Jim Pickard

Is George Osborne planning to scrap the 50p income tax rate? Yes.

But not today, nor tomorrow. Not this month, or next. Not even before Christmas. The move may not even take place next year.

The rate – which applies to those earning £150,000 – has always been classified as “temporary” by the coalition.

In recent weeks the Tories and Lib Dems have played up their differences over the issue. In fact neither think the 50p rate should be removed just now; the internal debate is whether to go for 2012 or 2013.

Danny Alexander insisted last Sunday that scrapping the rate was not a priority – and that lifting the income tax threshold to £10,000 should come first. Tory outriders such as Boris Johnson and Lord Lamont called for it to be axed; but even Lamont said this should happen in 2013. Johnson, meanwhile, is unfettered by the responsibilities of national coalition government. Read more

Kiran Stacey

George OsborneChancellors have always seen the all-important GDP numbers a day before they are formally published, which makes any event involving the chancellor on that day a fascinating game of bluff and second-guessing.

So what could we tell from Monday’s press conference with George Osborne, which was ostensibly about the UK-India trade relationship?

Osborne walked slowly and confidently into the room, his head held high and smiling. But read nothing into that: others have commented before on how he always manages to grin, whatever storm he is facing. Read more

Kiran Stacey

Top stuff here from Bloomberg’s Rob Hutton (@robdothutton).

Since the coalition government took over, and particularly since George Osborne laid out exactly which cuts he would make, confidence of UK consumers in the economy has nosedived.

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Jim Pickard

The latest opinion poll by ComRes is far from heart-warming for Labour, suggesting that the party has lost its poll lead over the Tories for the first time in seven months. The survey was done for tomorrow’s Independent newspaper.

The poll finds that Labour support has dropped two points since the last ComRes survey to 37 per cent, putting the party level with the Tories, whose support has fallen by one point. Liberal Democrat backing has recovered by one point to 12 per cent. Read more

There’s been some chatter in the City about David Cameron’s trip to the Gulf being part of a cunning plan to sell the taxpayer’s bank stakes. Read more

Margaret Thatcher always had a soft spot for David Young, the businessman who brought some “can do” spirit to the old Department of Trade and Industry.

Baroness Thatcher said of Lord Young: “Other people brought me problems. David brought me solutions.” Read more

From the FT’s Money Supply blog:

As far as Britain’s economy is concerned the spending review, just published, changes little. There was the “reprofiling” predicted first in the Financial Times, but it amounted to only £2bn a year of additional gross capital expenditure. This will not make the difference between stagnation and recovery. The Treasury is right: there is no Plan B. Read more

George OsborneCommentary led by Jim Pickard and Alex Barker of the FT’s political team, Michael Hunter, markets reporter, Gordon Smith,’s deputy news editor, Martin Sandbu, editorial writer and co-ordinated by Darren Dodd, of the UK newsdesk.

The chancellor sat down in the House of Commons at 1.33pm

JP: Osborne’s stroke of genius is to announce departmental cuts of 19 per cent – just lower than the 20 announced by Labour in March. Let’s wait to find if he is comparing apples with pears.

Average savings in departmental budget to be lower than the average implied in Labour’s March budget. Instead of average cuts of 20 per cent, there will be cuts of 19 per cent per department

Osborne says: “The measures set out today bring sanity to our public finances”

£15.8bn to refurbish schools

Schools budget to rise from £35bn a year to £39bn

More on education: Early years education budget for schools  to rise over each of the next four years. New £2.5bn pupil premium for disadvantaged children. And Sure Start services budgets will be protected in cash terms

Now for transport: The cap on rail fares will rise to retail price index plus 3 per cent for 3 years from 2012. £30bn to be invested in various transport projects over the next 4 years. M25 will be widened between 10 junctions. Crossrail will go ahead among other investments in Britain’s transport infrastructure

The BBC’s online budget will fall and it will not expand its activities competing with local media

Pilots of super-fast broadband to be started in the coming months

Now for the BBC: The BBC will take from the government the responsibility for the  World Service. The licence fee will be frozen for the next six years

Osborne says there will be £1bn to set up a “green investment bank”

JP: There is a 50 per cent increase in funding for apprentices. But the chancellor isn’t spelling out which schemes will suffer to pay for this – my bet would be the £1bn ‘train to gain’ fund (used to help companies send staff on training).

£220m invested in the UK Centre for Medical Research and Innovation at St Pancras. £200m to be invested in developing wind technology

Now for science: The science budget is protected at £4.6bn a year Read more

Has Michael Gove’s discreet approach to budget negotiations paid off? Education bravely resisted the shroud waving that marked the defence review. But it looks like Gove has emerged with a better deal than Fox, at least in terms of his resource budget.

