22nd November 2017.
Autumn Budget 2017: What to Watch Out For
The UK Budget is a mixture of measures that government ministers use to get on the public’s good side. It can give the chancellor the chance to make bold decisions on tax and spending and lay the groundwork for his government career.
The budget may offer a liberal sprinkling of surprises, but here are some predictions for what consumers and business are to expect from the announcement this afternoon.
The gig economy
Gig economies are becoming a trend in modern landscapes. These business environments wherre temporary contracts and independent short-term contracts are common, has taken over the UK. Particularly with the economy and contractor industry so uncertain, workers are looking more for flexibility.
Earlier this month, the Work and Pensions Committee, and Business, Energy and Industrial Strategy Committee published a joined report on the gig economy, calling for greater clarity around the definitions of employment status, and closure of tax loopholes exploited by some businesses.
A tribunal recently claimed that temporary deliveroo drivers were not “workers” and therefore not entitled to certain protections and equipment allowances. The following outcry from this decision will no doubt influence Hammond’s measures in the budget.
VAT shake-up post-Brexit
The Office of Tax Simplification recently released recommendations for reforming the VAT system, recommending a review into reducing the VAT registration threshold.
Small companies with a turnover under £85,000 a year do not presently have to charge VAT on goods and services they sell, but the Chancellor of Exchequer has proposed to reduce this to £43,000.
Many firms are reluctant to expand their business in fear of reaching the VAT threshold, and are sure to be discouraged further if the threshold is cut.
Chancellor was recently warned of the backlash that could come from such a VAT raid on small businesses from backbench Tory MPs. The Federation of Small Businesses last night launched a last ditch appeal to the Chancellor not to lower the VAT turnover threshold.
Paradise Papers
The Paradise Papers exposed the tax planning structures used by companies and individuals to shelter wealth in offshore tax havens.
Hammond will be under pressure to push back against tax avoidance by the wealthy, but will will lose favour with the public for inaction.
We must hope Hammond will take a tough stance by backing the government to tighten its approach on multinational tax avoidance and increase efforts to crack down on perceived individual tax evaders.
Stamp duty
It’s been billed as a Budget to win back young voters, so could support for first-time buyers be on the cards?
Hammond has said that it is “not acceptable” that so many young individuals aren’t able to afford their own home, and the Budget is widely expected to contain measures to improve the UK’s housing situation by encouraging the building of new properties.
Prime Minister Theresa May last week pledged that it’s her personal mission to “build more homes, more quickly”. To that end, the Budget is likely to include a number of measures to encourage construction and enable younger people to get on the housing ladder.
Fund for startups
In August, the Government proposed a new National Investment Fund that would help startup businesses access the “patient capital” funding they need to develop into innovative companies (‘unicorns’).
A consultation on the proposal closed in September, and Mr Hammond is likely to propose a confirmed plan of action in the Budget.
The consultation suggested funding should come from the British Business Bank, replacing the backing currently received from the European Investment Fund.
The Government is keen to demonstrate that London can attract big tech even when it’s no longer in the European Union.
Productivity
The only way Britain will escape its current economic difficulties is by improving productivity, so economic growth and tax revenues can rise faster than currently forecast.
While the Office for Budget Responsibility will downgrade its productivity growth forecasts on Wednesday, Mr Hammond will put in place plans aimed at reversing that decision in future.
He will set out parts of the government’s industrial strategy, including allocating money from the national productivity investment fund and the industrial strategy challenge fund for transport and infrastructure projects.
Public finances
Credit is slowly drying up, but public borrowing is still at £8 billion this month. This is a higher figure than expected, and could limit Hammond’s movement.
The deficit forecast in 2020-21 is likely to rise by more than £10 billion compared with the March forecast.
The government has already said it wants to reduce borrowing to under 2 per cent of national income by 2020-21
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