George Osborne returned to the Treasury this week with colleagues predicting that he will deliver his second Budget of 2015 “relatively soon” to mark a distinctive new phase of his chancellorship.
With the Liberal Democrats ejected from 1 Horse Guards Road, Mr Osborne now has the chance to deliver his first truly Conservative Budget, as well as an opportunity to make big cuts in an autumn public spending review.
Mr Osborne’s aides said no decision had yet been taken on a second Budget this year — his last one was in March — but Eric Pickles, his cabinet colleague, told the BBC: “I would anticipate a Budget relatively soon.”
When the Coalition came to power in 2010, George Osborne wasted little time in holding an emergency Budget that put his policies into action.
And now he could easily do the same again.
Mr Osborne has promised not to hike income tax, VAT or national insurance.
And the Conservatives also pledged to raise the income tax personal allowance to £12,500, meaning that no tax is paid on earnings below that amount, while also increasing the 40 per cent tax threshold from £42,385 to £50,000.
However IFS director Paul Johnson warned that income tax, VAT and National Insurance bring in 70 per cent of national income and that by pledging not to increase them, the Conservatives are ‘boxing themselves in’.
“If you want £5billion quickly, a penny on basic rate of income tax would give you £5billion quickly, probably without doing a vast amount of economic damage,” he told CityAM.
An announcement could also offer an opportunity for the Chancellor to deliver on other election promises, including raising health spending by £8billion above inflation, freezing commuter rail fares and cutting welfare spending by another £12billion.
In addition, the party is set to reduce inheritance tax, provide cash help for first-time buyers and freeze rail fares and TV licence fees.
But in order to pay for these measures and balance the books, savings will have to come from welfare spending.
The prospect of biting cuts has prompted protest demonstrations at Westminster.
Alternatively, the Chancellor could hold off on details until delivering his Spending Review, as usual, in the Autumn.