SPRING STATEMENT 2019: SPECULATION - DEHAVILLAND CONTENT TEAM MARCH 2019 - DEHAVILLAND BRIEFING
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DeHavilland Briefing Spring Statement 2019: Speculation DeHavilland Content Team March 2019
Introduction
DeHavilland Spring Statement 2019: Speculation
Introduction
As the country braces itself for a new reality of leaving the European Union, Westminster settles into
a new rhythm of one fiscal event a year with the second Spring Statement.
Chancellor Philip Hammond overhauled the process of twice-yearly fiscal events in 2016, moving
the main Budget Statement from the spring to the autumn. In place of the previous Spring Budget
slot, a new Spring Statement was established in its place. This event would not focus on introducing
major fiscal changes, but rather respond to the forecast from the Office for Budget Responsibility
(OBR).
On 29 January 2019, in a letter to the Treasury Select Committee, the Chancellor confirmed that the
2019 Spring Statement would take place in Wednesday 13 March 2019. In keeping with the low-
key nature of the event, Sky News reported that Mr Hammond was viewing the event as a “holding
statement”, given the proximity to the UK’s expected departure from the EU on 29 March.
However, the OBR’s economic forecasts will be used as evidence for the health of the UK economy
prior to a potential shock. Moreover, the event of a ‘no deal’ Brexit would see the Chancellor deliver
an emergency Budget. This year’s Spring Statement will therefore form the backdrop against which
the Government’s economic management and credibility will be tested.
The dominance of Brexit was confirmed when Prime Minister Theresa May announced on 26
February that MPs could expect a series of important Commons votes on Brexit that week. This
included a possible vote on 13 March - the same day as the Spring Statement - on the UK leaving
the EU without a deal.
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Speculation
Eyes in Westminster are looking towards the Comprehensive Spending Review later in the year, but
the Chancellor has not yet set a date for it.
As the Mirror points out, Mr Hammond will be under political pressure to match the claim made by
Prime Minister Theresa May last autumn that the “end of austerity” is coming. The Spring Statement
is not expected to be a full blown Budget, but will provide the first taste of the Government’s response
to the OBR’s economic projections and how these may have been affected by Brexit uncertainty.
The Statement is expected to last for around 20 minutes and be debated for a couple of hours in the
House of Commons. Given the Parliamentary impasse over Brexit, the outcome of leaving the EU
with or without a deal will likely not be known.
Even before he has delivered his response to economic forecasts that may be less than favourable, Mr
Hammond will face a fiscal challenge to meet political promises. On 11 February, the well-respected
Institute for Fiscal Studies (IFS) think-tank reported that the maintenance of per capita spending for
non-ring-fenced government departments would cost £5bn, whilst spending on protected services
would need another £11bn. Ending austerity will cost more that is currently committed by the Treasury.
The Spring Statement will largely be a response and a technical event with groups such as contractors
looking to see how regulatory changes - such as the pledge to extend IR35 reforms - might be
delivered.
Mr Hammond has faced criticism for some of his post-Brexit economic predictions already. On 12
February, the Treasury Select Committee described his claim that a Brexit “deal dividend”, of lower
taxes and higher spending, could be delivered as “not credible”. In the Committee’s report on the
2018 Budget, Committee Chair Nicky Morgan said that “claims by the Chancellor that austerity is
coming to an end are expansive and imprecise”.
However, the Financial Times has reported that strong self-assessment tax returns in January would
allow the Chancellor greater fiscal leeway in his statement. The paper wrote that the removal of the
threat of a ‘no deal’ Brexit would allow Mr Hammond room to spend the enlarged “insurance fund”
on public services in the Spending Review later this year. Treasury officials say there will be no new
tax and spend decisions in the Spring Statement.
Political uncertainty means that the Statement is widely anticipated to be a “slimmed down”,
placeholder event ahead of any wider fiscal action that might need to be taken in the event of
disruption caused by Brexit.
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This has not deterred those seeking to lobby the Treasury on key fiscal issues. Work and Pensions
Committee Chair Frank Field called on the Chancellor to deliver a “rescue package” to help
struggling families left worse off because of benefit caps and freezes. According to the Huffington
Post, research from the House of Commons Library showed that two-child families would be £132
worse in real terms next year compared with 2010. Mr Hammond did receive some positive fiscal
news in that income taxes beat public spending by £14.9bn to give the largest monthly surplus since
records began in 1993.
Certain fiscal consequences of Brexit will have a bearing on spending decisions taken by the
Government later in the year. On Monday 4 March during Commons oral questions, Communities
Secretary James Brokenshire told the SNP MP Alison Thewliss that the Spending Review would
cover more details of the proposed UK Shared Prosperity Fund, which will be used to replace money
lost from EU regional and structural funding.
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Treasury workstreams update
Whilst there are no major fiscal decisions expected in the Spring Statement, the Government
could use the opportunity to update Parliament on the progress of some measures announced for
consultation in the Autumn Budget.
Some of those measures that might be put out alongside the Statement are listed below.
Plastic packaging tax
In the Autumn Budget, the Government reiterated its commitment to tackling single-use plastic waste
by introducing a tax on packaging that did not contain a sufficient amount of recycled plastic. This
tax would be on the production and import of plastic packaging from April 2022 and apply to plastic
packaging which does not contain at least 30% recycled plastic.
