With an election less than two months away -- and a hair's-breadth between the two biggest U.K. parties in the polls -- the pressure is on the U.K.'s Chancellor of the Exchequer George Osborne to help keep the feelgood factor going.
So how is he going to use Wednesday's Budget to convince Brits to tick the box next to his Conservative Party on May 7? It would be simple if his party wasn't in coalition with rivals the Liberal Democrats. Any potentially vote-grabbing measures will have to go through them.
There are unlikely to be any huge moves from last year's Autumn Statement, and the Chancellor is set to continue his emphasis on his much-vaunted "long-term economic plan", while asking for a mandate to continue it.
The whole event is carefully news-managed. In previous Budgets, there were very few surprises owing to advance leaks to the press. During the past couple of years, the team at the Treasury always makes sure there is at least one big headline-grabber on the day of the speech– like the reforms to stamp duty, the property tax, in the Autumn Statement.
CNBC takes a few informed guesses as to what might lie ahead:
The drop in the oil price means that inflation in 2015 so far has been lower than many forecast. This means the government will pay less on its index-linked debt, which is linked to the inflation rate, and pay out less on benefits which are linked to inflation. All this could lead to public sector net borrowing (PSNB), the key measure of how much the U.K.'s debt is expanding, could be £2.5 billion less than current forecasts in 2015/16, according to HSBC. So, how the Chancellor use this piece of good news?
Thanks to the good reception to the recent launch of "pensioner bonds", there have been mutterings for months about more changes to the U.K.'s pension system.
One option being discussed by economists is whether the government could allow pensioners to sell annuities in return for a cash lump sum – which could appeal to wealthier pensioners, who are coincidentally more likely to vote Conservative.
The government could give formal backing to the Crossrail 2, a massive infrastructure project which would make train travel from the South-East to London faster. This project, which hasan estimated cost of £20-£27.5 billion, affects one of the core area for Conservative voters.
Raising the income tax personal allowance, potentially to£10,800 or £11,000 (up from the current £10,600), could be a potentialvote-winner, Simon Wells, chief UK economist at HSBC, pointed out in a note.This would also help out those at the lower end of the income spectrum whomight desert the Conservative Party for up-and-comingU.K. Independence Party.
- By CNBC's Catherine Boyle