Now, some content such as tax thresholds is revealed in the November autumn statement. And many other facets are leaked, sometimes to test reactions before fine-tuning (or ditching) and sometimes to prepare the electorate for the worst ahead of reining back to something less aggressive for the actual proposition. Budgets, especially in a coalition, can be more about presentational politics than the economy or investment.
Each year, accountants PWC present the likely tax runners and riders with the odds on each happening. PWC admit they are not William Hill, Paddy Power or Betfred – a level tenner on each at the offered odds would probably see big winnings. But it's a good indication. So here's their predictions with some Mindful Money comment.
- Corporation Tax – It's 5-1 on cuts beyond the 23% it's due to reach by 2014, to 20%. A "business-friendly" move without a popular backlash.
- Fuel Duty Could he commit to eventually replacing fuel duty with road tolls? PWC says 75-1 but the odds will have shortened since the road privatisation concept was launched this week. Osborne could get some popularity by freezing the planned fuel duty increase – even though each rise in pump prices is a no-effort bonus for the Treasury. The price of petrol is electorally sensitive, especially in suburban swing seats.
- Income tax It's 5-1 on an effective end date for the 50% tax rate paid by those earning £150,000 plus. This is a contentious move, especially for the LibDem coalition partners. It's been heavily backed, promoted and predicted but uniquely by the demographic that would do well out of it. A reduction would be politically easy because the Labour party that first introduced the rate in 2009 said it was "temporary". But then so too was income tax when first introduced over two centuries ago. Osborne could make the move more palatable if combined with a commitment to increasing the personal allowance for the lower paid.
- Wealth taxes The accountants say it's 15-1 against a mansion tax being introduced. Special taxes on expensive properties raise the right wing press spectre of the little old lady living in reduced circumstances in a super pricey Kensington home – they will already have their case studies lined up should he introduce such a move. And rural lobbyists in the shape of the National Farmers Union's insurance wing say: "Changes to taxation could harm asset-rich but cash-poor rural dwellers… struggling country homes and businesses could be hit by tax on property." More likely would be a new higher band of council tax (complete with help for impoverished widows) and, the most probable, a clamp down on company ownership of residential properties which enables avoidance of stamp duty on purchase.
- National Insurance Contributions The oddities of National Insurance are regularly rehearsed. There is little correlation between NI and benefits. It is levied on earnings from work and not investment income. It creates a combined 32% tax rate for most which only goes up to 42% for the higher paid (and 52% for the highest). There is a working party and consultation exercise. But PWC rate a complete harmonisation of NICs and income tax as a 100-1 outside chance. There would be too many losers as well as winners – Chancellors are always wary of boat rocking.
- Capital Gains Tax This could be the surprise move towards creating a "John Lewis" society. PWC rate it 3-1 (low odds by their reckoning) that entrepreneurs CGT relief is extended to all employees. This would encourage higher participation in owning equity in the company that employs you. There is unlikely to be any other CGT changes.
- Stamp Duty increase for high value properties. This is the nearest to a certainty that the accountants offer. They expect it to be evens whether there's an increased rate in stamp duty land tax for top value properties. This could be countered with a re-introduction of special first time buyer rates on the £125,000 to £250,000 price range. But the chances of a radical restructuring to avoid the effect of big increases over the whole property price at various cliff-edges. So no one prices a property at £251,000 or £501,000 as the whole of the price is at the top rate. The tax on £250,000 is £2,500 (1 per cent) on £251,000, it's 3% (£7,530).
- VAT It's 50-1 against zero- or lower-rated items moving into the higher rate. Indirect tax increases are unpopular and show up in inflation figures. Moving children's clothes from 0 to 20% would run into the parent lobby which is already hurting from the removal of child benefit from higher rate taxpayers. But expect increases in the excise duty take from wine, spirits, beer and tobacco – on health grounds.
- Pensions It's a 15-1 chance, say PWC, that pensions tax relief is reduced to the basic 20|% rate for everyone – many think it unfair that the rich should get more tax help for their retirement than the less well off. And the same odds that the annual allowance for tax relief on pension savings will be cut from the present £50,000, perhaps halved. Pensions have been subject to more lobbying than any other issue with some providers arguing against change as it would discourage the better off from retirement saving (although would they spend the money or save it some other way?). The bulk of pensions tax relief goes to higher and top rate taxpayers.
This is what Schroders' European Economist, Azad Zangana, believes we can expect from the 2012 Budget:
- The Chancellor to focus on growth measures that will not dent the exchequer.
- Income tax thresholds are clearly on the agenda, but to fund a cut in the top rate, the Chancellor will have to find a way to recoup the losses to the exchequer (likely to be small) with other measures.
- The focus will remain on boosting growth and employment, but not at the risk of losing the UK's credibility with investors.