The Chancellor produced what amounted to three mini-Budgets in his Autumn Statement last December. Many tax bands and social security rates were set for the years up to and including 2015/16. For example, we know the higher rate threshold will rise 1% a year and that the inheritance tax nil rate band will remain stuck at its 2009/10 level of £325,000.
The 2015/16 spending review shows how Mr Osborne will use the money he plans to raise by sub-inflation increases to benefits and tax bands. The review only covers one year instead of the usual three or four because the coalition government’s term ends in May 2015 – an inconvenient month after the current spending review period ends. In line with the press predictions, the review incorporated £11.5bn of spending reductions. However, as the Institute for Fiscal Studies (IFS) notes in its commentary on the spending review, “cuts of a similar magnitude are pencilled in for the two years from April 2016 as well.”
The IFS also observes that the austerity programme split between spending cuts and tax increases is currently 85:15 against the government’s planned 80:20 division. Bringing the mix back into line would mean a £6 bn tax increase in the next parliament according to the IFS’s number crunchers. The IFS remarks that “Coincidentally this is pretty close to the average tax increase seen in post-election budgets in recent decades.” You have been warned.