Spring Statement: The Deficit is Dead, Long Live the Deficit!
So, the Chancellor tells us we’ve made it. He was in bullish mood as he announced that the “current” budget deficit has been eliminated, and we are told to expect a small surplus in 2018/19, writes Robert Leggett – Tax partner, Ensors Chartered Accountants.
Excellent news, and something I’m not sure I believed would actually be achieved. Moreover, the final economic growth figures for 2017 have been revised upwards, as have the predictions for 2018. Still excellent news; roll out the spending, austerity can come to an end!
Except that it hasn’t, and probably can’t. Because we are still running a deficit, borrowing money for investment. Because overall debt still remains horrendously high at 85.6% of GDP and isn’t yet falling in a sustainable manner. Because we can’t get away from the fact that our economic growth remains the lowest in the G20. And because there could be bumps in the road ahead, not least the uncertainties of Brexit.
That said, today’s news is unmistakeably a step in the right direction for the nation’s finances, and the Chancellor even hinted that there could be some spending give-aways in the Autumn Budget if performance remains good, especially for the under-pressure NHS.
On the tax front, Spring is no longer the time when major policy announcements are made, and the Chancellor stuck by his word on this. However, there were a number of consultations and calls for evidence published, which hint at possible future changes.
• A focus on the environment, potentially including:-
• More effort to tackle single use plastic, potentially via the tax system;
• Consultations on the effect of non-agricultural red diesel on air quality in urban areas;
• Reduced duty for the lowest polluting vans;
• A new VAT collection method for online sales, where the online platform pays the VAT collected from customers directly to HMRC, whereas currently they would pay it to the vendor who then has to pay it over to HMRC with their VAT return;
• Tax relief for self-funded training;
• The next Business Rates review to be brought forward to 2021, and then be triennial;
• More to be done to tax large digital businesses like Facebook and Google where their users are, rather than where their operations are.
• Ideally the Government wants to achieve this by way of international co-operation via the OECD;
• However, it will consider using interim measures, for instance, revenue based taxes;
• An extension to Entrepreneur’s Relief to deal with the dilution of shareholdings below 5%.
So, with the publication of a “spending pathway” as well, we have lots to look forward to at the Autumn Budget.