Tomorrow, all eyes will be on Philip Hammond, Chancellor of the Exchequer, as he delivers his third budget statement to the House of Commons, but this won’t be any ordinary budget announcement, it will be the last one the chancellor makes to parliament, before the United Kingdom leaves the European Union next year. Pentland looks at what we can expect from the forthcoming budget.
Is austerity over?
Following on from Theresa May’s claim that “austerity is over” the pressure will be on Mr Hammond to come up with the necessary public spending to match that bold claim, with the Resolution Foundation suggesting that it will take an extra £30bn of public spending by the end of this parliament to end austerity.
The dilemma for Mr Hammond is, does he choose to stick to the Conservative manifesto pledge to get rid of the deficit by 2025 or embark on increased public spending ?
As a committed remainer, Mr Hammond has repeatedly warned of the serious implications for the UK’s economy in the event of there being a no deal Brexit. In August, Mr Hammond said “leaving the European Union without a deal could have large fiscal consequences” whilst the Institute of Economic Research suggests that the difference between a deal and no deal Brexit could be in the region of £30 billion.
The High Street
With the decline of Britain’s High street, there will be pressure on Mr Hammond to propose measures to reverse what many people believe to be the death of the High Street. It is widely speculated that Mr Hammond will announce a boost worth £1.5bn for the UK’s High Street, which will include plans to cut business rates for small retailers and relax town planning laws.
It is also expected that Mr Hammond will announce plans to tax internet retail giants such as Amazon, amid speculation that internet retail companies don’t pay tax due to international tax loopholes.
Whilst, this will be welcomed by high street retailers, Mr Hammond also stressed that the changing face of the UK high street as a shopping destination means that the high street must evolve with the possibility of empty retail premises being used for housing.
It is rumoured that Mr Hammond could reduce the threshold for VAT payments by small businesses, from £85,000 to £43,000, which could potentially generate £1.5 billion in revenue for the government but won’t be a popular move with the 5.7 million small businesses in the UK.
During the Conservative Party conference, Theresa May announced the end of the borrowing cap, which was welcomed by local authorities up and down the country. It is suggested that the amount of investment needed could total £1 billion per year, with borrowing likely to be under tight fiscal rules.
Mr Hammond has suggested that he will offer a £20 billion spending boost for the NHS with any increases in tax being an “absolute minimum.”