Budget 2018: Everything you need to know ahead of Philip Hammond's big announcement
6 min read
As Chancellor Philip Hammond delivers the final Budget before Brexit, here's absolutely everything you need to know today.
Brexit Budget
Like everything in British politics at the moment, Brexit looms large over Philip Hammond’s statement today - especially as he has regularly warned of the dire economic implications of leaving the EU. He hasn’t earned his Eeyore nickname for nothing.
True to form, the Chancellor warned this weekend that leaving the EU without a deal could basically render today's exercise completely pointless. A no-deal would, he said require a "different approach" and a "different strategy" from the tax-and-spend plan he is set to unveil today. The National Institute of Economic and Social Research has already quantified a £30bn difference over the next five years between a deal and no deal scenario, while the Treasury has forecast an £80bn black hole in the public finances without a deal. Ouch.
Expect some scary stats like that to be sprinkled throughout the set-piece, partly because Hammond’s prone to Brexit negativity and partly to focus minds in Westminster in preparation for the meaningful vote.
Is austerity really over?
Apart from Brexit there is one other big political theme that will dominate the day. Theresa May promised at last month’s Conservative party conference that austerity was over, but it’s the Chancellor who will have to put the money where his boss's mouth is. And journalists, as well as political opponents, will be reading the small print today find out if the policy delivers on the headlines.
According to the Resolution Foundation, it would take an £31bn of extra spending by the end of this parliament to end austerity, so the Government may well fall short.
We've already seen signs that the Chancellor is preparing to splash the cash, though. A big item on his checklist is finding the money for the £20bn-a-year of extra NHS spending promised by his boss. As a kind of downpayment, the Chancellor will will today pledge £2bn-a-year of new cash for mental health services to fund a fleet of mental health ambulances, get hospital's existing facilities up to scratch, and give schools more help to support pupils struggling with mental health conditions. We're also expecting a significant boost to social care spending to be outlined today.
Mr Hammond will meanwhile turn on the spending taps to try and sort out Britain's pothole-laden roads and dodgy bridges. He's promised a £28.8bn road repair package - a 40% increase in Britain's spending on the highways. Struggling high streets are also in line for a £1.5bn boost from 'Fiscal Phil' - with £900m coming from business rates relief and a new £650m pot aimed at boosting infrastructure and transport links to allow local retailers to compete more easily with online giants like Amazon.
Don't expect any of the spending spree to come from that infamous "Brexit dividend" though - the Institute for Fiscal studies, which produces the holy grail of economic analysis, has described it as “virtually” non-existent".
What else could happen?
Pressure has been mounting on Mr Hammond to find an extra £2bn for the Government's troublesome welfare policy, Universal Credit. If the Treasury doesn't stump up the cash, the Chancellor won’t hear the end of it from restive Tory backbenchers. He said this weekend that he would take a "pragmatic" approach to the future of the shake-up. That's Treasury-speak for 'We're going to do something'.
Tory backbenchers have long been agitating for extra defence spending, and there are signs that the Ministry of Defence is in line for at least £500m of fresh cash to support the armed forces after intense lobbying from the MPs and Defence Secretary Gavin Williamson. Some outlets put the figure as high as £1bn.
There have also been a smattering of smaller, but still headline-grabbing announcements that have already been dribbled out in advance. There'll be a shiny new 50p coin to celebrate Brexit and a shake-up of outdated marriage rules to allow more couples to tie the knot in pubs and restaurants. The Chancellor is also expected to hand people saddled with debt 60 days of breathing space from bailiffs, and Treasury sources have indicated he's ready to launch a review into a new scheme offering interest-free loans to families struggling with payday lenders. And there's been a £60m cash boost today for tree-planting, in a major coup for fans of oxygen.
The deficit and the back-of-the-sofa billions
Despite the anti-austerity rhetoric, fiscal Phil will still want to stick to his targets on deficit reduction. Under the Tories, deficit pledges have consistently been pushed back as events inevitably get in the way. Hammond’s latest promise is to keep the deficit within 2% of GDP by 2020/21 and eliminate it altogether by 2025 – although the Office for Budget Responsibility thinks 2031 is probably more realistic.
On a more positive note though, he was handed an extra £13bn to play with when the Office for Budget Responsibility revised its borrowing forecast. Kerching!
Tax tweaks
It was reported this weekend that the Chancellor is pressing ahead with Tory manifesto plans to raise the personal tax allowance to £12,500 - and will in fact do it earlier than expected.
There had been some speculation that he would shelve the rise to free up money for Universal Credit and the NHS splurge, but that extra £13bn of wiggle room from the Office for Budget Responsibility looks to have given him a crowd-pleasing rabbit to pull out of the hat.
One place extra tax will not be coming from is fuel duty, after May announced in her conference speech it would be frozen for the ninth year in a row. The Chancellor might also be forced to scrap plans for a £100m beer duty hike, after 54 Tory MPs wrote to him denouncing the move which they say would add 4p to the cost of a pint.
Speaking of Conservative pressure, it'll be well worth keeping an eye on any plans to clobber 'White Van Man' at today's Budget. The Chancellor is said to be pressing ahead with a tax shake-up that could see national insurance payments spike for self-employed workers who set themselves up as companies. Top Tory Brexiteer Steve Baker has already sounded the alarm, telling The Sun the move would "destroy entrepreneurial spirit" in Britain. The Chancellor's faced a backlash over national insurance changes before, so this one could run...
Hammond is also expected to flesh out his Tory conference pledge to impose a new UK "digital services" tax on big tech firms if there's no international agreement on the same idea. Expect at least a timeframe for the proposals.
Other things to keep an eye on
Labour’s response… The opposition will of course be peddling the line that austerity isn’t really over, and they’ll probably have some fancy social media content to drop on the day. Shadow Chancellor John McDonnell toured the TV studios this weekend to accuse Hammond of "callous complacency", so expect that one to get an airing today.
The vote… which is usually a formality, but the DUP and some Brexiteers have threatened to go against the Government on the Budget in protest over Brexit. It’s probably all hot air - but who knows these days?
And finally, have sympathy for… the IFS number-crunchers who stay up all night making sense of the Budget so we don’t have to.
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