Wednesday’s Spring Statement will be unique.
Not in who delivers it and where, nor most of its content, but a Chancellor can never have delivered a peace-time address on the public finances under quite the shadow Philip Hammond is contending with.
As you may have read in one or two places, the Spring Statement will be made as the Brexit process reaches a crescendo of discord and House of Commons votes.
Theresa May is due to put her deal to a meaningful vote the day before, with votes on whether Parliament supports a ‘no deal’ or a request for an extension to article 50 to follow in the two days after, the first of which clashes with the Spring Statement.
The Brexit talks with the EU and related votes in Parliament are casting a long shadow over the Chancellor’s Spring statement this week.
‘This reflects bumper self-assessment tax receipts in January and, more generally, the fact that economic growth has been focused recently on more “tax rich” areas such as income from employment and consumer spending, rather than business investment.
‘The Chancellor is not likely to be in a hurry to spend any windfall until the fog of uncertainty over Brexit has cleared.’
It seems highly unlikely the Chancellor will announce meaningful changes to taxation under the cloud of the Brexit process reaching a conclusion.
He may reiterate some of the aspirations the Treasury has in terms of lessening the tax burden in certain areas, but that is as far as things will go in all likelihood.
‘With the Spring Statement potentially the filling in a sandwich of Brexit votes, a large scale fiscal event with significant funding announcements and tax changes appears to be off the table,’ said Stella Amiss, head of tax policy at PwC.
‘More probable is a summer “Brexit Budget” when a clearer picture of the UK’s future relationship with the EU should allow the Chancellor to set out something of a future economic roadmap. Given all the other ongoing Government business it’s unlikely we will see a firm announcement to set a date at this stage.’
‘As the Chancellor promised, last year’s Spring Statement didn’t contain any new immediate tax changes but it did prove to be the launching pad for a series of updates and consultations. We can expect similar again on Wednesday,’ she added.
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Science and technology
The Chancellor has already let slip that he want to put new measures in place to advance Britain’s technology sector.
There is talk of fresh public investment in a genetic research facility in Cambridge, and money for the Oxfordshire based development of cutting edge laser technology.
Fresh investment in developing ‘supercomputers’ is also seen as a likely inclusion in what is set to amount to a total package of £200m.
The environment and climate change
Hammond is strongly tipped to deliver a series of proposals for action on the environment, biodiversity and climate change as part of his address.
Among the announcements is expected to be a review of the economic benefits of biodiversity.
New carbon offset measures related to transportation and additional red tape on new build homes to ensure they are energy efficient are also being mooted as probable features of his speech.
What about pensions, investments and property?
There have been no indications Hammond is readying big changes in these areas. Substantial changes to pensions in particular are usually heavily debated, thoroughly leaked before they happen and would feature in the Budget rather than a Spring Statement.
While big changes cannot be completely ruled out, tweaks around the edges are likely to be the most we see.
‘An improvement in the public finances could also allow the Chancellor to focus on improving rather than tightening savings incentives such as tax relief on pensions,’ noted Steven Cameron, pensions director at Aegon.
‘The Government has committed to looking at ways to increase pension take-up amongst the self-employed. Here, as in automatic enrolment, successfully increasing money saved into pensions means the Treasury collects less in income tax receipts.
‘But encouraging greater self-provision has huge long term benefits for retirees and those of working age alike and should save the Government in benefit payments longer term.’
Property can be a hot-button issue in Budgets and other fiscal statements, but is not expected to feature heavily this time around.
‘We’re not expecting any major announcements regarding property in the Spring Statement, but we would welcome any changes that might ease the burden currently borne by landlords,’ said Chris Sykes, mortgage consultant at Private Finance.
‘Lenders are doing everything they can to maximise the viability of the buy-to-let option for landlords, but without changes in government policy, their efforts may be in vain.’