the last five years than the next. It will demonstrate what a Conservative government austerity programme will truly look like without the Lib Dems controlling influence. All we know for certain is that if the Conservatives are going to reach the £30 billion cuts required according to the IFS from government departments to meet deficit targets by 2018, then this is just the start of the cuts.