In 2016, Philip Hammond announced that the Autumn Statement he was about to make – his first ‘fiscal event’ as Chancellor, in fact – would be his last.
This was not because he intended to step down after only four months into the job, though I am sure many Conservative backbenchers would have quite liked that to have been the case. Instead, it was because he wanted to hold only one fiscal event each year. Autumn was the preferred timing for a Budget, in which Mr. Hammond wanted to include some major tax change announcements.
This all made sense at the time. Making announcements in Autumn provided the flexibility of including a short (but long enough) consultation period before the changes came into effect at the start of the next tax year, or one of nearly 18 months if they were not to come in until the year after. This was seen as likely to reduce drafting issues with the legislation, though of course that is yet to be seen.
Another positive to this strategy was limiting the frequency of major tax policy announcements to one occasion per year, as opposed to previous years in which changes to the same part of the statute book were announced only a few months apart.
As someone who delves into the fine print of changes, and who prepares key content for presentations and articles, I was particularly appreciative of the switch.
However, in 2017 the Chancellor transitioned onto the new fiscal programme by continuing with two Budgets, one in March and one in November. The implication of this was that the first Autumn Budget was actually quite light on tax changes. We now approach the 2018 Budget, scheduled to take place on 29 October, without having seen a major ‘fiscal event’ in nearly twelve months.
This is the longest gap I have seen since joining the accountancy profession, so naturally there are some questions.
Can we expect a bumper Budget on tax changes this time around? Perhaps so, especially since the Chancellor is coming under increasing pressure to bring tax rules up to date with the digital economy. There is also a drive to ensure the deficit continues to reduce, by securing the best possible tax take in anticipation of an uncertain economic environment in 2019.
Moreover, there are areas of tax law which have been untouched for many years and where changes have been touted time and time again. Perhaps Mr Hammond would like to address some of these while he is still in post, especially given that a successful party leadership challenge would likely lead to his departure from Number 11. Such a challenge is speculated about on an almost daily basis.
One possible change has attracted much commentary over the years. This is an alteration to the rate of income tax relief received on pension contributions. A perceived vote-winner with basic rate taxpayers could be to increase the rate of relief to above the 20% marginal rate of income tax which they pay, and to introduce a flat rate of relief (say 30%) which applies to all taxpayers. While higher earners could lose out, which party could they turn to instead?
There has also been some political pressure to increase the tax take that comes from inheritance tax, particularly in targeting a cap to the quantum of relief that can be claimed in relation to business and agricultural assets. This is yet to be seen, but as with the pension tax relief regime, it is much talked about.
No doubt the Chancellor will use the opportunity to remind us of any previously announced ‘tax breaks’ which are due to come into effect next April. Although this is a clear PR exercise for the government, it also serves as a useful reminder for the rest of us.
The Conservative Government, propped up by the DUP to effectively take it into a majority position in the House of Commons, could be argued as unlikely to want to rock the boat by risking their proposed finance bill voted down by backbenchers, particularly with the wider political landscape so fragile.
However, I think our current Chancellor’s desire to Brexit-proof the economy will lead to a reasonable amount of tax-raising measures weaving their way into the Budget on 29th October. We will have to wait and see whether those changes are made completely clear in Mr. Hammond’s hour-long monologue, or if they will be in the fine print that only gets published (and I begin sifting through) from the moment he sits down.
Unlike this article, in which I managed not to use the B-word (Brexit) until the penultimate paragraph, the safest prediction ahead of this Budget is that those two syllables will feature prominently in Mr Hammond’s speech.