In the run up to the Spring Statement, the Treasury went to some lengths to dampen the anticipation of what would be announced – stressing on a number of occasions that there would be no new fiscal announcements, that it would be much shorter than previous Autumn Statements and moving it from the prime time post-PMQs slot usually reserved for financial statements to a lower key Tuesday afternoon. Indeed it had even been reported that Philip Hammond would have probably preferred not to have had a Spring Statement at all, were it not a legal requirement by the OBR.
There was clearly therefore a concerted effort on the part of the Chancellor to move away from the practice of his predecessors, not least Gordon Brown whose ‘Pre-Budget Reports’ quickly became an exercise in media management and evolved into what became, in effect, an interim Budget mid-way through the political and financial year – a practice continued by George Osborne. Instead the business community now have just one annual Budget to wrestle with – something met with relief by those in the financial sector in particular.
We were told not to expect much from the Spring Statement and in that sense there were no surprises. However the Chancellor did highlight potential future policy changes and signalled areas where he would consult ahead of the next Budget. Here are some of the key things to take away from today’s Statement:
1. The Government is now running a surplus on its day to day spending – with tax receipts covering ongoing spending for the first time since 2002/2003
This announcement was in fact first made a fortnight ago. However despite being presented as a triumph by the Government, it is nevertheless two years later than they had originally planned. Behind the headlines, the national debt still stands at £1.8 trillion, or 86.5 per cent of annual economic output. The Chancellor has also announced that a departmental spending review will take place in 2019 to examine departmental budgets further.
2. A consultation on single use plastics
This had been expected for some time and is a big step forward in the Government’s new ‘green agenda’ being driven by Michael Gove. However, it also follows the recent criticism from the Environmental Audit Committee that the Government was ‘dragging its feet’ on the issue of introducing a deposit return scheme for plastic bottles. Today’s Call for Evidence is expected to put greater momentum behind the issue of plastic waste and put the ball back in the Government’s court.
3. Potential changes to the taxation of multinational tech companies – switching to a tax on revenues rather than profits
This would be a dramatic shift, and is designed to tackle tax avoidance by multinational tech firms who allegedly use various companies onshore and offshore to hide their profits. However, it won’t come as a surprise, as the proposed change was first raised by Financial Secretary Mel Stride in February.
4. A review into VAT paid by small businesses – with a proposal for a gradual introduction of VAT on firms with a turnover of more than £85,000 a year
This is likely to be well received by small businesses who currently face a cliff edge VAT bill when their turnover reaches £85,000 a year, with many suppressing business growth or their recorded takings in order to maintain healthy profit margins. A tapered system would give them greater incentive to grow.
5. A consultation on the impact of VAT and Air Passenger Duty in Northern Ireland
This was something insisted upon by the DUP in return for its support for Theresa May’s minority Conservative Government. It has long been a hobby horse of Northern Ireland politicians who have argued that it has driven business south of the Irish border where rates of VAT and APD are lower. A report into the issue is expected in time for the Autumn Budget.