Chancellor ‘may have to abandon deficit target’ in upcoming Budget, IFS states

Chancellor ‘may have to abandon deficit target’ in upcoming Budget, IFS states

In a new report, the Institute for Fiscal Studies (IFS) has stated that Chancellor Philip Hammond may be required to abandon his target for eliminating the deficit if he is to increase spending on public services.

The government has stated its intention to move public finances into surplus by the mid-2020’s, with the Treasury reaffirming its commitment to reducing the deficit ‘while also investing in our public services’.

Image result for deficit targetAccording to the IFS, productivity growth is likely to be cut – meaning that the deficit could increase significantly, potentially rising to £36 billion by 2021/22.

In the report, the Institute said that it would be difficult to see how Mr Hammond could stick to his deficit reduction targets and also respond to the ‘growing demands for spending’.

Commenting on the matter, Mr Hammond recently said: ‘We’ve already moved the target for balancing the books out from 2020 to 2025, but continuing to drive down the deficit in a measured and sensible way over a period of years… has to be the right way to go.’

Carl Emmerson, Deputy Director of the IFS, stated: ‘Public sector workers, the NHS, the prison service, schools and working-age benefit recipients, among others, would like more money. Even if Mr Hammond does find some, unless it did represent a very big change of direction, it won’t mean ‘the end of austerity’.

‘Given all the current pressures and uncertainties – and the policy action that these might require – it is perhaps time to admit that a firm commitment to running a budget surplus from the mid-2020s onwards is no longer sensible.’

The Chancellor will deliver the Autumn Budget on Wednesday 22 November.

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FSB urges Chancellor to ‘rule out business tax increases’ in Autumn Budget

FSB urges Chancellor to ‘rule out business tax increases’ in Autumn Budget

In its Autumn Budget submission, the Federation of Small Businesses (FSB) has urged Chancellor Philip Hammond to refrain from introducing business tax increases for UK firms in his Budget speech.

Related imageThe FSB also called on the Chancellor to maintain investment incentives, such as Entrepreneurs’ Relief (ER), the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

In regard to Brexit, the Federation has called for the government to ensure that ‘no nation or region in the UK loses out after 2019’, and has recommended the introduction of exporting vouchers for small businesses who trade overseas.

The FSB believes that such vouchers would give prospective UK exporters the freedom to invest in the resources they need to start selling overseas.

Commenting on the FSB’s Autumn Budget wishlist, Mike Cherry, National Chairman of the Federation, said: ‘With the Brexit clock ticking, other nations are trying to tempt our businesses to their shores. The Budget marks an opportunity to position the UK as the best place in the world to invest in innovative firms.

‘If the Chancellor is serious about tackling the staggering disparity in productivity between different areas of the UK, he should replace EU funding according to existing allocations. No region or nation should lose out as a result of Brexit.’

The Chancellor will deliver the Autumn Budget on Wednesday 22 November. Make sure you keep an eye on our website for coverage of the key announcements.

Chancellor suggests ‘staircase tax’ could be abolished

Chancellor suggests ‘staircase tax’ could be abolished

Chancellor Philip Hammond has suggested that the so-called ‘staircase tax’ could be abolished by the end of this year.

Image result for tax abolishmentDuring a Treasury Select Committee hearing, the Chancellor admitted that the tax has been putting additional stress on businesses. He told the Committee that he is ‘certainly looking at’ the legislative steps that can be taken to abolish the tax.

Termed the ‘staircase tax’, businesses with offices on multiple floors of a commercial property have been receiving separate business rates bills for each floor they occupy, provided the areas separating the offices are communal. Some firms in England and Wales have seen their business rates rise as a result.

Business rates are calculated separately in Scotland using the rateable value, which is set by a local assessor, and the ‘poundage rate’, which is set by the Scottish government.

In a recent letter to Melissa Tatton, Chief Executive of the Valuation Office Agency (VOA), Nicky Morgan, Chair of the Treasury Select Committee, labelled the sending of backdated staircase tax bills to firms as ‘unfair’.

In response, Ms Tatton revealed that, of the 11,000 rates that had to be reviewed, 5,500 firms saw their rateable value rise as a result of the staircase tax, 4,100 experienced an increase of less than 10%, and 1,400 saw a rise of more than 10%.