The consultation for the design for a plastic packaging tax was published on 18 February and will
run until 12 May. This means it is unlikely to feature in the Spring Statement.
From RPI to CPIH
The Government has committed to changing the headline measure of inflation from the Retail
Price Index (RPI) to CPIH, which includes household costs. Whilst Ministers agreed that CPIH was
“conceptually the best measure of inflation”, they intended to stagger moves away from RPI and the
Consumer Price Index (CPI), whilst not using RPI for any new indexing.
On 12 February 2019, Treasury Committee Chair Nicky Morgan and Economic Affairs Committee
Chair Lord Forsyth of Drumlean wrote to the Chancellor urging him to fix the flawed RPI.
Taxation of trusts
The Government published a consultation on 8 November 2018 on the principles of taxing trusts to
ensure they were underpinned by “transparency, fairness and simplicity”. This consultation was due
close on 28 February, after having the deadline for responses extended.
Child Trust Funds
In the Autumn Budget the Government announced that it would publish a consultation in 2019 on
draft regulations for maturing Child Trust Fund accounts. The annual subscription limit for Child
Trust Funds for 2019-20 is due to be uprated in line with CPI to £4,368. This consultation could be
announced as part of the Spring Statement.
Stamp Duty Land Tax (SDLT): non-UK resident surcharge
Following on from a commitment made in the Autumn Budget, the Treasury published a consultation
on the design of a 1% surcharge SDLT for non-UK residents who purchased residential property in
England and Northern Ireland on 11 February. It is due to close on 6 May.
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Gigabit-capable connections for new home and tenants
Alongside the Budget, the Treasury published consultations to mandate gigabit-capable connections
to new build homes and speed up the delivery of upgraded connections to tenants. It was intended
to make it quicker and easier for communications providers to roll out full fibre networks. Both
consultations were published on 29 October and closed on 21 December. The responses could be
announced in the Spring Statement.
Innovation in utilities
On 29 October, the Government published a consultation to ensure the design of the utilities
system was fit for the future. This included exploring whether there were opportunities for using new
technologies and if a regulatory approach needed to be offended. The consultation closed on 15
January 2019.
Planning reform
A consultation on the simplification and speeding up the planning system was launched with the
Autumn Budget. It covered different sets of proposals, including: new and amended permitted
development rights and changes to use classes, the disposal of surplus local authority land, a draft
listed building consent order, and a draft guidance on the compulsory purchase powers of new town
development corporations. It closed on 14 January.
Debt breathing space
A high profile media campaign has been focused on lobbying the Government to introduce a breathing
space and statutory debt repayment plan. It would introduce a 60-day period of protection from
creditor action to recover debts to help people make plans to pay back their debts in a sustainable
way. A consultation was launched on 29 October and closed on 29 January. The Treasury may
choose to public its response with the Spring Statement.
Pension Dashboards
The Government has been moving to support the launch of Pensions Dashboards, innovative tools
that will for the first time allow an individual to see their pension pots, including their State Pension, in
one place. The Department for Work and Pensions (DWP) held a consultation from 3 December to
28 January on the detailed design for the Pensions Dashboards, and on how an industry-led Budget
2018 approach could harness innovation while protecting consumers. DWP will work closely with
the pensions industry and financial technology firms. The Budget provided extra funding in 2019-20
to help make this a reality.
Digital Services Tax
As announced in the Autumn Budget, the Government has consulted on the detailed design of the
Digital Services Tax. The consultation ran from 7 November to 28 February. Subject to feedback,
they intend to legislate in Finance Bill 2019-20.
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Corporate capital loss restriction
The Government is committed to bringing the tax treatment of corporate capital losses into line with
the treatment of income losses from 1 April 2020. This will restrict the proportion of annual capital
gains that can be relieved by brought-forward capital losses to 50%. A consultation was launched
with the Autumn Budget and closed on 25 January. Ministers intend to legislate in the 2019-20
Finance Bill.
Business rates treatment of self-catering and holiday let accommodation
To ensure that second properties are subject to the appropriate tax, the Treasury consulted on the
criteria under which self-catering and holiday lets become chargeable to business rates rather than
council tax. The consultation ran from 7 November to 15 January.
Capital Gains Tax
The Government intends to reform lettings relief so that it only applies in circumstances where the
owner of the property is in shared occupancy with the tenant. The final period exemption will also be
reduced from 18 months to 9 months.
Cairncross Review
Published on 12 February, the Cairncross Review called on the Government to introduce new tax
reliefs aimed at encouraging payment for online content and the provision of local and investigative
forms of journalism. It called on the Treasury to extend the zero-rating of VAT to digital newspapers
and magazines. In addition, Cairncross recommended that the Government gave priority to exploring
the development of a form of tax relief, ideally under the Charities Act but if necessary along the lines
of the Creative Sector reliefs, to support public-interest journalism.
In his statement responding to the Review, Culture Secretary Jeremy Wright said: “On tax reliefs
and other forms of incentive that we are able to offer, we will consider what Dame Frances says very
carefully. One attraction of at least one of the methods she suggests is that it will enable us to focus
on the public interest news that she speaks so much about and that we want to see supported. If we
do that, it would be a good case to make”.
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