Listening to Hammond’s first and last Autumn Statement, described by some as the first (but not the last!) Budget of Theresa May’s government, I found myself judging the Chancellor’s performance not by reference to his proposals to fill the black hole which has opened up in the public finances, nor by reference to his plans to meet the needs of the country after Brexit, but by the expectations set by some of the Chancellor’s colleagues. They had assured us that the speech would be dull, short and completely devoid of the “rabbits” so loved by the Chancellor’s predecessor George Osborne.
Having listened to dozens of Budget and Autumn Statements over the years, this was definitely not a performance in the mould of Gordon Brown or George Osborne. But to my ear at any rate, it wasn’t dull. Nor was it particularly short. But, if we exclude the re-announcement of measures introduced in the March 2016 budget, it was definitely light on new tax content.
Strikingly, the brevity of the HMRC documents, which normally run to scores if not hundreds of pages, raises the prospect that the new Treasury team under Mr Hammond may be taking a different view of the role which tax plays in influencing the behaviour of companies and individuals.
That’s not to say that the new chancellor isn’t a juggler in the traditional mould. For example, having made much of the fuel duty freeze, saving motorists £845m in a full year, he increased insurance premium tax by 2% to so raising £840m for the exchequer.
While specifically recognising the problems faced by those who are just about managing, I was surprised that the chancellor did not make more of the various changes he is introducing to the personal independent payment, Universal Credit and other benefits and allowances. In a full year, these are worth around £2bn to the recipients.
In his statement, Philip Hammond strongly advocated the benefits of productivity and efficiency and there are signs that this will reflect in some streamlining of our arcane tax system.
The alignment of the primary and secondary NI thresholds was one manifestation of this, and was accompanied by announced changes concerning the removal of tax benefits obtainable by using certain types of ‘salary sacrifice’ arrangement.
At least some of the challenges of applying the existing tax rules to the ‘gig economy’ – the interface between the clearly employed and workers who have some of the features of an employment relationship but work independently, often through a service company – are also being addressed.
If these changes are taking us in a direction which ensures that individuals with similar incomes will have the same tax liability irrespective of the structure they operate within, this is good news.
Finally a clear commitment to preserving the competitiveness of the UK economy as a favourable business tax regime is to be welcomed, with the chancellor re-affirming the intention to offer the lowest corporate tax rate in the G20. Where does that leave the UK if US President Trump reduces federal business tax rates to 15%? Combined US state and federal tax rates for businesses would still be 20 percent or more, so latest speculation is that we’re unlikely to see UK corporation tax rates dipping below 15% in 2021.
George Bull is senior tax partner at RSM