We already know that schools spending — based on the Ed Balls baseline — will rise in real terms (albeit by a tiny amount). Today’s surprise will be that the education department will win the best settlement of all the unprotected departments. That means its resource budget will be cut by less than the 7.5 per cent imposed on defence. When it came to a stand-off between kids and frigates, the kids appear to have prevailed.

Now, as with all settlements announced today, the headline figure mask a great deal of pain. Spending channelled through local authorities (such as children’s services) will suffer. So will spending on 16 to 19 year olds. And of course the resource settlement does not include the education capital budget, which is about to be thumped. Read more

Jim Pickard

The document on quango reform reveals further details about the reasoning behind why some bodies are being axed and others are not. And that some are being dealt with more quickly than others.

Most strikingly, the merger of the Competition Commission and Office of Fair Trading will not be immediate. Instead there will be a consultation period – starting next year: Read more

There’s been lots of speculation over the Treasury’s plans on sickness benefit. The Times flagged up a proposal to “means test”, while the Observer has a letter pointing to £2.5bn of incapacity benefit savings from an unspecified reform.

No final decisions have been taken. But reading between the lines, it sounds like moves are afoot to scale back “contributory incapacity benefit” (which I’ll explain in a second).

If so, it blows a rather big hole in George Osborne’s claim that a he’ll be finding savings from ending the “lifestyle choice” of those determined to “pull down the blinds” and scrounge on benefits. These reforms largely take money from people who have worked and fallen ill, rather than those who’ve allegedly chosen a life on the “sickie”. Read more

Jim Pickard

In a keynote speech at Bloomberg HQ on Friday Ed Balls will lay into the coalition in a way that exceeds anything we have heard before.

He will warn that “a hurricane is about to hit” Britain’s economy, in the most dramatic warning yet by a Labour politician that the coalition’s deficit reduction programme could prompt a double-dip recession.

Balls will label George Osborne, chancellor, as a “growth denier”, who is ignoring warning signs of a global slowdown. Read more

Option: Cut the officer corps of the armed forces by a quarter, returning the ratio of top brass to lower ranks the 1 to 7 level that prevailed through the cold war.

Saving: In salary alone, the saving is around £400m a year. There are then knock on savings from bonuses, housing costs, private school fees, the entourage, the offices, travel costs, training, the pension etc.

The case for a cut: Britain’s armed forces are more top heavy with officers than at any point in the 20th century. As the armed forces have shrunk in size, the lower ranks have suffered more than the officer corps. It now looks terribly unbalanced. The ratio of officers to lower ranks has fallen from 1/10 in the Second World War, to 1/7 in the cold war, to 1/6 through the late 1990s, to 1/5 today. There was no strategic decision to change this structure — it is a symptom of a bureaucracy protecting those at the top at the expense of efficiency. Most striking is the trend since 1997, which is shown in the chart below. Senior officers (colonel and above) have increased by 8 per cent, while the lower ranks have been cut by 12 per cent. What is the rationale for that? There are now more admirals than active warships and two-fifths as many RAF officers of one star and above as there are in the US Air Force, which is roughly eight times the size. Read more

The axe is hovering over the £2.7bn winter fuel payments. But cutting this bung to the over-60s is harder than it seems. Even if Osborne decided, say, to pay out £600m less than Gordon Brown, it would make no contribution at all to cutting the deficit.

How so? The Labour wheeze was to top-off the winter fuel payment with a one-off bonus each year, which was presented as a Gordon’s munificent Christmas gift. Last year it amounted to £600m. The Budget books doesn’t expect this bonus to be repeated, so the future winter fuel payments are only scored as £2.1bn in 2010, not the £2.7bn actually spent in 2009.

The dilemma for Osborne is:

– Find an extra £600m from savings or increasing debt to pay out as much as Brown in 2009, or

– Take the political hit from withdrawing £50 off all pensioners (and £100 off all those over 80), without any upside in terms of deficit reduction.

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Whitehall finally puts its worst fears to paper today. After months of agonising preparation, officials will finally dispatch the budget bids to the Treasury. The letters themselves include a plea for leniency that runs for about four to five pages. But the important part is a blood-curdling chart that shows how the department would find cuts of up to 40 per cent cut. “The sacred cows lining up for slaughter,” in the words of one official.

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The Office of Budget Responsibility faces a big credibility test today. Chris Giles, the FT’s economics editor, has an agenda-setting story that raises doubts over its very purpose and independence. It is far more significant than any speculation over Sir Alan Budd’s departure.

Through persistent questioning, Chris uncovered that the OBR tweaked its Budget forecasts at the last-minute to erase around 175,000 public sector job losses by 2014/15. Read more

Jim Pickard

It was Ed Miliband who called for all workers to have the right to flexible working earlier in the week – in a speech that pointed out that GDP isn’t the be all and end all of everything. (At present only carers and parents can do so automaticallyRead more