What could we see in the November budget?
MHA Moore and Smalley’s head of tax, Tony Medcalf, looks ahead to the chancellor’s autumn budget on November 22 and details five things to look out for.
An offer to the younger generation
Budgets are political events, not just economic ones. The popularity of Jeremy Corbyn among younger voters, and fears expressed by Conservatives they’re not doing enough to attract them, could lead to an attempt by the chancellor to woo young people.
There’s rumours in Whitehall Mr Hammond is going to do something to address “intergenerational fairness” by offering some form of tax break to younger people, perhaps on National Insurance Contributions.
However, this is already being called a “tax on age” and the chancellor needs to tread carefully. He’s already been forced to backtrack once on NICs this year following opposition to his spring budget proposal to increase contributions for the self-employed.
A possible increase in public sector spending
Again, it will be interesting to see what the Chancellor will do to counter some of Labour’s proposals. Are we going to see a spending increase? I think Mr Hammond will want to be seen to be increasing public spending. Therefore, we might see some announcements relating to increased funding for housing and the NHS and, perhaps, some relaxation of public sector pay caps.
A guarded package of support for business
With the continued uncertainty around Brexit, the chancellor will want to be saying that ‘Britain’s open for business’. However, he’s still walking that tightrope of being accused by Labour of offering tax cuts to big business, so I don’t think he can afford to be too over the top.
The better than expected Q3 GDP figures will probably have eased the pressure on the chancellor to act. As a result, I think it’s unlikely we’ll see corporate tax rates going any lower than they are already.
Little movement on general tax rates
I don’t expect any major structural changes to the headline tax rates. Any alterations are likely to be tinkering. The Inheritance Tax rate has not shifted for years, so I don’t expect anything there, nor any changes on Capital Gains Tax rates.
I would also be very surprised if there were any changes to the main rates of income tax. Despite the recent drop in government borrowing, I still think any tax giveaways would likely be funded by tax clawbacks elsewhere.
A budget for stability?
This is the first budget after the election, which is normally the time political parties make their boldest and most controversial changes. However, I can’t see anything too radical being proposed this time.
Following their narrow win at the election, the Conservatives will want to avoid any major own goals in this budget. I expect the chancellor to stick to his overall message about creating a stable economy over the long term.