It’s the eve of the most important Budget in Philip Hammond’s career as chancellor of the exchequer.

And with the last major throw of the financial dice before Brexit, “Spreadsheet Phil” may be forgiven for taking advantage of the special dispensation he has to have a drink while delivering his plans for a post-EU UK.

So what measures are experts urging Hammond to adopt for the sake of the nation? And what shouldn’t he meddle with?

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“Having our major fiscal event thrown in among a calendar of critical Brexit talks is far from ideal,” says Stella Amiss, head of tax policy at PwC.

“It’s no surprise that the chancellor seemingly wants things done and dusted as soon as possible. But the continued uncertainty means there is some difficult terrain to navigate if he wants to make any significant policy changes.

“After committing to just one major fiscal event it seems more likely the chancellor may have to break his pledge and earmark another Budget in the spring once we have a better idea of the fiscal landscape. That leaves the prospect of an autumn Budget that’s more likely to contain a couple of headline grabbers, with measures of real substance stored up until the spring,” she adds.

“As has been the case for recent Budgets, the unsettled political landscape in which the chancellor is operating leaves little room for manoeuvre. But having committed an extra £20bn a year in NHS funding, he now faces the conundrum of how to raise taxes in ways that won’t be too unpalatable to the electorate.”

Benefits

When it comes to tax and benefits, the biggest story in the last year has certainly been the almighty hash the switch to universal credit has become.

Claimants have been left destitute as their accounts have been streamlined from a series of different benefits to this single source of support, compounding the effects of cuts announced in the 2015 July Budget that meant 3.2 million households will be around £50 a week worse off on universal credit compared with tax credits – most of them families with children.

As new research from the Joseph Rowntree Foundation reveals almost three million children are locked in poverty despite living in a working family, the charity has urged the government to put £2bn back into universal credit to boost the living standards of almost 10 million parents and children in working families.

“As Britain prepares for Brexit, we need to make sure working families have a firm foundation from which they can build a better life,” warns Campbell Robb, chief executive of the independent Joseph Rowntree Foundation who points to the work allowance – the amount working claimants can earn before their benefits are stopped.  “Reforming universal credit by increasing the work allowances for families with children is one step that would help address the rising tide of in-work poverty.

“The work allowance is over five times more effective at getting money into the pockets of low-income working families than increasing the personal tax allowance,” he adds. “The Office for Budget Responsibility estimates it will cost £1.4 billion to raise the personal tax allowance (PTA) to £12,500 and the higher rate threshold to £50,000 in 2020. This money would be better spent helping to pay the lion’s share of increased work allowances.” 

Personal finances

Coming into the Budget announcement with some broadly positive economic news at his back means the chancellor may take a slightly more relaxed approach to certain spending commitments, suggests Richard Stone, Chief Executive of The Share Centre.

“The economic outlook for personal investors has improved in recent times too, most notably with the return to positive real wage growth after years of negative real wages. This should increase consumer spending power, but should also enable individuals a little more headroom to save and invest.”

 The Household Savings Ratio published by the Office for National Statistics – the proportion of our income that we set aside – has fallen to a level around 4 per cent, not seen for more than 50 years. “Indeed the rate is less than half that experienced over the last 50 years. This needs to recover and government needs to do more to encourage savings and investments,” Stone warns.

“We therefore call upon the chancellor to take action in three specific areas in his forthcoming budget: improve financial education by promoting a Financial Awareness GCSE using child trust funds; increase public participation in capital markets, and; continue to encourage savings and investments.”

Pensions

It is rumoured the UK Treasury has a small red box on the wall, with a glass lid inscribed “In case of Budget emergency, break glass”. Inside it keeps the UK’s pensions tax relief.

With spending promises for the NHS and elsewhere to be honoured, the tax reliefs handed out to pension savers are once again under scrutiny. Hammond has called out the pension system in his recent speech to the IMF conference in Bali, so he clearly has a tax raid in mind.

His targets for pension tax relief savings could include scrapping the higher rate tax relief or moving to a flat rate, reducing the tax-free lump sum allowance and reducing the annual allowance for all pension savers.

“There are plenty of ways the chancellor can raid our pensions to help balance his Budget,” warns Tom McPhail, head of retirement policy at Hargreaves Lansdown.

“His ideal formula would be something which is easy to implement, doesn’t upset many people, raises lots of money and doesn’t seriously erode the long term retirement savings system.”

“The change which would potentially raise the most revenue is something targeted at the underlying assets in the pension system, similar to Gordon Brown’s infamous advance corporation tax raid in 1997. There’s around £2.1 trillion in the pension system so even a very modest transaction charge of some description could raise serious revenue.”

“Unfortunately the mood music suggests the government is quite willing to carry on raiding from this country’s financial future to shore up the spending plans of today. Tax charges on the money people have put aside for their retirement solves a short-term problem, however it means a more impoverished retirement for millions in the future. This is not a pain-free solution and constant tinkering undermines investors’ confidence in the system.”

Property market

The latest data from the stumbling housing market has made estate agents jittery, especially as they eye the economic unknowns of the post-Brexit market.

Add the continued dampening of landlord enthusiasm thanks to a flurry of tax changes and the days of endless price rises regardless of the wider economy seem firmly in the past.

It’s no surprise that agents are crossing their fingers that the chancellor won’t do anything silly when it comes to property market or taxation tinkering.

“The government needs to reverse home ownership decline and improve rental conditions as one third of ‘Generation Rent’ may never buy,” says Jeremy Leaf, an estate agent in north London and a former residential chairman for Royal Institution for Chartered Surveyors (Rics).

“Persuading landlords to buy or not to sell or, if so, with tax breaks for sales to long-term ‘sitting’ tenants, can satisfy both and reduce upward pressure on rent.

“This will help aspiring first-time buyers. Mandatory three-year tenancies would probably also be acceptable to many landlords provided rents can be increased and tenants falling into arrears or damaging property can be removed more easily than under the current fault-based method.

“Better enforcement of existing planning regulations would increase new housing supply and housebuilders need stricter ‘use it or lose it’ rules to prevent landbanking even when sales are slow – without compromising SMEs further.

“Social/affordable housing has the potential to provide the infrastructure from which the economy can benefit. There should be more financial incentives for social and affordable housing, Build to Rent and shared ownership.”

Sole trading and small businesses

“Questions have been raised about this government’s commitment to sole traders and small firms. Monday is its chance to set the record straight,” Federation of Small Businesses (FSB) National Chairman, Mike Cherry said.

“VAT is the most time-consuming levy for small business owners to manage. A small registered firm loses six working days a year to VAT compliance on average, draining their productivity.

“Speculation about a drop in the £85,000 turnover threshold for registration is very concerning. Suddenly dragging more small firms into the VAT regime would be incredibly damaging, placing a huge admin burden on thousands of businesses and bringing them into the scope of ‘making tax digital’ by stealth.

“The chancellor should maintain the current VAT registration threshold until 2022. At the same time he should consider a smoothing mechanism – as recommended by the Office for Tax Simplification – to address the issue of small firms bunching around the £80,000 turnover mark. Doing so would incentivise small business growth rather than stifle it.”

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