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Budget will not mark end of austerity measures

It's just over a year to go before the next General Election and Britain is basking in an improving economic outlook.

You may therefore think that Wednesday's Budget will mark the end of austerity but you would be wrong.

With the UK national debt still moving upwards and predicted to rise to around £1.4 trillion, George Osborne's hands continue to be tied. If he wants to maintain credibility as a Chancellor who is aiming to ultimately balance the books then there is a limit on what he can do in terms of offering sweeteners to the electorate without putting up taxes elsewhere.

I would certainly expect politics to feature heavily in Wednesday's speech with Mr Osborne claiming that his policies are taking the country's economy in the right direction. He will need to strike the right balance between safe-guarding existing measures which promote continued economic growth while, at the same time, ensure he is being seen by the wider electorate to be cracking down on individuals and employers not paying their fair share in tax.

You can expect plans to close tax loopholes that mainly benefit higher earners. New rules governing Limited Liability Partnerships, for example, could see some individuals being re-classified as being employed rather than self-employed, a change which could have a significant impact on their annual tax liability. Mr Osborne will also likely reiterate his 2013 Budget announcement to tackle the use of so-called 'employment intermediaries' which can be set up to disguise an employee - employer relationship to reduce the PAYE and National Insurance Contributions liability for both parties.

The extra revenue generated from some of these measures could help the Chancellor continue and even potentially expand a few other tax breaks which promote enterprise to ensure the UK stays on the path of economic growth.

The UK is back to pre-recession growth levels, forecast to outperform the rest of Europe in the year ahead. While several unemployment black spots still remain across the country, more people are getting back to work and overall there is a notable step change in business confidence. We've witnessed within our own firm that here in Scotland there is an increasingly active deal market.

However, this recovery is fragile and the business community will continue to rely on existing corporate finance initiatives like the Business Growth Fund and Funding for Lending Scheme to ensure continued progress. Other key investment incentives such as the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme, aimed at slightly larger and more developed businesses, will also continue to be essential in driving forward the recovery.

While he has a careful path to tread, the upbeat economic forecasts and numerous positive business confidence surveys should give the Chancellor the platform he has been wishing for since 2010 to praise the virtues of austerity.

As a major figure within a Unionist party, I suspect he'll also not be able to resist making some political challenges to Scottish independence campaigners as to whether a standalone Scotland would be able to deliver pro-business measures such as the forthcoming cut in corporation tax, reducing it to 21 per cent from this April.

Although the 2015 General Election is not far away don't expect this to be a giveaway Budget. While the Chancellor will want to demonstrate that we are finally starting to see the benefits of the last four years of Government restraint, he has set out his stall and staked his reputation and political fortunes on being able to reduce Britain's debt. Expect lots of politics on Wednesday but don't expect an end to austerity because we still have a long way to go.

Mark Houston is the Glasgow Managing Partner at Johnston Carmichael

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