Instead, he would be concentrating on building a £27bn fighting fund by 2020. With 2% growth forecast in 2017 and a significant fall in borrowing, a positive spin could be put on this
Nevertheless, with many of his predecessor’s tax and spending measures still in the pipeline, it was hard to escape the view that another eight years of spending cuts and tax rises would be required to eliminate the deficit
In what was presented as a balanced Budget, and taking advantage of some strong(ish) financial figures, the chancellor nevertheless had to tackle three pressing issues of the moment. Estimates of the likely cost varied, but figures around £4bn had the ring of truth around them.
First among these was relief for businesses struggling to meet the impending rates increase. At a total cost of £450m, the chancellor promised targeted support for small businesses coming out of transitional relief, a £1,000 discount for smaller pubs and a discretionary support fund to enable local authorities to deal with particular cases of hardship. This targeting, which seems to have been reasonably well received, has possibly got the chancellor out of the woods at a considerably lower cost than might have been expected.
The second pressing issue is social care. Hammond pledged additional funding of £2.4bn, with further NHS funding of £510m.
Third, skills, productivity and competitiveness. A range of measures have been proposed which are intended to improve the opportunities available for schoolchildren, workers and businesses alike.
In the event, the Budget turned out to be balanced to a level which reflects the chancellor’s legendary spreadsheet skills. With commitments to new spending totalling £4.88bn over five years, and tax increases worth £4.7bn over the same period, the net cost of the Budget is £180m.
So where do the main tax increases fall?
Two percentage point increases in Class 4 National Insurance Contributions for the self-employed are top of the list, followed by a reduction in the dividend allowance from £5,000 to £2,000, with effect from 6 April 2018. These sit on the edges of a wider review of the taxation of work and the tax status of employees, the self-employed and director-shareholders of their own businesses. With corporation tax rates set to fall to 17% from 1 April 2020, the chancellor – like so many of his predecessors – is once again having to police the line between low and high tax-rate environments.
The other major tax increases relate to the continuing attack on tax avoidance. Here, the chancellor plans to target for specific areas which are expected to raise around £830m by 5 April 2022.
What sounds like a welcome administrative measure, allowing small businesses and landlords with turnover less than the VAT registration threshold a 12 month deferral before they have to join Making Tax Digital in April 2019, is also revealing of what HMRC hopes MTD will achieve. Figures published today show the deferral will cost £280m between now and 2021/22.
That's interesting because HMRC have always said that MTD will improve the accuracy of tax returns and therefore improve the collection of tax which ought to be coming in anyway. In other words, HMRC reckons that simply by improving the accuracy of tax returns of small businesses, they could be collecting anything between £20m and £150m extra in tax per year.
And what about the things which were not in the Budget? To widespread relief, the chancellor has hammered the final nail into the coffin of the notorious 10% "death tax", instead using other tax increases to fund improvements to social care. There still seem to be regrettable gaps in the way the new salary sacrifice rules are meant to work. And, despite daily coverage across all the media, there was absolutely nothing – not even a fuel duty rise – which might help the environment.