Seven things to look out for in the Budget small print

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Ahead of Wednesday’s Autumn Budget, we’ve had the usual spate of speculation and pre-briefing on some of the contents. History tells us that the weekend’s press is never the full picture, but we are able to piece together a bit of the jigsaw.

Here are some announcements we can be fairly confident in outlining ahead of the speech:

 

  • The UK is definitely about to build a lot more houses, the Chancellor will see to it with a package of measures that will address the ‘very complex challenge’ of the housing market.
  • Some of the unallocated national productivity investment fund (NPIF) cash will be directed towards boosting R&D. This won’t be new money, but part of the £23bn package announced at last year’s autumn statement.
  • The OBR will declare its glass half-empty and cut forecasts for growth and productivity. Its predictions for the deficit are likely to look a bit better in the near term and a bit worse further out.

 

We will, of course, be looking out for and blogging on the detail of these on the day. But there’s likely plenty of other insights hiding in the detail of the red book and accompanying papers – here’s our seven best of the rest.

1. Business investment forecasts. 

We’re always interested in the components of the OBR’s forecasts as well as the top line numbers. In the past we’ve questioned the OBR’s optimism around the business investment outlook (see here and here). March’s expectations for business investment growth next year are significantly north of the consensus view and look ripe for a rethink. 

Autbud-preview-1

2. Impact of any actions outlined in the budget that would influence the forecasts (or things that could have, but didn’t make it into the final announcement).

Downgrades to the investment outlook may be less urgent if the Chancellor creates some fiscal wiggle room and deploys it towards boosting business investment – this could be any number of things, but you can read some of our suggestions here.

We’ll also be on the look-out for what might have been.  Back in Budget 2016, when calls were growing for reform of the business rates system, Treasury looked like they were briefly convinced by the arguments to remove plant and machinery from valuations, but it was whipped off the table at the last minute, after the OBR had factored it into their forecasts.

3. And speaking of business rates – the future of the multiplier?

We do expect to hear something new on business rates. The multiplier (see here for a reminder of what it is and how it worksis due to be uprated in April using September’s RPI – which came in at 3.9%. There isn’t a business rep body in the land that thinks that’s what companies need right now.

We could also get more detail on the raft of consultations that have been undertaken on the system, such as moving to more frequent revaluations. 

4. Other business issues, including the national living wage (NLW).

Another announcement that businesses will be listening out for is the Low Pay Commission’s (LPC) recommendation on next April’s minimum and living wage increases.

We’ve had our say on steps to get the NLW to 60% of median earnings by 2020, but given pressure for government to tackle stagnating living standards, will government agree to the LPC’s recommendations?

5. Fiscal restraint could mean that any policies that cost the Exchequer may require an equal and opposite action. 

The near decade of trying to reduce the deficit means that new policies require some ‘reprioritisation’ away from other areas. The details of the policy costings in the red book are worth some scrutiny to see if headline decisions in some areas will be funded by tax increases or bigger cost savings elsewhere.

There seem to be some live discussion about, for example, where further cuts to corporation tax should sit in the government’s priority rankings. Rowing back on the aim to get to 17% by 2019 could be diverted to address any number of public service challenges. 

6. We’re due a spending review – any hints at when that will come around‚Äč?

And on the topic of spending, we can’t be that far away from a spending review. The last one, in 2015, set out department spending limits to 2019/20 (except health and defence, with DELs set to 2020/21).

I’m sure there’s not much that government would rather do less than this in the next twelve months. If Whitehall negotiations and horse-trading on spending allocations, the fourth such round in the era of deficit reduction, go ahead next year it will be against a backdrop of economic uncertainty – and of course, Brexit costs (including an additional £350m per week for the health service….). Might we learn any more about the timetable or approach in the statement from a very brave Chancellor? 

7. No spring budget – really?

Linked to Brexit, this is likely to be the last fiscal statement before the finer details of our exit from the EU are hammered out. With his previous commitment that there will be no more spring budgets, only a spring forecast update (unless the country desperately needs one), will we really get to the other side of the negotiations without another Budget? 

 

 

 

 





 

 

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Chief Economist

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