Osborne: Budget To Put Economic Security First

The Chancellor has tweeted a picture of himself putting the finishing touches to his Budget speech with a promise his Budget will "put economic security first".

The message suggests George Osborne will not fight shy of announcing £12bn welfare cuts, although Sky News has learned the pace of the reductions will be slowed.

Prime Minister David Cameron's official spokeswoman said: "This is a Budget that will put our country firmly on the path from a high tax, high welfare society to a lower tax, lower welfare society.

"It will provide a strong and solid foundation to secure a better future for people across the UK in the years ahead."

Mr Osborne had promised to find the £12bn cuts by 2017/18 but this has been extended by at least a year.

This is partly because buoyant tax revenues and new Office of Budget Responsibility projections mean the Chancellor can meet his fiscal mandate without making the welfare cuts within two years.

There has also been some pushback in Whitehall and internationally against cutting to deeply, too quickly.

The Organisation for Economic Co-operation and Development (OECD) warned the two-year timetable would have an "impact on growth" this month.

Mr Osborne will set out his plans in a "bold" Budget, in which he is expected to use the Greek crisis as an argument for keeping borrowing under control.

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The rationale for slowing the pace of cuts is clear - a slower timetable on withdrawal of tax credits, for example, will allow for more fundamental reforms to raise low pay.

On housing benefit too, extra time will allow housebuilding to increase and temper the rise in rents and housing benefits.

Senior sources in Whitehall suggested that the welfare cuts by 2017/18 would amount to around £8bn - still substantial and focused on housing benefit and tax credits.

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The move also raises the prospect of a prolonged cash freeze in working-age benefits beyond the two years announced by Mr Osborne at the last Conservative Party conference.

The already announced cut to welfare budgets arising from the BBC taking responsibility for free licence fees for the over-75s will only save money after 2018.

Mr Osborne has ceased to mention the 2017/18 date in relation to welfare cuts.

The Conservative manifesto seemed to imply a commitment to 2017/18, but the Institute of Fiscal Studies (IFS) points out the wording was a little vague.

The Government is still expected to meet its fiscal targets for debt to keep falling as a share of GDP and the current budget to be balanced by 2017/18, because of buoyant tax revenues and growth.

On tax, the Chancellor is expected to defy calls from Tory MPs to cut the 45p top rate of income tax and announce action on increasing the £10,600 threshold when workers start paying tax - possibly to as much as £11,000

There is also likely to be action on increasing the level at which the 40p rate of tax kicks in. The threshold is expected to rise to £45,020 by 2019 - saving 800,000 people £1,300 a year. In their manifesto, the Conservatives promised to raise the threshold to £50,000 by 2020.

There are also suggestions Mr Osborne may scrap student grants, or reduce the amount a family can earn before children receive them, and reform council tax.

In his Budget speech, Mr Osborne is expected to say: "Our long-term economic plan is working.

"But the greatest mistake this country could make would be to think all our problems are solved.

"You only have to look at the crisis unfolding in Greece to realise that if a country's not in control of its borrowing, the borrowing takes control of the country."

The Chancellor is also expected to promise to be "bold in transforming education, bold in reforming welfare, bold in delivering infrastructure, bold in building the Northern Powerhouse, bold in backing the aspirations of working people… it is a Budget that sets the way to secure Britain's future".