Spring Budget 2017 – Is the Chancellor building for the future?
March 07, 2017
The forthcoming Budget should give more flavour of the Government’s vision for post Brexit Britain. The recent industrial strategy paper, emphasised a broad approach - creating conditions for businesses of all sizes and across all sectors to thrive. But the language gave clues as to priorities - with an emphasis on industries and services of the future. Whilst the Chancellor has indicated a fairly quiet Budget is on the cards we will at least get more indication of the role tax policy will play in our future.
There was almost no mention of tax in the Industrial Strategy paper but tax policy will be crucial in helping achieve the stated objectives, such as helping businesses to scale up. So, in this the first of two Budgets this year we can expect to hear more on the public spending and the tax measures to underpin his plan...and indeed we will see what kind of Chancellor Mr Hammond wants to be.
In the Autumn Statement the Chancellor focused on some tax cuts, including raising the income tax personal allowance and higher rate threshold, cutting the rate of corporation tax and reforms to the inheritance tax system. However, these were offset by tax increases, including higher tax on dividend income, an increase in tax on insurance premiums, and a restriction on pension contributions for those on very high incomes.
Will we see the same kind of approach? I think so with a long list of areas needing extra funding - this Chancellor is unlikely to run amok with his new found reduction in deficit.
Tempered by his Party’s commitment not to raise the rates of the main taxes in this parliament, the Chancellor has little room to manoeuvre - but this doesn’t stop him indicating the changes he could look to make in the future and he may well be buoyed by his brighter economic figures to provide some help to those seen as most in need.
Thinking about some of the pillars of the industrial strategy, what could we see?
Supporting businesses to start and grow - self employment vs traditional employment
There’s been a lot of attention around the disparity of tax treatment for workers who are self employed and those who are not. This is a big and delicate topic. Encouraging self employment through favourable tax treatment arguably encourages entrepreneurship and new business. But with self employment becoming more and more popular, vis-a-vis the Gig economy and Sharing economy, is Government tax take under threat? As a minimum the announcement of a consultation seems likely with the results feeding into the Autumn Budget.
Driving growth across the country
Business rates have been one of the most heated tax issues of the year. There’s clearly a regional dimension, given rates reflect property rental values. Could we see some measures to relieve rate-payers who have seen the greatest hikes following the recent revaluation? This would certainly demonstrate a Chancellor who is listening and working for all.
Could there be announcements, or at least an indication of further devolution of tax raising powers, in line with the move to more devolved government more broadly. For example, the introduction of a local income tax system - Scotland has shown that this can be done.
Given skills shortages are such a priority, could tax help address the challenge. For example, tax incentives to encourage people to study key subjects like science at university. You could, for instance, raise the income tax threshold for when student loans for certain courses have to start being repaid.