Since the last budget delivered by George Osborne in March 2016, there have been some significant changes that have affected the UK economy; an economy that had still not fully recovered from the global financial crisis that hit in 2008.
First came the public vote to leave the European Union (EU), followed by a change of Prime Minister and Chancellor that saw both Theresa May and Philip Hammond thrust into the limelight. The pound crashed against the dollar and euro after the referendum result, dropping further when the actual date for serving notice on our exit from the EU was announced.
So what will Philip Hammond deliver in his first autumn budget statement?
Well, he has already let us know that he will not be pursuing the suggestion made by George Osborne to reduce corporation tax rates to 15% and will continue with the planned gradual reduction to 17% by 2020. He has also abandoned his predecessor’s plans to reduce the deficit by the end of this Government’s term, indicating he will not continue with such stringent austerity measures.
This gives him the opportunity to increase government borrowing and invest in infrastructure, which he has already indicated that he would like to do by increasing spending on road and rail links, and introducing incentives to smaller builders to boost the UK’s housing supply.
The Chancellor also pledged at the recent Conservative Party conference that the Government will guarantee funding for all agri-environment schemes signed after the Autumn Statement and which continue after the UK has left the EU.
Included in his announcement was a commitment to the protection of structural growth funds, such as the European Social Fund (ESF), which have played an important role in promoting the diversification of rural economies, especially in Wales.
It is very difficult to predict precisely what any Chancellor will include in a budget statement, especially a new Chancellor taking office during unprecedented times for the UK economy. The Office for Budget Responsibility’s report is expected to predict a significantly lower outlook for growth of the UK economy and Mr Hammond has hinted that he will use the budget to fundamentally help support the economy, as both households and businesses try to maintain stability after the effects of the referendum result.
With concern over the level and quality of housing stock in the UK, it would be encouraging to see measures to not only help first time buyers, but to also encourage responsible landlords, many of whom are considering the sale of their properties after the changes to tax relief on mortgage interest which are due to be introduced from April 2017. The Royal Chartered Institute of Surveyors, for example, has already announced a shortage of rental accommodation and called for the Chancellor to take action.
The Government has also taken significant steps to counteract tax avoidance schemes in recent years and, within a week of HM Revenue & Custom’s announcement this summer that they would tackle accountants for promoting tax avoidance schemes, the new Chancellor announced penalties of up to three times the tax could be applied to tax avoiders. I believe that there will be continued changes in this area under the new Chancellor, particularly as George Osbourne was accused of being too soft on large company tax evaders.
Although Mr Hammond has given little away about his forthcoming budget, many now feel that there is a real need for some post-Brexit spending commitments to stimulate the economy, help aid in the recovery of the pound and ensure that we have continued growth in the UK.
With the uncertainty of the Brexit negotiations still a cause for concern amongst many businesses, a little bit of spending could go a long way to not only bolster the economy, but more importantly, boost business confidence across the UK.