Budget Analysis: Extraordinary spending – but where is the money coming from?
PUBLISHED: 20:28 29 October 2018 | UPDATED: 07:02 30 October 2018
The spending commitments outlined by the chancellor in his budget are projected to cost a “colossal” £94bn between now and April 2024, writes CLARE GOODSWEN, tax partner at M+A Partners in Norwich.
Philip Hammond’s budget was quite extraordinary because it appears to mark the end of the government’s austerity policy.
We expected a number of spending decisions but the extent of the spending set out in the Budget was surprising for a number of reasons.
The Office of Budget Responsibility (OBR) had earlier published news of better-than-expected tax receipts and this gave the chancellor headroom to flex his fiscal plan.
We knew there was to be money for extra spending on the NHS, potholes and help for the High Street but Philip Hammond found extra money for schools, housing, environment, defence and more.
The biggest announcement was the increase in the personal income tax allowance one year early, together with the raising of the starting point for higher rate tax.
It was thought that this manifesto pledge may be abandoned as part of the fundraising to cover money pledged to the NHS so this was a surprise measure. The changes to income tax benefit almost 31 million taxpayers and will cost the Treasury a staggering £2.8bn in lost tax revenue alone in 2019/20.
The total costed spending measures announced are projected to be a colossal £94bn between now and April 2024. It appears that the government is placing a huge amount of faith in the growth projections set out by the OBR and the delivery of increased tax receipts over this period from measures announced in previous budgets.
The elephant in the room is of course Brexit and the success or otherwise in securing a Brexit deal. We were told that there may be a “double” deal dividend if negotiations are successful as the chancellor has retained sufficient headroom in his new flexed budget to provide fiscal support to the economy if needed.
Given the amount of spending announced in the Budget, the government is clearly now reaping the benefits of the last eight years of swingeing tax increases and spending cuts so they clearly don’t feel the need at this time to be seen to be raising even more taxes from us now.
The Chancellor certainly didn’t appear to be a man clinging to his job when he delivered his speech but I expect we will be facing yet another Budget in Spring 2019, so watch this space.