Budget: Osborne's Hopes Of Rescuing Economy

By Jon Craig, Chief Political Correspondent

George Osborne will today unveil a Budget with the twin aims of attempting to rescue both the British economy and the political fortunes of the Conservative Party.

The Chancellor will announce a raft of measures he hopes will not only kick-start economic growth but also reverse a Tory slump that began with his Budget a year ago.

Many Conservative MPs blame last year's so-called "Omni-shambles" Budget - containing a series of blunders that required embarrassing U-turns - for the collapse in support for the party over the past 12 months.

This year Mr Osborne has already promised help for pensioners, working couples and homebuyers.

But to avoid another onslaught from critics he will also need to provide help for motorists on fuel duty and businesses with incentives to invest.

On tax, the Chancellor is tipped to help the low paid by accelerating raising the income tax threshold to £10,000, a move championed by the Tories' LibDem Coalition partners.

And after the furore in the Conservative Party over gay marriage, the Chancellor may boost the married couples' allowance to cheer up disgruntled Tory backbenchers. A cut in corporation tax from 21p to 20p would also delight business leaders.

Mr Osborne is also expected to agree to unlock £4.8bn in child trust funds and allow parents to transfer their investments into more generous Junior ISAs. This move could leave some children up to £34,000 richer.

He will also announce that thousands of elderly people who lost up to half of their life savings when Equitable Life came close to collapse a decade ago will receive compensation.

But in a bleak message to MPs and voters on the state of the economy, there will be no U-turn on spending cuts or unfunded tax cuts and some grim economic forecasts.

Speaking at the weekend, the Chancellor rejected calls from Lib Dem Cabinet colleague Vince Cable and former Tory defence secretary Liam Fox to change course and abandon his so-called "Plan A".

Warning that economic recovery would be a slow process, he said: "There is no easy answer to Britain's problems. There is no miracle cure, because of course if there was a miracle cure it would have been deployed.

"It is just a lot of hard work dealing with Britain's debts, helping businesses create jobs and helping families who work hard and want to get on."

It has been revealed the Chancellor will unveil another £2.5bn of cuts to fund capital spending, although health, schools, overseas aid and HM Revenue and Customs will be shielded from the latest round of savings.

Osborne warned there would be no U-turn on spending cuts

Mr Osborne told the Cabinet other departments would have to find 1% savings on day-to-day budgets for each of 2013/14 and 2014/15.

But the move was attacked by Labour. Shadow Treasury Minister Chris Leslie MP said: "An increase in capital spending of just £2.5bn compares to deep cuts of £12.8bn to infrastructure investment in the last three years on the plans George Osborne inherited.

"If this is the only additional investment in infrastructure in the Budget it will be a huge disappointment. Business groups, the IMF and even Vince Cable have all said now is the right time to invest, at record low interest rates, in building homes, road and schools to create jobs now and strengthen our economy for the future.

"The test for the Budget is whether it delivers bold action to kickstart our flat-lining economy and significant tax cuts for middle and low income families, not a £3bn tax cut for the very richest and more of the same failing policies."

But only weeks after Britain lost its AAA credit rating and slipped into a double dip recession with the risk of a triple dip, Mr Osborne is expected to have to deliver more gloomy news about the country's finances.

The Office for Budget Responsibility is expected to raise borrowing forecasts and lower those for growth.

Confirmation of Mr Osborne's unpopularity comes in a survey suggesting that more than four out of 10 voters (44%) think he should be sacked as Chancellor.

Fewer than one in five (18%) of those questioned said Mr Osborne should keep his job, while 38% did not know.

Favourite to replace him is Mr Cable, favoured by 12%, followed by Foreign Secretary William Hague (5%) and Home Secretary Theresa May (3%).

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