A Budget as much about UK politics as about UK finances
“As the Chancellor delivered the first Monday Budget since 1962, those who listened have been left reflecting on whether Philip Hammond’s speech said more about the prospects of an early election than anything else.
“Positive announcements aimed at swing voters were everywhere. On spending, the announcement of more money to make sure Universal Credit works as intended buys the Chancellor time. The same is true of adult social care, where the additional £700m is a welcome boost. But, both of these measures do not address the root cause of the problems in these areas – instead they are sticking plasters, not cure and certainly not prevention.
“On tax, a similar picture of buying off the Conservatives’ core constituents emerged. Tax reliefs enhanced for smaller businesses, especially those on the high street or those incurring expense on plant and machinery. And, where tax is being raised the measures were aimed at larger companies – whether in respect to off payroll workers (the IR35 rules that will apply more vigorously to the private sector from 2020) or even the new Digital Services Tax – 2% in respect of tech business with global revenues of more than £500m per annum in respect of UK generated sales, again from 2020.
“The big announcement related to the bringing forward of the increase in the personal tax allowance – to £12,500 – in April 2019 – a year earlier than expected. This, together with other measures, will see the average family being around £1,000 a year better off, a measure that will be welcomed by many following sluggish wage growth. Furthermore, if there is a downturn after Brexit, it might keep the tills ringing and prop up consumer confidence.
“These giveaways can be justified by stronger public finances. The proportion of debt is set to fall and current spending is not covered by current receipts even after providing further contingency funding for Brexit.
“This Budget leaves all options open – including the prospect of an election before the end of March 2019. It deals with current challenges and leaves the door open to the main event – the fundamental spending review – next year.”