Is Osborne planning a surprise cut in income tax for the Budget?

A source suggests that Ed Balls's call for a temporary cut in the basic rate was designed to pre-empt Osborne's Budget rabbit.

Expectations for the Budget have been so downplayed that suspicion is growing in Westminster that George Osborne will pull some kind of rabbit out of the hat tomorrow. If so, could it be a surprise cut in income tax? Here's the theory one source put to me earlier.

Ed Balls, who always seeks to pre-empt Osborne's announcements (he called for a freeze in fuel duty before the Chancellor did just that in last December's Autumn Statement), proposed a temporary cut in the basic rate in his interview in last Saturday's Daily Telegraph. The shadow chancellor, who has previously called for a cut in VAT and the reintroduction of the 10p tax rate (a measure Osborne was considering before Labour's announcement), told the paper: 

Anything he can do to help low and middle-income families would be better than no tax cut at all. A Labour shadow chancellor says taxes should be cut. A Tory Chancellor says, 'Over my dead body.' I can't remember a situation like that in my lifetime. If George Osborne, in this Budget, were to cut the basic rate of tax, we would applaud him. If that's all he did, I would be concerned. But, even so, we would say, 'At last'.

My source suggested that Balls had either learned or guessed that Osborne was planning to cut income tax in the Budget. If the former, the question now is whether Osborne will go ahead with the move. After last year's disastrous decision to abolish the 50p rate, a 1p cut in the basic rate would be the perfect way to demonstrate that, as Tory MP Robert Halfon recently put it to me, the Tories believe in "tax cuts for the many, not just the few". 

Chancellor of the Exchequer George Osborne. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.