Philip Hammond, the new chancellor, has signalled a scaling back of austerity.
Mr Hammond said that while austerity was the right answer to the 2008 financial crash the economy was entering “a new phase” and it was right to review the pace at which the government balanced the books.
The new chancellor ruled out an emergency Budget, which had been mooted by George Osborne before the European Union referendum.
Mr Osborne was given his marching orders by Theresa May when she became prime minister yesterday (13 July).
Mr Hammond said he would take the summer to review with Bank of England governor Mark Carney how to tackle the “chilling effect” of the Brexit vote on the economy, after fears in the Treasury that the economy could tip into recession.
In an interview with the BBC’s Today programme, Mr Hammond said: “It has shaken confidence. It has caused many businesses to pause investment decisions they were making.”
Mr Hammond said he would set out a revised economic strategy in the Autumn Statement having consulted with Mr Carney.
The new chancellor and Bank of England governor were due to hold talks on Thursday morning (14 July) before the Bank’s interest rate decision.
He said deficit reduction would have to continue, but the pace and “parameters” of that were up for review.
Tax experts have already started to speculate what Mr Hammond could tinker with in the Autumn Statement.
Rachael Griffin, Old Mutual Wealth financial planning expert, said cuts to corporation tax were already firmly in the sights of Mr Hammond’s predecessor George Osborne to help boost the post-Brexit economy.
When the coalition government came into power in 2010, corporation tax stood at 28 per cent.
The rate is now 20 per cent and Mr Osborne said in March he would continue cutting down to 17 per cent by 2020.
Ms Griffin said: “In light of the Brexit vote, the new chancellor could be more aggressive and take the UK below Ireland’s rate of 12.5 per cent, tempting companies to stick with their British bases rather than move to the EU member state across the Irish Sea.
“This would also lessen the burden on SMEs as he seeks to encourage more businesses to export. For entrepreneurs, business-owners and investors in British businesses, a cut in corporation tax would provide a welcome boost.”
Similarly, tax experts predicted the chancellor may want to take measures to stimulate investment in smaller businesses that can be vulnerable during periods of financial turmoil.
The 2016 Budget saw a significant tax boost to enterprise investment schemes (EIS) with deep cuts to capital gains tax.
The capital gains tax rate fell from 28 per cent to 20 per cent at the higher end, and from 18 per cent to 10 per cent for basic rate taxpayers. This came into effect in April this year.
Old Mutual Wealth’s Ms Griffin said Mr Hammond could choose to build on the reliefs afforded to EIS, venture capital trusts (VCTs) and seed enterprise investment schemes (SEIS) or look to extend the annual investment limits in order to encourage savers to invest in innovative firms in need of growth capital.
