Chancellor sets his face against any ‘unfunded giveaways’

George Osborne faces calls to change tack in his budget. Picture: AFP
George Osborne faces calls to change tack in his budget. Picture: AFP
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CHANCELLOR George Osborne last night warned that his Budget will not include any “unfunded giveaways” in a message to his own Tory backbenchers and Liberal Democrat colleagues who are pushing for tax cuts.

In a speech to the EEF Manufacturers dinner, Mr Osborne warned “everything has to be paid for” as Lib Dem Business Secretary Vince Cable appeared to suggest that a deal could be done on scrapping the 50p highest rate of tax.

Mr Cable’s intervention was a break from previous Lib Dem policy that had opposed the Tory’s plans to get rid of the highest tax rate for those earning more than £150,000 a year, but only in exchange for the introduction of a “mansion tax” targeting property wealth.

In a surprise move Mr Cable said he was “not ideologically wedded” to the 50p rate.

However, it appeared last night the deal which could be unveiled by Mr Osborne in the Budget on 21 March could see increased council tax bands for more expensive properties, which means Scotland would be exempt unless the SNP follows suit since the tax is devolved.

But in his speech last night, Mr Osborne made it clear that any tax breaks will have to be met with increased taxes elsewhere or more cuts.

The Chancellor had already faced calls from Labour to reduce income tax or VAT to boost growth in the economy.

And his speech also seemed to be aimed at those in his own party who have joined Labour in demanding he drops a move to scrap child benefit for families with a higher tax earner. During Treasury questions yesterday, Mr Osborne appeared to stick by his policy when he came under attack from Shadow chancellor Ed Balls, despite Lib Dem Deputy Prime Minister Nick Clegg saying this week that it was to be looked at again.

Mr Balls said the plan would create a situation where a two-income family earning £84,000 will receive child benefit while a single-earner family on £43,000 would not.

Meanwhile, Labour leader Ed Miliband said that, while the government should look at proposals for a tax on valuable homes, scrapping the 50p rate would be “absolutely the wrong thing to do”.

Mr Osborne declined to reveal details of his Budget in his final appearance at Treasury questions, telling MPs only that there would be no “unfunded giveaways”.

Challenged over his plan – announced in 2010 – to remove child benefit from those earning over £42,745 a year from January 2013, he said: “I think it is fair to ask those in the top 15 per cent of the income distribution to make a contribution to the fiscal consolidation.”

But Mr Balls told him that he could not “do the right thing” on child benefit as his policies had failed to deliver growth.