George Osborne second 2015 Budget predicted 'relatively soon'

George Osborne returns to the Treasury on Monday with colleagues predicting that he will deliver his second Budget of 2015 "relatively soon" to mark a distinctive new phase of his chancellorship.

With the Liberal Democrats ejected from 1 Horse Guards Road, Mr Osborne now has the chance to deliver his first truly Conservative Budget, as well as an opportunity to make big cuts in an autumn public spending review.

Mr Osborne's aides said no decision had yet been taken on a second Budget this year - his last one was in March - but Eric Pickles, his cabinet colleague, told the BBC: "I would anticipate a Budget relatively soon."

The chancellor has already promised to legislate within 100 days to, in effect, ban himself from putting up income tax, value added tax or national insurance in the new parliament.

The "tax lock" was widely criticised by economists as an election gimmick but it does reflect Mr Osborne's determination to finish the task of deficit reduction by cutting public spending - not raising taxes.

According to the Treasury, one option is to replay 2010 with an early limited Budget statement, setting the total of welfare cuts to be achieved and spending for government departments over the next few years.

Alternatively, Mr Osborne could start a summer spending review, to report in the autumn, without a firm total for departmental spending, giving himself more flexibility but a less clear mandate.

Mr Osborne will begin his second term as chancellor without his longstanding chief of staff, Rupert Harrison, who is leaving government and is expected to take on a well-paid job in the City.

Mr Harrison, an economist who joined Mr Osborne's team in opposition in 2006, has been a key player in developing Tory strategy and is highly regarded by Treasury officials for his grasp of economic policy.

The former Eton head boy has spoken in the past about taking up a post in the City after the 2015 election. He refused to comment on his plans, other than to deny previous reports that he would join a hedge fund.

Mr Harrison may return to politics as an MP in the future - some Tory officials believe he could be a future prime minister - but in the meantime the chancellor spent part of the weekend drawing up plans to replace him.

Mr Osborne had not expected to return to office as chancellor in a majority Conservative government: he thought his next Budget would be a compromise meshing Tory and Lib Dem policies.

The chancellor will welcome his newfound freedom but now has no excuse for not delivering on promises made during the election campaign, including raising health spending £8bn above inflation, freezing rail fares, cutting taxes and finding £12bn of welfare savings.

The broad economic strategy will remain unchanged. Fiscal austerity will still be married with monetary activism and low interest rates to keep growth high, unemployment down and the deficit falling.

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The Office for Budget Responsibility still expects a reasonable rate of expansion, not because unemployment falls but because it expects productivity growth to return after a seven-year absence.

The new government's first task should be to underpin productivity. If it fails, growth will settle back to rates that fail to improve living standards or it will generate inflationary pressures, prompting the Bank of England to raise interest rates.

The biggest direct challenge for Mr Osborne remains the fiscal one. The coalition managed to cut the deficit in half as a share of national income and the chancellor has pledged to eliminate it by 2019-20.

With more than £7bn of income tax cuts, a pledge to reduce inheritance tax and commitments to increase spending on health by £8bn more than inflation while also protecting pensions, schools and overseas aid, the cuts to the rest of government will be brutal.

In non-protected departments, the proposed cuts are similar in scale to those since 2010 but they will come from a base that has already been trimmed of the fat of the Labour years.

Economists describe the task as ranging from difficult to impossible. Paul Johnson, director of the Institute for Fiscal Studies think-tank, said these cuts were "probably as difficult as those achieved over the last parliament". Theywill come on top of the £12bn, or about 10 per cent, sliced from the annual bill for non-pensioner social security.

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