The Federation of Small Businesses (FSB) had previously called for the staircase tax to be axed. The business group welcomed the Chancellor’s remarks: Mike Cherry, National Chairman of the FSB, said: ‘The staircase tax has heaped misery on thousands of small businesses that happen to occupy split workspaces.

‘The Chancellor’s words will come as welcome relief to the desperate firms who had absolutely no idea that bill hikes were coming down the line.’

Chancellor announces Autumn Budget date

Chancellor Philip Hammond has announced that he will deliver the Autumn Budget on Wednesday 22 November.

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The Autumn Budget will be the second Budget to be delivered this year, and will set out the government’s plans for the UK economy, based on forecasts from the Office for Budget Responsibility (OBR).

It will also outline any tax changes and spending plans for the new tax year.

Mr Hammond stated that the government intends to set its thinking on ‘how to keep the economy strong and resilient and fair’ in order to create ‘an economy that works for everyone’. The Chancellor recently told the Economic Affairs Committee that the UK economy has been ‘overshadowed by the uncertainty of the Brexit negotiation process’.

The 2017 Autumn Budget will be the first of its kind under the government’s new fiscal timetable: during the 2016 Autumn Statement, the Chancellor revealed that the annual Budget will now take place in the Autumn, as opposed to Spring.

Going forwards, Mr Hammond will make a Spring Statement each year, responding to a forecast produced by the OBR.

The first Spring Statement will be delivered in 2018.

Brexit deal must put jobs and prosperity first, says Chancellor

In his annual Mansion House speech, Chancellor Philip Hammond stated that any Brexit deal between the UK and the EU must put UK jobs and prosperity first.

Mr Hammond revealed that the government will seek a ‘bold and ambitious’ free trade agreement, that covers both goods and services. He also stated that mutually beneficial transitional arrangements will be made in order to avoid ‘disruption and dangerous cliff edges’.

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Agreeing ‘frictionless’ customs arrangements to facilitate trade across UK borders is also a priority during Brexit talks, Mr Hammond said.

Additionally, the Chancellor pledged to keep taxes ‘as low as possible’, stating that higher taxes will ‘slow growth, undermine competitiveness and cost jobs’.

Responding to the Chancellor’s speech, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘In the negotiation itself, small businesses are looking to the government to secure an ambitious free trade agreement with the EU, while still allowing small firms to retain access to the skills and labour they need to grow and prosper.’

He continued: ‘While Brexit is the dominant issue of the day, our members are increasingly concerned about the weakness in the domestic economy. We therefore welcome the Chancellor’s commitment . . . to a low tax burden.’

Significant fall in government borrowing, official data reveals

Government borrowing fell to £52 billion in the year to the end of March, data published by the Office for National Statistics (ONS) has revealed.

As a result, government borrowing is now at its lowest level since the 2008 financial crisis.

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However, experts have stated that the fall in borrowing was helped by one-off factors, and warned that rising inflation, an ageing population and an increase in healthcare costs will continue to add pressure to public finances.

Samuel Tombs, UK Economist at Pantheon Macroeconomics, said that the Office for Budget Responsibility (OBR) ‘expects borrowing to rise to £58.3 billion this year’.

He continued: ‘The chance that the Autumn Budget contains net tax rises – like all of the last six post-election Budgets have done – is very high.’

Chancellor Philip Hammond recently hinted that the Conservative party may amend or potentially abandon its 2015 manifesto pledge not to raise income tax, national insurance or VAT.

IMF upgrades UK growth forecast

The International Monetary Fund (IMF) has raised its UK growth forecast for 2017 for the second time in three months.

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Within its half-yearly World Economic Outlook, the IMF predicts that the UK economy will now grow by 2% this year, up from its previous forecast of 1.5%. This makes the UK economy the second fastest growing advanced economy, after the US economy.

The IMF stated that the forecast has been raised in response to the stronger than expected performance of the UK economy since the vote to leave the EU last year.

However, UK economic growth is expected to slow to 1.5% in 2018.

Commenting on the IMF’s decision to raise its growth forecast, Chancellor Philip Hammond said: ‘The fundamentals of our economy are strong and we continue to invest in the skills needed for a stronger and fairer Britain.’ Mr Hammond also stated that Britain will play ‘an active and engaged role in the global economy’.