Is there more behind the Budget?

Yes, the Autumn Budget may have come and gone, but the caveat remains that there could be another one next year, if Brexit goes a bit pear-shaped.

How anyone could see Brexit as anything but pear-shaped so far is a moot point, but the chancellor’s largesse on October 29 seemed somewhat at odds with the reality of the UK’s fiscal position.

Philip Hammond, or Fiscal Phil, or Spreadsheet Phil – whichever epithet you prefer – did get a considerable windfall when the Office for Budget Responsibility said borrowing for this year would be around £11.6bn less than expected.

Good stuff: the UK is finally on its way to balancing the books and ending borrowing by 2025 as planned.

But you could say that much of this Budget was a play to the crowd, a means of creating a sense that ‘the government is on your side’.

Well no, actually. That is not likely to happen now according to the OBR, since ‘profligate Phil’ decided to spend the lot on a variety of tax giveaways that could, if you were so inclined, make you think the government was preparing for a general election.

Unlikely in the short term, with the Brexit negotiations at such a delicate final stage – stability is what is needed. But given the self-serving nature of so many of our politicians, that does not mean it will not happen.

But pushing ‘treats’ – as we were so often reminded given the proximity of the Budget to Halloween – towards key voters just in case will not do any harm. 

With any Brexit deal still needing to head through both the EU 27 and parliament, you simply do not know what will happen.

More treats than tricks

That was obviously in the mind of the chancellor when shaping the Budget this year. No tinkering with pensions tax relief, which had been widely expected but was unlikely to happen this time when companies and Britons generally are already being asked to deal with so much fiscal uncertainty. No nasty tax rises on beer or spirits – but if you like a cigarette with a glass of wine, you will be coughing up more to fund it.

Fuel duty was frozen for the ninth year, the living wage is increasing to give a full-time worker an extra £690 a year, and the personal allowance will rise to £12,500 from next April – with the 40 per cent tax bracket starting at £50,000 from the same date.

First-time buyers getting a shared-ownership property valued up to £500,000 will not pay stamp duty, and this will be made retrospective, so anyone who has bought a property on this basis since the last Budget will also gain.

There were cuts of a third in business rates for retailers with a rateable value of £51,000 or less, and a threat of a digital tax on companies (think Google, Facebook, Amazon etc) that make more than £500m a year worldwide, which is expected to make around £400m a year for HM Treasury.

It is expected to be enforced by 2020 – but only if there is not an international consensus on how digital companies should be taxed before then.

Now, consider this for a second. Here we are, at the 11th hour of Brexit talks, where we are hoping to start trade deal negotiations with the likes of the US – home of Silicon Valley – the day after we leave. Is this digital tax charge likely to make for a smooth discussion?

Given the response from the US to this measure so far, the answer has to be a resounding no.

Yet this may have been a push to gain popular ground from those who are sick of these companies making mind-boggling profits but, which are paying considerably less tax than you would expect.

After all, if you think of your home finances, there is relatively far more being taken out of our wages by the government than these technology giants pay.

But you could say that much of this Budget was a play to the crowd, a means of creating a sense that ‘the government is on your side’ – exactly what they would want you to think if an election were in the offing.

Even though one is not planned, that does not mean a thing – Theresa May last year was adamant there was not going to be an election, until, of course, there was one.

Failing to balance

While the Budget itself was full of giveaways, there is one thing I cannot get past.

The Conservatives have been talking about balancing the books by 2025 for years. Yet suddenly the chance to achieve this is presented, and the chancellor does the complete opposite of what would have made sense to achieve that aim.

Has the interest in balancing the books suddenly disappeared? 

The best way to avoid being a failure is never to achieve in the first place. If the chancellor had balanced the books within the next three to six years, but Brexit had increased pressure on the economy considerably, then that achievement could have unravelled in a ‘new’ flurry of borrowing to bolster the UK economy.

Not politically expedient, and certainly not balancing the books. So, forgive me for being sceptical, but I wonder if there is a little more behind the giveaways than there seems to be at first glance.

And remember, we could be doing this all over again anyway in the next six months.

Alison Steed is a freelance journalist