By Mark Fairlie.
Chancellor Phillip Hammond will deliver the very last Autumn Budget before Brexit later today at 15.30.
The pressure continues to rise for the UK government as Britain prepares to leave the European Union, and many are wondering what the Chancellor’s plan will include for the coming months.
What can we expect from the Autumn Budget?
Economic and political experts across the country will be keeping a close eye on Hammond’s presentation later today, as concerns arise over how he will keep the Prime Minister’s promise to “end austerity” while retaining control over the government’s £1.8 trillion debts.
Here are the top issues the Chancellor will need to address in the Autumn Budget 2018.
Earlier this year, Prime Minister Theresa May revealed that the NHS in England would receive an extra £20 billion a year in funding by 2023.
In an interview with the BBC, May referred to the controversial EU referendum campaign bus that claimed the UK sends more than £350 million a week to the European Union; money that the Leave campaign stated should be used to “fund our NHS instead” on the side of their famous red bus.
The PM stated that her announcement would mean that “there will be about £600m a week more in cash going into the NHS” in 2023-24. May stated that this funding would “be through the Brexit dividend”; the money that is currently sent to the EU.
However, May also conceded that “as a country” we will need to contribute more, leading many to expect a hike in taxation may be on its way to fulfil this pledge.
Changes in the tax threshold
Thresholds are the amount a person can earn before they are liable to start paying tax. Should the Chancellor freeze the current tax threshold, the annual wage inflation could mean more workers in the UK become subject to income tax.
This decision, however, would likely be voted down in Parliament due to a contradiction with the Conservative manifesto last year which pledged to increase thresholds.
Public finance announcement
In the UK, public finances are now in a much better situation than expected in last year’s Budget.
Tax revenues are stronger and local council spending is lower; meaning the amount the government must borrow this year could be as much as £13 billion lower than the Office for Budget Responsibility previously predicted, according to the BBC.
If true, this could give the Chancellor the leeway needed to support additional spending and funding without raising taxes substantially or freezing the income tax threshold.
The end of austerity?
Theresa May made headlines when she announced the “end of austerity” will come after Brexit in her Conservative conference speech in Birmingham last month.
Austerity is the term used by economists to refer to a government consciously attempting to spend less than it receives in taxes.
Following the financial crisis in 2007, an economic recession began in the UK. This was quickly followed by austerity measures being introduced in late 2008.
Usually, in these situations, a government would stabilise the economy by increasing tax revenues and imposing spending cuts. Austerity is an attempt to correct any structural overspending so that the country does not put itself into further debt.
The Secretary of State for Defence, Michael Fallon, said that: ‘We all understand that austerity is never over until we’ve cleared the deficit.’
Whether or not this goal will be attainable is still unclear, however, it is likely this will be addressed by the Chancellor later today.
The IFS recently said that spending cuts to end austerity would likely cost around £19 billion a year by 2022. Along with promises to increase NHS England funding by £20.5 billion, critics believe May has “written a cheque her Chancellor can’t cash.”
The deputy director at the Resolution Foundation, Matt Whittaker, had this to say:
“The Chancellor has a seemingly impossible task in his Budget of ending austerity, reducing the national debt and keeping the public finances protected against any Brexit uncertainty.
“But should strong recent public finances figures lead the OBR to deliver a £13 billion windfall, the Chancellor’s ‘mission impossible’ may become ‘just about plausible”.