Chancellor Philip Hammond is “between a rock and a hard place”, says the Institute for Fiscal Studies, as he tries to reconcile his fiscal targets with demands for more public spending in his first autumn Budget, out next Wednesday. He has been “pinned” into a corner by a housing crisis, a young generation “devoid of hope”, demands from a cash-strapped public sector, and “rising borrowing costs on the national debt”, says Philip Aldrick in The Times.
If Hammond wants to “crank up investment” while reducing the deficit (as outlined in the Tory manifesto), his only option is to “chuck an extra £25bn or so” a year until 2020 at housing, infrastructure and innovation in a bid to boost growth and fix productivity.
Pressure to deliver a big, revolutionary budget to rescue the “floundering” government may be growing, say George Parker and Chris Giles in the Financial Times, but Hammond is a fiscal conservative convinced that Brexit poses an “immediate threat”, and his disastrous March Budget will incline him to be cautious. A radical housing policy certainly isn’t about to be unveiled given that ministers have failed to agree on proposals for a major housebuilding programme, say Jim Pickard and Aime Williams in the same paper. Instead, there is likely to be a stamp-duty cut for first-time buyers.
A more radical shake-up for VAT is on the cards, however, says Catherine Neilan in CityAM. Hammond may drop the current £85,000 turnover threshold for VAT down to anywhere between £40,000 and £20,000. A report by the Independent Office of Tax Simplification estimates that halving the threshold would affect around 500,000 small businesses and boost tax receipts by £1bn, while dropping it to £25,000 would yield £2bn.
Pensions are an “easy target” too, says The Daily Telegraph – the annual contribution allowance, lifetime allowance and tax relief may all be reduced. Another possibility is a higher levy of around £200 on every new diesel car, says Patrick Maguire in The Times. A crackdown on “tax perks for well-off investors” such as enterprise investment schemes (EIS) is also possible, says Vanessa Houlder in the Financial Times.