Tax and the Budget: which part of the government will win the upper hand?

David Cameron’s comments over the weekend that he wants to cut tax but now is not the time gives a very strong indication as to what the overall impact will be of any new measures in next month’s Budget – no net tax cuts. But no net tax cuts is not the same as no tax cuts.

Two different ideas were also floated over the weekend, from credible looking sources even if they were also both formally denied by the government. They were to move even further towards the planned £10,000 basic income tax allowance and also to tax non-doms more heavily. That combination could be neutral in its overall effect on the government’s finances whilst also favouring most people at the expense of some of the very richest.

The possibility of taxing non-doms more sits uncomfortably with other moves in government to encourage such people to live here by relaxing visa requirements but it isn’t an impossible combination to bring off.

Of course, there are many in the Conservative Party who would rather see any tax cuts take other forms, such as a marriage tax break. It would be foolish to expect any such changes to completely meet Liberal Democrat hopes – there isn’t a Lib Dem majority in Parliament overall – but the balance between those and the traditional Conservative demands will, in addition to being important for those directly affected by the policies, be a good indicator as to how strongly Danny Alexander and Vince Cable are able to make their case in government.

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