The chancellor is to reveal the government’s spending plans for next year exactly five months before Britain is due to leave the European Union
The date for the Autumn Budget has finally been announced. This year it will take place on 29 October. Yes, a Monday. This is a little earlier than expected but concern over the potential impending turmoil threatened by Brexit appears to have had an impact.
Indeed, there were question marks over the logistics of this year’s Budget in the run up to the announcement.
A couple of weeks previously, Chancellor Philip Hammond was asked by the House of Lords Economic Affairs Select Committee whether it was safe for its Finance Bill Sub-Committee to assume it was at least 10 weeks away. The chancellor must give at least 10 weeks’ notice of the date to the Office for Budget Responsibility, so it can prepare its Economic and Fiscal Outlook.
Hammond said he was unable to give such an assurance. In a masterly understatement, he said: “The situation this autumn is complicated by the fact there are some very significant political events.” He highlighted a special European Council meeting in November, widely seen as the end of the line for Brexit negotiations, as well as other events, including his own party conference which began on Sunday.
He stressed the 10 weeks’ notice period was a minimum, not a maximum, and that he had already asked the OBR to start work on the EFO, albeit with an indeterminate Budget date.
That said, it had been quoted he wanted to announce his Budget as early as possible. Which is what has come to pass. It seems the logic behind the move is more political than fiscal.
So, the chancellor is to reveal the government’s spending plans for next year exactly five months before Britain is due to leave the European Union.
The Autumn Budget is the biggest day in the financial calendar and Hammond has promised to deliver a plan that will support public services while building a stronger economy.
All eyes will be on how he aims to fund giving the NHS an extra £20bn a year by 2023, a policy announced earlier this year. It equates to a 3.4 per cent rise annually – but is less than the 3.7 per cent average increase the NHS has had since it was created in 1948. Prime Minister Theresa May came under fire for suggesting the money would be funded by a “Brexit dividend”, which the independent Institute for Fiscal Studies said did not exist.
What else can we expect?
Well, the last few months have seen the launch of investment taxation and inheritance tax reviews undertaken by the Office of Tax Simplification, as well as calls to abolish IHT from the Resolution Foundation. So the outcome of all of that could be interesting.
There have also been interesting comments made by the Treasury Select Committee on pension tax relief.
It said: “There is widespread acknowledgement that tax relief is not an effective or well-targeted way of incentivising saving into pensions. Ultimately, the government may want to return to the question of whether there should be fundamental reform. However, the existing state of affairs could be improved through further, incremental changes. In particular, the government should give serious consideration to replacing the lifetime allowance with a lower annual allowance, introducing a flat rate of relief, and promoting understanding of tax relief as a bonus or additional contribution.”
As we near 29 October, however, bear in mind that given the political situation and the Conservatives’ thin majority, radical changes that could generate strong resistance by some in the party may be avoided this time around.
Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn