George Osborne could dish out tax cuts totalling as much as £7 billion in the run-up to the May 2015 General Election, according to a report by the Centre for Economics and Business Research (CEBR).

Due to the recovering economy, the Chancellor can hand out “modest” tax cuts, the consultancy said.

It also believes the Government has “more room to manoeuvre” before next year’s election than many assumed.

The CEBR said the main constraint faced by the Chancellor will probably be the reaction of the financial markets, who will generally “penalise such measures by forcing up bond yields and weakening the pound.”

None-the-less, the CEBR believe that Mr Osborne has more “credibility” in the City than his Labour opposite, Ed Balls, which means he should get away with these tax cuts without too much backlash from the financial markets.

The CEBR is forecasting continued global growth over the next two years and UK exports would be likely to become more supportive than at any time in the past eight years.

However, long-standing weaknesses and spending cuts to reduce borrowing could stunt the economy, with growth falling to 2.2 per cent in 2015. The CEBR report concluded:

“The likely development of the economic data should work in favour of the Conservatives in the next election.”

Photo by Dimitry B