More like a holding statement than a Budget one
In keeping with his “Spreadsheet Phil” persona, Philip Hammond’s Budget today was mostly boring. Many of the announcements had been expected, due to a tightly controlled drip-feed to the media over the last week or so. Cash for social care was announced, measures on business rates were mentioned (including good news for pubs), and money for education was in there, as it usually is.
But it will be more interesting if you’re self-employed, as your pockets will be a bit lighter shortly. With the announcement that the main rate of Class 4 NICs will increase from 9% to 10% in April 2018, and to 11% in April 2019, many who work for themselves will be paying more in contributions. The government says this is fair, bringing many self-employed people closer in line to those who are employed by others.
However, given that some controversy must be written about at every Budget, the NICs issue is what is currently grabbing the headlines. Many commentators are claiming the announcement breaks a key Conservative manifesto commitment on no tax rises. The chancellor’s people are arguing that it isn’t, because that promise applied only to Class 1 NICs, although that may not be a sustainable position. This could, therefore, end up being Philip Hammond’s first Budget U-turn.
That measure aside, though, this Budget was really about kicking things down the road. Even on some of the announced measures, Mr Hammond signalled more changes ahead. For example, there will be a consultation on the long term funding of social care brought out later this year, while an approach to reforming the business rates revaluation process will also be set out in due course.
So the chancellor’s speech seemed more like a holding statement than a Budget one. This may be because he wants to show he has the fabled “steady hand on the economic tiller”, and the lack of rabbits-out-of-hats, giveaways or indeed anything exciting at all may have been a part of that.
Yet with tentative good news on this year’s growth and strong tax receipts, plus an EU to leave, perhaps the more radical stuff will be in the first autumn Budget, which Mr Hammond will deliver later in the year. By then, Article 50 will have been triggered and the chancellor may find himself and the economy in a different position, perhaps even stronger, meaning that bolder measures can be taken. It would take quite an effort for the Budget in the autumn to be more boring than this one.
What today does seem to signify, though, is that there is unlikely to be an early election. Under the Fixed Term Parliaments Act, the next general election is scheduled for 2020, although this could feasibly be overturned if the prime minister was minded to. However, Budgets before elections are traditionally feel-good ones, with a few giveaways for groups such as “hard working families” or those “just about managing”. With no such soundbite in evidence, let alone giveaways, today suggests that Mrs May is intent on going to 2020. While it is no bad thing for a Budget to be boring, there is likely to be more excitement over the next three years than was on show today.
Written by Simon Hodges, Head of Public Policy (@SimonDHodges)