It is official: summer has ended and parliament is back in business. Now there is the first Autumn Budget, set for 22 November, to consider.
Following the announcement last year from incoming Chancellor Philip Hammond that he would be switching to Autumn Budgets from 2017, the Treasury published a statement explaining how the timetable would work.
It stated: “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, will move from December to the summer, starting in 2018.
What the Treasury did not say was that there will be no Legislation Day for the Autumn Budget 2017 because there is not sufficient time. However, it 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 representations for the Autumn Budget 2017 was 22 September.
Before considering what might be in the Autumn Budget, the following background points need to be looked at:
- Traditionally, the first Budget after an election is when the unpalatable medicine – i.e. tax increases – is dispensed. According to the Institute for Fiscal Studies, each of the five elections prior to the 2015 election 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 of this extra revenue disappeared in the following Autumn Statement, when then-chancellor George Osborne was forced to climb down on reforms to tax credits.
- Hammond has already lost planned income from his own Budget climb down on National Insurance Class 4 contributions – a measure which never even reached the first Finance Bill. In the grand scheme of things, the loss is small beer at about £2bn spread over four years from 2018/19. He is on record as saying he will need to replace the missing revenue but, at the time, any recoup will be lost in the noise of overall numbers.
- On the expenditure side, Hammond must find an extra £0.5bn a year over the next two years that was pledged to Northern Ireland as part of the Democratic Unionist Party’s “confidence and supply” deal following this year’s 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.
- The latest Government borrowing figures appear to give the Chancellor as much as about £10bn worth of wriggle room. However, he will face the problem that prompted another ex-chancellor Gordon Brown to drop Autumn Budgets before: the fiscal picture at the start of the new tax year can be very different from that of the previous autumn.
So what can we expect on 22 November? At present, there are few clues. The “normal” Budget process, in which the previous Autumn Statement gives a clear steer of content, does not exist on this occasion. The Budget 2017 Red Book mentioned a variety of future consultations, some targeting an Autumn Budget announcement. Little has emerged in the aftermath of the election, as a look at the Treasury’s list of consultations reveals.
The Brexit legislative programme will mean 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. In addition, 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 (i.e. 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.
Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn