Budget preview - what can we expect from the chancellor's red box?

In exactly one week Philip Hammond will stand outside No 11, waving his red box around, hoping that its contents will save the economy - and his own job. Julian Francis considers the chancellor’s options.

Much has changed since the chancellor presented his spring budget. The circumstances in which the chancellor presences his second budget of the year are far less rosy then they were in the spring. Having lost its majority in May to a surprisingly successful Jeremy Corbyn, the government now faces the task of both dealing with the reality of the agreement with the DUP and responding to a rapidly changing political and economic landscape. 

This budget will be an overtly political budget with the aim of re-establishing the Conservative Party’s fortunes and seeing off the threat of a challenge by Labour. To do this Philip Hammond will need to reach deep into the public purse to find goodies that will win over a sceptical public. The only problem with that is that there is very little money to be found. 

In October the Institute of Fiscal Studies (IFS) stated that the chancellor was “between and rock and a hard place” when it came to crafting a budget as he would have to face “the prospect of either abandoning his fiscal targets or ignoring demands for more public spending”. 

Traditional political and economic woes are not all the chancellor has to worry about ahead of his first autumn budget. More than once in recent weeks, the May administration has found itself unflatteringly compared to the troubled premiership of John Major, after it was engulfed by a fresh sleaze scandal that threatened to claim both its authority and its practical ability to govern.

The chancellor is therefore fighting for his life and reputation. His critics want him to be big and bold, although this feels like a test being set knowing he won't pass.

So, from our industry’s point of view we should not expect to see any major announcements with the possible exception of some rail investment, help for home buyers and digital infrastructure. Most of the budget will be dealing with technical issue such a VAT thresholds, stamp duty rates, tuition fees and public sector pay awards  

Scrapping stamp duty for first-time buyers, the under-40s, or elderly people looking to downsize have all been talked about. He is not expected, however, to introduce more radical changes to the stamp duty system, despite widespread calls for reform.  A new study released today has found that stamp duty blocks 45,000 home purchases a year.

Also, a likely £10bn expansion of the Help to Buy loan scheme has already been trailed. This will hopefully ensure the housebuilding sector remains buoyant in a upcoming year that looks like it will be hard for SMEs.  

Notwithstanding that the autumn budget will be delivered in the shadow of Britain’s departure from the EU in March 2019, it is also likely that the autumn budget will look considerably beyond this point. For example, given the UK’s lead in enacting legislation denying certain benefits from hybrid instruments, the UK might also undertake a similar role in relation to initiatives focused on the taxation of the digital economy. In addition, revenue neutral measures aimed at simplifying the administrative burden imposed by UK tax system would also be welcome.

Finally, given the recent media attention given to perceived “offshore” tax avoidance in the so-called “Paradise Papers”, some headline grabbing measures targeting some of the more visible forms of assertive tax mitigation and any remaining tax avoidance are likely. Such measures are generally well received by Conservative Party back-benchers in the House of Commons, and offer the chancellor the opportunity to grab some favourable media headlines. It may, in this context, therefore be an uncomfortable autumn budget for owners of luxury jets.