The Chancellor of the Exchequer, Philip Hammond, is set to deliver his second Budget of the year on Wednesday 22 November. His Budget Statement is expected to start at 12.30 pm and will set out the government’s economic plans based on the latest forecasts produced by the Office for Budget Responsibility (OBR).
This will be the first Autumn Budget in more than 20 years following the Chancellor’s decision taken last November to move the main fiscal event from the spring to the autumn. The intention of this switch is to provide greater stability for businesses with tax changes announced well in advance of the new tax year.
As the previous Budget only took place six months ago, it might be expected that this one is unlikely to feature any major changes to the government’s tax or spending plans. However, the Chancellor is clearly under intense political pressure to deliver a Budget that bolsters both his own precarious position and provides a boost to the flagging fortunes of Theresa May’s beleaguered government.
Indeed, it is widely being viewed as a key opportunity for the Conservatives to reset their party’s image following the June election setback and Theresa May’s lacklustre performance at the party conference in October. Many Conservatives have therefore called on the Chancellor to ease austerity and deliver a Budget that will appeal to those young voters who deserted the Tories at the last election.
However, the economic backdrop is not particularly favourable for the Chancellor. The UK economy has performed relatively sluggishly over the course of this year, with rising inflation biting hard into household incomes and the uncertainties created by Brexit leading many businesses to sit on their hands rather than invest.
Furthermore, despite an unexpected improvement in public finances over the past six months, the OBR has warned that its budget deficit projections are likely to be lifted appreciably when its latest forecasts are unveiled alongside the Budget. This largely reflects the fact that productivity growth is set to be downgraded which will result in a slower economic growth profile. This will inevitably limit the Chancellor’s room for manoeuvre if he is to stick by his self-imposed fiscal rules.
There has been some good news for the Chancellor, though, with the Office for National Statistics’ recent decision to reclassify housing association debt back to the private sector. While this move is a technical issue that has no bearing whatsoever on the underlying state of public finances, it will effectively reduce the headline borrowing figure. And this may be enough to provide the Chancellor with vital wriggle room as he attempts to perform a budgetary illusion by pulling a rabbit out of his empty hat.
During a round of interviews over the weekend, the Chancellor revealed some of his top Budget priorities. Housing, for instance, will clearly be a key theme with the Chancellor signalling that he will use the Budget to set out government plans to build 300,000 new homes a year. Increased spending on the NHS and some movement on public sector pay are also likely to feature within the Budget, along with a number of measures to help younger households.