Yet the chancellor will also row back on the Conservatives’ manifesto commitment to find £12bn of savings from welfare payments by 2017-18 – instead taking an extra year to reach the target.
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Low and middle-earners alike are expected to benefit from the Tories’ first Budget since shedding their Lib Dem coalition partners in May’s General Election.
The government will lift the threshold for the 40p rate of income tax above its current level of £42,385, and accelerate plans to increase the personal allowance to £12,500 – both promises made by the Conservatives in the run-up to the General Election.
City A.M. understands that the chancellor will announce today that the pace of welfare cuts will slow, with Osborne revealing around £8bn in cuts to be made by 2017-18, and a further £4bn by 2018-19.
The manifesto also included promises to raise the higher rate threshold to £50,000 over the course of the current parliament.
In a speech last month, Prime Minister David Cameron said that he wanted to move from a “low wage, high tax, high welfare society to a high wage, low tax, low welfare [society],” a refrain he has repeated many times in recent weeks.
And in an interview with the BBC last weekend, Osborne said that raising the personal allowance was the government’s “priority.”
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The chancellor is also expected to use today’s Budget to reward war heroes, by multiplying the annuity given to recipients of the Victoria Cross and the George Cross.
Osborne will say that recipients’ awards will increase from £2,129 to £10,000. The Treasury confirmed last night that the £3m cost of the annuities would be covered by penalties levied by the Financial Conduct Authority (FCA).
A Treasury spokesperson said that the chancellor “decided that good causes should benefit from the misdemeanours of bankers.”
Meanwhile Sky News reported that Osborne will also use the set-piece speech to reveal details on how the government will start to sell out of its majority stake in RBS.
Additionally, Osborne will lift the inheritance tax threshold to £1m for married couples, to come into force by 2017; introduce a lower benefit cap of £23,000 in London and “lower than that in the rest of the country”; and unveil plans to make some local authority and housing association tenants in England pay up to the market rent.