Autumn Budget – What To Expect
September 21st, 2017
Last November, the then relatively new Chancellor, Philip Hammond, announced he would be switching to Autumn Budgets, starting after the Spring Budget in 2017. This was a reversion to an idea introduced in the early 1990s, but abandoned when Gordon Brown replaced Ken Clarke at the Treasury in 1997.
Following last year’s announcement, the Treasury published a “7 things you need to know” press release explaining how the Autumn Budget timetable would work. This said “From winter 2017, Finance Bills will be introduced following the Budget. The aim will be to reach Royal Assent in the spring, before the start of the following tax year.” It also promised that “Legislation Day”, when most tax policy consultation summaries and draft Finance Bill legislation is published, would move from December to the summer, starting in 2018.
What the Treasury did not say was that there will effectively be no Legislation Day for the Autumn Budget 2017 because there is not sufficient time. However, the Treasury has “opened the Budget representations portal earlier than usual to allow more time for HM Treasury to note and consider representations”. The deadline for submitting representation for the Autumn Budget 2017 is 22 September, according to Treasury guidance.
Before considering what might be in the Autumn Budget, some background points need to be considered:
- Traditionally, the first Budget after an election is when the unpalatable medicine, ie tax increases, is dispensed. According to the Institute for Fiscal Studies, prior to the 2015 election, each of the previous five post-election Budgets saw net tax rises of more than £5bn in today’s terms. The Summer Budget after the 2015 election topped this, aiming to raise the Treasury’s inflow by more than £9bn. However, over a third extra of this revenue disappeared in the following Autumn Statement., when George Osborne was forced to climb down on reforms to tax credits.
- Philip Hammond has already lost planned income from of his own Budget climb down on NIC Class 4 contributions – a measure which never even reached the first Finance Bill. In the grand scheme of things, the loss is small beer – about £2bn spread over four years from 2018/19. He is on record as saying he will need to replace the missing revenue, but any recoup will be lost on the noise of overall numbers.
- On the expenditure side, Mr Hammond must find the extra £0.5bn a year over the next two years that was pledged to Northern Ireland as part of the DUP’s “confidence and supply” deal following the general election.
- The DUP’s support means that in theory the Government has a majority in the House of Commons for Finance Bill legislation. In practice, as the Class 4 row showed, theory can be overturned if enough Conservative backbenchers are unhappy – and they are hardly an overjoyed team post-election and mid-Brexit.
- The latest government borrowing figures appear to give the Chancellor as much as about £10bn wriggle room. However, he will face the problem which prompted Gordon Brown to drop Autumn Budgets: the fiscal picture at the start of the new tax year can be very different from that the previous autumn.
What might appear in the Autumn Budget? At present, there are few clues. The ‘normal’ Budget process in which the previous (Autumn) Statement gives a clear steer of future Budget contents does not exist on this occasion. The Budget 2017 Red Book mentioned a variety of future consultations, some targeting an Autumn Budget announcement. In the aftermath of the election little has emerged, as a look at the Treasury’s list of consultations reveals.
The Brexit legislative programme will mean that Mr Hammond is unlikely to risk any controversial proposals that could upset backbenchers, such as major revisions to pension tax relief or other tax increases. The absence of consultations also points to few changes. Mr Hammond will face the further headwind of MPs weary of Finance Bill work alongside the European Union Withdrawal Bill 2017-2019.
The result could be a dull, steady-as-she-goes Budget, with little of interest beyond the standard tweaking of tax bands and allowances. The Conservatives’ election manifesto promised a personal allowance of £12,500 and a higher rate threshold of £50,000 by 2020 (ie 2020/21). That implies increases of £1,000 and £5,000 spread over the next three tax years.
One of the reasons given by the Treasury for the Autumn Budget timetable was that it would “help Parliament to scrutinise tax changes before the tax year where most take effect”. It may be that this time around there will be few changes for the Finance Bill weary parliamentarians to study.