13 March 2018
In recent years there have been two large fiscal events, the Budget and a second economic statement. Until 2016, the latter had become known as the Autumn Statement, usually taking place in November. However, in November 2016 during his first Autumn Statement, Chancellor Philip Hammond announced plans to move the main Budget to Autumn and the statement to Spring.
Today therefore saw Hammond deliver his first Spring Statement. But in a major change to policy-making process, there were no tax or spending announcements and the statement instead consisted only of a response to economic forecasts from the Office for Budget Responsibility (OBR), along with notice of various consultations on future changes.
This change meant there was no major submission operation before today’s statement, which has previously seen everyone from business groups, charities and members of the public set out their needs for the year ahead.
At an age when ‘uncertainty’ is the key word for businesses, with the final destination of Brexit unclear, the departure from the ‘mini budget’ of past statements is welcomed by many. Businesses have complained for a number of years that they were having to go through major changes twice a year as a result of the second fiscal statement, so this move to a ‘once a year’ approach offers greater predictability and stability for all.
In 2016 Hammond said “No other major economy makes hundreds of tax changes twice a year, and neither should we. If unexpected changes in the economy require it, then I will, of course, announce actions at the Spring Statement. But I won’t make significant changes twice a year just for the sake of it.”
Today Hammond did just that, slashing his speech to just 25 minutes and making no major announcements.
So what did we see today?
It was clear from today’s announcement that the Chancellor wished to give a positive outlook in response to the OBR’s figures, describing himself as “at my most positively Tigger-like” and stating that “forecasts are there to be beaten and we should make it our business to do it again” in reference to GDP growth of 1.7% achieved in 2017 against the OBR’s expectations of 1.5%. Paul Johnson, Director of the Institute for Fiscal Studies (IFS), was clear that he doesn’t share Hammond’s optimism however, tweeting that “against a long term trend of at least 2% a year growth, after poor growth since 2008, and compared with growth across rest of OECD, these are not encouraging forecasts.”
Whilst there were no big surprises announced, the Chancellor did pitch a few ideas in today’s statement and we expect to hear more about these in the main Budget statement later in the year. He also confirmed plans for a detailed review of public spending, and expects to outline an overall path for public spending to 2020 at the Autumn Budget.
Hammond also announced that plans unveiled in Autumn 2017 to bring forward business rates revaluations will go ahead; indeed the next revaluation, originally due in 2022, will be brought forward to 2021.
Hammond also announced a series of consultations where future changes are likely. With a focus on the growth of digital businesses, he announced various consultations aimed at this sector including on the tax paid by multinational digital businesses, the role of cash in the digital economy, and on a new VAT mechanism for online payments. Other reviews announced were on extending tax reliefs to support self-employed people who fund their own training, on reduced Vehicle Excise Duty (VED) rates for the cleanest vans, and on how to best use the tax system to encourage the responsible use of plastic as part of the Government’s pledge to minimise the environmental impact of plastic waste.
Commenting on this first Spring Statement, Andrew Snowdon, head of tax in the London office of UHY Hacker Young, said “The Chancellor promised us a simple statement without introducing sweeping new tax changes. He has to that extent delivered on those promises. Our new tax legislation is already too voluminous and complex as it is, without having these changes imposed on us twice a year. That is to be welcomed I hope as a new permanent trend.”
Want to know more?
Click here to read our 2018 Spring Statement summary which offers a clear and concise commentary of the main proposals, focusing on the issues pertinent to you, your family and your business.