"What fresh hell is this?” Your last-minute Budget 2017 preview
The Budget is largely a waste of time. But the chancellor is under heavy pressure to “do something”. John Stepek looks at what Philip Hammond might come up with tomorrow.
It's the Budget tomorrow. In fact, it's Philip Hammond's second Budget of the year.
Hooray. Said no one.
So what's Phil likely to pull out of his spreadsheet this time? And will any of it survive the week?
Remember, this is all about the politics
The first thing to remember about Budgets is that they are a piece of political theatre. I'm not sure if this has always been the case, but certainly in the era of Gordon Brown and George Osborne (who were both constantly auditioning for the role of PM), that's what they degenerated into. (Alistair Darling was something of an honourable exception, but then he was distracted by an awful boss and the prospect of financial apocalypse.)
It's a disruptive waste of time and energy for everyone involved. The chancellor is under pressure to "do something!", even although whatever stupid rule changes he came up with at the previous budget are still bedding in.
So what matters is the politics, not the economics. That means: giveaways and easy targets in the headlines; wallet-battering fiddling in the small print. Short term over long term.
In this case, Phil has to somehow give the impression of being responsible (so keep a tight grip on the finances) while making the population feel a bit less uninspired by the government. A tall order. And don't hold your breath for anything transformational I reckon the best we can hope for is "hmm, surprisingly competent and not too disruptive."
Anyway enough of the ranting. What should you be looking out for when Phil stands up tomorrow?
What to look out for in tomorrow's Budget
Pensions: we'll start with the obvious one. The Budget has for years now, acted as a wonderful sales tool for financial advisers and pension providers across the land. There's nothing that encourages a sense of urgency in your target audience than the threat that their tax breaks might be taken away.
Will the chancellor scrap higher-rate tax relief on pensions and move to a flat system? It's always possible. So if you're a 40% taxpayer and haven't maximised your allowance yet, it's probably worth looking at it.
Diesel: talking of easy targets, people who bought highly-polluting cars because they thought they were "greener" than petrol cars are now under the spotlight. The tax on diesel cars is only likely to go up. If Hammond really wants to encourage people to change cars, he'll put the tax on the fuel. Otherwise, it'll be an added layer of duty.
Alternatively, I wouldn't be astonished to see some sort of scrappage scheme reintroduced. How do you keep the car industry sweet ahead of Brexit? Offer to subsidise a whole new upgrade cycle, particularly with car sales starting to flag.
Self-employment: the chancellor was badly stung when he last tried to equalise the treatment of the self-employed and people on PAYE by hiking National Insurance contributions for the self-employed. It was described, somewhat unfairly, as a "white van" tax and a U-turn was duly forced. So I'd expect him to find some other way to finesse this perhaps as part of wider efforts to address the issues around Uber-type work.
Put simply, if you are self-employed, keep a close eye out, because one way or another you are highly likely to get stung in this Budget. That goes double if you are technically self-employed, but in reality, have just one employer.
Student loans: obviously, young votes are one area where the Tories are lagging badly behind Labour. More importantly, plenty of those middle class young people's parents are having their heads turned by the idea that they may not have to fork out for university tuition fees. "Never mind capital controls", they think "we'll be able to afford more holidays in the Cotswolds and Cornwall if we don't have to pay £9k a year when the kids head off to Exeter."
Part of the plan to win those votes back is to raise the salary level at which repayments fall due. But might he come up with something a bit more attention-seeking? For now, the main promise appears to be some sort of railcard for the 26-30 age group, which isn't exactly impressive.
Property: solving the UK's housing problems is a complicated business, involving everything from monetary policy, bank stress-testing and planning laws, to the peculiar interactions of different types of taxation. That's why it'll never be addressed in something as flimsy as a 45-minute Budget speech.
Instead, expect flamboyant empty gestures. A stamp duty holiday for first-time buyers would be one of the most obvious moves. Meanwhile, Hammond has promised to get building his target is apparently 300,000 homes a year, although it'll be interesting to find out how he plans to do this.
Tax: no Budget would be complete without tax rises. So what'll go up? Manifesto pledges (another ridiculous political artefact) mean that Hammond can't put any of the big taxes like income tax or VAT up. As a result, he'll put up small ones instead. We'll still pay more tax, but in the process, our tax system will get more complicated and less efficient simply because our politicians are incapable of being honest with us or braving the occasional bad headline.
Insurance premium tax is a good one for Phil to target, because it's the "new" stealth tax that no one fully understands. The threshold at which businesses have to register for VAT there's another area. National insurance is always a goodie, but maybe not this time around.
And of course, tax-dodging. These days it's pretty easy to extend the definition of tax-dodging once a legal concept has been shifted to being about the "spirit" of the law rather than the "letter", you can make it mean whatever you want.
Expect governments to take full advantage of this fact, until one day we're all being hauled in front of the courts for putting money into our Isas, and thinking to ourselves: "Wasn't this legal at one point?"
Cynicism aside, avoid any tax avoidance scheme that isn't explicitly state-sanctioned or that is too clever for you to understand, unless you fancy a big tax unexpected bill landing on your doorstep, probably at a point in your life when you can least afford it.
Anyway. Let's see what happens tomorrow. I can't wait.