Next week Chancellor of the Exchequer, Philip Hammond, will lift the Red Box for the first time. The Pagefield team considers what we might find in there.
Brexit and international trade (Josh Lambkin)
With the prospect of a highly publicised battle in the Supreme Court looming large, the Government will not be giving anything away on the Brexit plan in this Autumn Statement. Instead, Philip Hammond is likely to focus on spending plans and fiscal policy, albeit with less gimmicks, in an attempt to instill confidence in the economy. That said, the Chancellor is expected to admit to a significant hole in the public finances resulting from Brexit – a £100 billion hit to growth and tax receipts. This could mean tax increases or even a raid on pensions, often seen as an easy target when it comes to deficit reduction.
International trade and foreign policy rarely get a mention in the Autumn Statement but it’s possible that the Chancellor will pledge funding for the new Department for International Trade, now in much need of staff and resource.
Tax and welfare (James Barge)
Upon her appointment, the Prime Minister set out a One Nation agenda, determined to do something for the “just managing”. With the Chancellor promising to press the “fiscal reset” button, this is the first test. There is merit in the argument to look again at manifesto promises around personal tax cuts post-Brexit. Narrowing the tax base at this stage may not be sustainable. Government is also under pressure to climb down on planned cuts to disability benefits. Elsewhere, there is little political room for manoeuvre on tobacco and alcohol duties. I would expect a freeze on fuel duty, a freeze or reduction on air passenger duty and increased help for childcare costs.
Business, manufacturing and energy (Kieran O’Connell)
Speaking at Conservative conference earlier this year, Chancellor Philip Hammond spoke of the UK’s progress towards a fourth industrial revolution which will drive post-Brexit growth and productivity. What will the Autumn Statement – or the industrial strategy which could be published alongside it – do to spur this? Expect to see support for high-value manufacturing sectors, with modest packages for technology and life sciences. Theresa May’s intervention over Nissan’s future indicates continued support for more traditional sectors, but will her Chancellor be bold enough to give into calls to reform business rates for manufacturers? Time will tell, but he could try to re-energise the sector by providing incentives for climate-friendly electric vehicles. To demonstrate environmental support we may also hear about plans to create a new ‘intelligent system’ to help reduce consumer energy bills, as well as a new local energy framework. And if he felt particularly pressured to calm commercial nerves ahead of the triggering of Article 50, he might consider bringing forward the planned 2020 cut in corporation tax to 17%.
Transport and infrastructure (Ben Winter)
It’s no secret that the Chancellor does not share the same unflinching confidence in Brexit as his colleagues in the Department for International Trade and the Department for Exiting the European Union. He believes that it is now essential to future-proof the economy from the turbulence of Brexit, and it is in transport and infrastructure that he is placing his focus. There is speculation that Hammond is planning to invest up to £15bn in the UK’s road and rail network, as well as infrastructure projects big and small, in an attempt to boost productivity and economic growth in the regions; a move that would be welcomed by influential industry stakeholders such as the CBI. The Chancellor is also looking to attract private investment in big ticket projects such as HS2 and broadband upgrades. He is hoping that current interest rates – at a historic low of 0.25% – will attract pension plans, which traditionally gravitate towards long term infrastructure projects like these.
Housing (Geoff Duggan)
Previous Chancellor George Osborne’s overhaul of the stamp duty system which reduced the amount of stamp duty paid by most ordinary house buyers was presented as a win win when unveiled in his 2014 Autumn Statement. But just two years later some argue that it has damaged the housing market, particularly in areas like Central London. Given her commitment to being a ‘one nation’ Prime Minister and despite a predilection to overturning Osborne policies, I’d be surprised to see a May government halt what is ultimately a more progressive system. Instead, expect changes that might stimulate the market while benefiting those who appear less well-off – e.g. scrapping stamp duty for retirees who are downsizing – as well as incentives for smaller house builders.
Health and devolution (Fred Azis-Laranjo)
Whilst ostensibly a strange pairing, health and devolution will likely be intimately tied together in the Autumn Statement with further transference of health and social care budgets to local authorities beyond the ‘Northern Powerhouse’. Building on the success of decentralisation to date, the Government may allocate additional budget to support the trailblazing Greater Manchester Health and Social Care Partnership Board. Some additional funding may be promised for clinical research to plug any gaps that may appear post-Brexit. Money for mental health services will also likely be boosted, particularly given Labour’s recent pressure on the Government on the topic. Today’s story in the Times that every Health Secretary from the past 20 years has condemned the “enduring injustice” faced by patients with mental illnesses, will put more pressure on the Government to act.
On devolution of powers beyond health, London is likely to be the big beneficiary, with Sadiq Khan widely reported to have presented Hammond with a ‘wish-list’ of powers for the capital. When barely 7% of all tax paid by London’s residents and businesses is retained by its mayor and boroughs, compared with 50% in New York, there is clearly a strong case to be made.