With the EU Referendum looming and Conservative divisions playing out daily in the media and Parliament, the Chancellor of the Exchequer, George Osborne faces a real challenge to grab the headlines with this Budget.
He will be disappointed that he has already had to retreat on the reforms to pension tax relief that looked likely to form the centre-piece of his Budget after Conservative MPs made clear they would not stand for it. In the absence of this potentially controversial policy many commentators are now expecting the budget to be a damp squib, but we shouldn’t underestimate Osborne’s ability to pull a rabbit out of his hat.
It is not just the EU referendum that will define this Budget. When Conservative party members were asked in a recent ConservativeHome poll who they would prefer as their next leader, 33% voted for Boris Johnson, 20% for Michael Gove and George Osborne was languishing in fourth on 11%, behind former Defence Secretary Liam Fox. Though any leadership contest is likely to be a long way off, George Osborne’s leadership ambitions are clearly being dented by the EU referendum and his U-turn on tax credits. Appealing to Conservative backbenches and grassroots will naturally be in the back of his mind.
A reported £18 billion black hole that opened up in the economy since November will compel him to tighten the squeeze on public spending. Despite the pressure on him from backbenches to carry out tax cuts, he will be tempted to postpone these to a later date.
Another factor to consider is the weakness of the Opposition. With Labour bitterly divided and the Lib Dems all but wiped from the map, the opposition that matters to the Chancellor is his own backbenches.
His priority therefore is to avoid any further division in his party and this Budget is widely tipped to be a quiet one as a result. But despite all of this, George Osborne has proved himself in recent years to be a master of set pieces, cleverly using them for his own political machinations. Connect will be watching this Budget as closely as ever because it is sure to shape the political scene in the year ahead.
Download the full Connect Budget briefing here.
