George Osborne's pre-election budget: Economic boost now spells the end of UK austerity

CHANCELLOR George Osborne will this week signal that the end to austerity is in sight thanks to a greater than expected upturn in the economy.

George Osborne with budget briefcaseGETTY

George Osborne's pre-election Budget will show robust economic growth

His pre-election Budget on Wednesday is expected to include improved outlooks for economic growth and deficit reduction as calculated by the independent Office for Budget Responsibility.

With the economy showing robust growth, low inflation, Government borrowing costs low and wages starting to rise, it is thought Mr Osborne will use the Budget to announce he will relax the austerity shackles during the second half of the next Parliament.

He is also expected to spell out his economic vision for the “long-term”, and deliver “a truly national recovery” to help narrow the North-South divide.

At the same time he is expected to announce a package of measures expected to appeal to the “grey vote”, including plans to extend pension freedoms to around five million people who have already bought an annuity.

From April 2016, the Government would remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity, without unwinding the original annuity contract.

Pensioners will then have the freedom to use that capital as they want, just as those who reach retirement with a pension pot can do under the pension freedoms of the 2014 Budget.

They can either take it as a lump sum, or put it in a drawdown account to use the proceeds more gradually.

The Government is expected to remove rules which mean that people wanting to sell their annuity income to a willing buyer currently face a 55 per cent tax charge, or up to 70 per cent in some cases.

Mr Osborne is also set to use his Budget to offer an income tax giveaway to 27 million voters and a “Google tax” crackdown against multinational companies that avoid paying tax in Britain.

He is expected to raise the level at which people start paying income tax “towards £11,000” a year, in a bid to win over voters on modest incomes.

Growth is up, the deficit has been halved and jobs are on the rise

Andrew Stephenson

The move is designed to put between £160 and £200 in voters’ pockets ahead of the general election.

It is expected that the Chancellor will also take the opportunity to announce a full review of business rates.

Sources suggest one option is switching from a charge based on a commercial property’s rateable value – aspects of which date from Tudor times – to a modern alternative, such as some form of sales tax.

Critics of the existing system have long argued that it is absurd in the internet age to base company taxes on the physical space a firm occupies.

There is also speculation that the Chancellor will unveil a cut in the duty on beer and wine.

He is also under pressure to cut VAT on tourism.

More than 100 MPs have signed up to a campaign, launched in conjunction with English Tourism Week which began yesterday.

Last night Tory MPs praised the Chancellor for his management of the economy.

Mark Spencer said: “Britain’s on the mend and it’s getting better every day as we work through our long-term economic plan.

“But the wounds inflicted by Labour’s disastrous handling of the nation’s finances ran deep, and we’re not out of the woods yet.

“Providing we stay on the right course, and stick with a Conservative government and a Conservative Chancellor, we’ll crack austerity in the next Parliament.”

MP Andrew Stephenson, added: “When we came into government five years ago the country was on the brink of bankruptcy.

“Look where we are now: growth is up, the deficit has been halved and jobs are on the rise.

“It’s a recovery that’s happening right across the country, and not just in London and the South-east.

“But we’ve still got a way to go.

"If we want to clear that deficit and balance the books, we need a Conservative win in May.” 

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