Here's what we think the Chancellor will announce in his Budget speech.
George Osborne has already made a big announcement this week by revealing that he is bringing forward big changes to the State Pension and the social care system to 2016.
But there should be some more big announcements in his 2013 Budget speech. Osborne knows that the economy is still struggling, so he needs to convey the impression that he is ‘doing something’ while still sticking to his original austerity plan to reduce the Government’s deficit.
Income Tax and VAT
We may see an acceleration of the plan to give everyone a £10,000 personal allowance on which you don’t have to pay any Income Tax.
Beyond that though, I don’t expect to see any changes in Income Tax rates. VAT will probably remain unchanged too.
Fuel duty
Under current plans, the Government is due to increase the duty on fuel in the autumn. However, the Chancellor has form for changing his mind on previously announced rises in fuel duty – he’ll do it again this time.
Corporation Tax
[SPOTLIGHT]One obvious move would be a further cut to Corporation Tax. The tax is already due to fall to 21% next year, but I suspect that Osborne might announce a further cut to 20% in 2015. Further cuts should help to stimulate business and also keep Tory backbenchers happy.
Funding for Lending
The Funding for Lending Scheme (FLS) has helped to push mortgage interest rates to record lows but has also inflicted further pain on savers by pushing down rates on savings accounts.
Expect to see a rejig of the scheme so that banks are under greater pressure to use their FLS money to lend to small businesses rather than homebuyers.
Infrastructure
Osborne will almost certainly announce some new infrastructure projects – these could include a ‘super sewer’ in London as well as a toll bridge between Runcorn and Widnes known as the ‘Mersey Gateway.’
These kind of projects create jobs and will be welcomed by the vast majority of politicians. However, Labour will probably say that Osborne should have given the go ahead for these kinds of project much earlier.
Bank of England Monetary Policy Committee
There’s a good chance that Osborne will change the framework in which the Bank of England’s Monetary Policy Committee (MPC) works.
Now that might sound complex and dull, but the MPC is the body that sets the base rate, which then has an impact on interest rates across the economy. So the workings of the MPC do affect us all.
Right now, the MPC is supposed to solely focus on keeping inflation nice and low. In reality, the MPC hasn’t followed its own rulebook in recent years and has also focused on trying to stop a massive economic crash in the UK.
It looks like Osborne will introduce a new framework which place less emphasis on inflation and more on jobs and the wider economy. Such a framework will just encourage the MPC to keep the base rate at 0.5% for a long time to come – that could mean record low rates continuing for two years or longer.
So those are my best guesses as to what we’ll hear in the Chancellor’s speech. What do you think he might say?
Don't forget you can follow the 2013 Budget speech live here on lovemoney from 12.30pm GMT on Wednesday.
More on the Budget
Budget 2013: what should George Osborne do?
Budget 2013: what do you want to hear?
George Osborne brings forward State Pension and care reforms