Today we'll see how smart Osborne really is

George Osborne holds up his ministerial red box ahead of today's Budget. Photo:

Consensus has it here at Westminster today that George Osborne has a rabbit to produce from his hat at the end of this year's budget. The Treasury has done little to dampen expectation, telling me and others last night that there 'will be a few surprises'.

In this, they appear to have learnt the lessons of the so-called 'omnishambles' budget of 2012 when both sides of the coalition were so desperate to take credit for the various measures that everything was leaked in advance, leaving us to concentrate on such relatively trivial matters as the pasty tax and caravan tax (no offence to caravanners, obviously).

So, of course, there is intense speculation here as to what that rabbit could be. Most people expect it to be around personal taxation, but beyond that there is a lot of scratching of heads. A penny cut in the basic rate of income tax, perhaps? Well, possibly, but that would be incredibly expensive (£3.8 billion this year and £4.4 next).

The same is true of a cut in the employee part of National Insurance Contributions, where a penny off costs £3.75 billion in the first year and £3.9 in the second. Neither of these measures would really fit with the overall narrative, which appears destined to be that we are still broke and the job of repairing the public finances is far from finished. Changes to the 40p rate would be a lot cheaper, because many fewer people pay it.

A penny cut here would cost only £700 million. But that's not going to help the Tories convince voters on modest incomes that they have their interests at heart (which remains the driving political imperative of this budget for them).

Fair to say, then, that we are a bit stumped. George Osborne has a reputation for being a clever politician. Today, we'll see how smart he really is.

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