The Chancellor is under serious pressure to produce a growth Budget on 21 March. But where will the money come from for tax cuts for entrepreneurs and businesses generally, not to mention other good causes? Increased borrowing is probably not the answer, if Mr Osborne has been influenced by Moody’s shot over his bows when the ratings agency recently designated a negative outlook for the UK economy.
One answer, according to commentators, would be to raid the higher rate tax relief on pension contributions – there have been several stories to that effect in the Financial Times and elsewhere. Of course, this has been threatened many times in the past. But this time could be different.
For a start there are people in the Coalition Government – the Lib Dems – who favour the policy. And discussions about the possibility of abolishing higher rate tax relief have been reported as taking place at the highest levels. The practicalities have been an inhibiting factor in the past, but now the legislators know exactly how to do it from their recent experience under the previous occupants of Downing Street. What’s more, it would look as if we really were ‘all in it together.’
Of course, there would be a lot of squealing – and quite right too. Yet what is the alternative political home for those who don’t like the idea? It is unlikely that most would be tempted into voting for Mr Miliband. David Cameron and George Osborne can blame Clegg and co. And there’s no getting away from the fact that it would raise billions.
So the Budget really could contain some major surprises this year – and pensions tax relief might only be one of them.