Preview: Everything you need to know about today’s Budget
PUBLISHED: 08:44 29 October 2018 | UPDATED: 11:34 29 October 2018
Pressure has been growing on the chancellor to take action on business rates, beer duty and fuel prices - but what will Philip Hammond be able to deliver in this afternoon’s Budget?
Philip Hammond’s last Budget before Brexit and his first since Theresa May declared an end to austerity will be watched even more closely than usual. But what will the chancellor actually deliver?
• So is this the end of austerity after nine years?
Maybe not quite yet. In her conference speech, Mrs May actually promised to loosen the purse-strings after Brexit, in next year’s Spending Review. But her words have put massive pressure on Mr Hammond to offer at least a glimmer of light at the end of the tunnel.
• Where might he splash out?
Mrs May has already made some of those decisions for him. She has said he will use the Budget to explain how he will pay for the £20bn boost to NHS spending she has promised by 2023/24.
Meanwhile, dozens of Conservative MPs are calling on the chancellor to halt an inflation-linked 3.5% tax rise on beer, and it is expected he could announce a £1.5bn package to support Britain’s struggling high street, including business rates relief for almost 500,000 small retailers.
And roads campaigners in Norfolk are hoping the chancellor will include the A47 in a £28bn war chest to upgrade the nation’s major routes and motorways.
• Why is he in a position to increase spending at all?
On many measures, Britain’s finances are in better shape than they have been since the 2008 crash.
Official figures show government borrowing below £40bn in 2017/18, having peaked at £153bn in 2009. And the national debt has even started to decrease as a share of GDP, though at 84% it remains high by historic standards.
• What does an end to austerity even mean?
That is anyone’s guess. Experts at the Institute for Fiscal Studies calculates that just keeping spending on services in line with inflation, while funding generous rises promised for health, defence and aid, would cost the Chancellor £19bn.
And that would not reverse all the cuts to services like councils, police forces and public sector pay imposed since 2010 in the name of austerity, so many voters may feel little better off.
• What about benefits?
Some £7bn worth of previously announced benefit cuts are still working their way through the system.
There is a lot of pressure from Tory backbenchers for more generous funding of Universal Credit, including from the architect of the system, Iain Duncan Smith.
Reversing cuts to the new benefit imposed by George Osborne in 2015 could cost anything between £2bn and £5bn.
• Where will Mr Hammond get the money from?
That is the big question. The chancellor has been leaving the door open for possible tax rises, with speculation revolving around cuts to pension tax relief for high earners.
Labour have been calling on him to halt planned cuts to corporation tax. But the Office for Budget Responsibility recently handed him £13bn worth of room to manoeuvre, in the shape of better-than-expected receipts from personal and corporate taxes.
• How will Brexit affect the Budget?
The failure to reach a Brexit deal at last week’s EU summit means we will probably have to wait and see on this one.
Mr Hammond has said he expects a “deal dividend” once agreement is reached, as businesses press ahead with delayed investment and the government is freed of the need to spend billions on preparations for a no-deal Brexit.
Having a deal in his pocket would also give the Chancellor freedom to use some of the £15bn “headroom” built into the national finances as a buffer against possible disruption. Without a deal, all of this will have to be put on hold.
• Hang on, don’t these things normally happen on Wednesdays?
They do. This is the first Monday Budget since 1962.
The assumption at Westminster is that the chancellor took a look at the calendar, saw the date would be October 31 and decided not to give newspapers the opportunity to greet a Hallowe’en Budget with headlines about a “Hammond Horror Show” or a “Nightmare on Downing Street”.
If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box below for details.