* Osborne set to ignore calls for bigger tax cuts
* Growth forecasts to be raised
* Budget key to sentiment before 2015 election
By William Schomberg
LONDON, March 19 British finance minister George
Osborne will announce a pre-election budget on Wednesday that is
likely to offer some tax relief to voters but will stick closely
to his tough decade-long plan to fix the public finances.
Britain goes to the polls in May 2015 and the annual budget
plan is one of the government's last opportunities to make a
difference to how people feel about their finances before then.
But Osborne is seeking to turn his focus on austerity into a
trump card in the fight against the opposition Labour party,
which remains a few percentage points ahead of the
"The question for (Labour) is why would you give the keys
back to the person who crashed the car?" Osborne told the BBC on
Sunday when he again sought to remind voters how Labour was in
power when the financial crisis of 2007-09 tipped Britain into a
deep recession and exposed its shaky public coffers.
A much stronger-than-expected economic recovery in Britain
has buoyed Osborne. A year ago, he was about to come under
pressure from the International Monetary Fund to spend more. Now
he is considered a strong contender as Conservative party leader
when Prime Minister David Cameron eventually steps down.
To reinforce his image as the guardian of the public purse,
Osborne has said he will announce details of a ceiling on
welfare spending along with his budget on Wednesday.
Labour says many Britons are not feeling the effects of the
recovery and point to a "cost-of-living crisis" that is hitting
low and middle-income earners. It wants to freeze energy prices
and reintroduce a 10 pence starting rate of income tax.
Osborne has rebuffed demands from within his Conservative
party to make big changes in personal income tax.
Instead he is widely expected to announce on Wednesday the
latest in a series of increases in the amount of money people
can earn before paying income tax. On Tuesday, the government
announced tax breaks to help cut the cost of childcare.
Other measures likely to be announced include the extension
of a tax break to encourage business investment beyond 2014.
Osborne said last month he wanted to boost investment and
exports, something that would reduce the unsustainable reliance
of Britain's economy on household spending.
Manufacturers also want measures to help to reduce their
electricity bills - which they say are among the highest in
Europe - on top of the expected freezing of a carbon tax which
Britain introduced to help spur investment in renewable power.
Britain's budget deficit totalled 11 percent of gross
domestic product when the Conservative-led coalition came to
power in 2010 and is forecast to be about 7 percent in the
current fiscal year, still much higher than other big economies
in the European Union.
Official forecasts for economic growth - which underpin the
budget - are likely to be revised up for the current fiscal year
to 2.3 percent and to 2.5 percent for the next two years, but
beyond that they will probably stay unchanged, said Sam Hill, an
economist at RBC Capital Markets in London.
"It's very difficult to spin a dramatic story about a
totally different outlook for the public finances from that."
Economists will look closely at the small print of the
official forecasts which have estimated that the amount of spare
capacity, or slack, in Britain's economy could take five years
to run down.
If that assumption proves to be too generous, the government
may have to cut spending further or raise taxes in the coming
years to offset the larger-than-estimated structural component
of the deficit.