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.

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Tom Watson rouses Labour's conference as he comes out fighting

The party's deputy leader exhilarated delegates with his paean to the Blair and Brown years. 

Tom Watson is down but not out. After Jeremy Corbyn's second landslide victory, and weeks of threats against his position, Labour's deputy leader could have played it safe. Instead, he came out fighting. 

With Corbyn seated directly behind him, he declared: "I don't know why we've been focusing on what was wrong with the Blair and Brown governments for the last six years. But trashing our record is not the way to enhance our brand. We won't win elections like that! And we need to win elections!" As Watson won a standing ovation from the hall and the platform, the Labour leader remained motionless. When a heckler interjected, Watson riposted: "Jeremy, I don't think she got the unity memo." Labour delegates, many of whom hail from the pre-Corbyn era, lapped it up.

Though he warned against another challenge to the leader ("we can't afford to keep doing this"), he offered a starkly different account of the party's past and its future. He reaffirmed Labour's commitment to Nato ("a socialist construct"), with Corbyn left isolated as the platform applauded. The only reference to the leader came when Watson recalled his recent PMQs victory over grammar schools. There were dissenting voices (Watson was heckled as he praised Sadiq Khan for winning an election: "Just like Jeremy Corbyn!"). But one would never have guessed that this was the party which had just re-elected Corbyn. 

There was much more to Watson's speech than this: a fine comic riff on "Saturday's result" (Ed Balls on Strictly), a spirited attack on Theresa May's "ducking and diving; humming and hahing" and a cerebral account of the automation revolution. But it was his paean to Labour history that roused the conference as no other speaker has. 

The party's deputy channelled the spirit of both Hugh Gaitskell ("fight, and fight, and fight again to save the party we love") and his mentor Gordon Brown (emulating his trademark rollcall of New Labour achivements). With his voice cracking, Watson recalled when "from the sunny uplands of increasing prosperity social democratic government started to feel normal to the people of Britain". For Labour, a party that has never been further from power in recent decades, that truly was another age. But for a brief moment, Watson's tubthumper allowed Corbyn's vanquished opponents to relive it. 

George Eaton is political editor of the New Statesman.