Hammond's 'humiliating' NI U-turn: How the papers reacted

Budget 2017: Will Philip Hammond raise taxes to fund social care?

6 March

Wednesday's Budget is expected to reveal a boost to growth to two per cent this year and a cumulative £29bn less borrowing in this parliament, but there will still be few giveaways.

Instead, to address a growing social care crisis and soften the blow of business rate increases, Chancellor Philip Hammond is planning to raise taxes on the self-employed and drinkers, says The Times.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

He has already set aside £27bn for a war chest to meet unexpected costs resulting from Brexit to 2019. The plan is to use the reduced deficit in the coming years to boost this to closer to £60bn.

Hammond told the BBC's Andrew Marr Show yesterday: "It’s not money in the wallet because we’re borrowing a huge amount of money.

"We have over £1.7trn worth of debt. We're spending over £50bn a year just on paying the interest on our debt - that's more than we spend on defence and overseas aid together.

"What is being speculated on is whether we might not have borrowed quite as much as we… forecast."

But with the social care system in crisis and putting strain on the NHS, which in turn is missing targets by record amounts, Hammond is being tipped to give another £1.3bn in emergency funding to councils.

This is expected to be largely funded by raising the National Insurance rate on the UK's growing army of self-employed people to 12 per cent, in line with the rate on PAYE workers and worth £1bn.

He could also increase duty on alcohol, much to the chagrin of the industry, but is not likely to increase costs for smokers or diesel drivers.

It was previously announced that businesses in the south-east facing a huge increase in business rates will get more transitional relief, which will add to the funds Hammond needs to find.

Alongside the mooted – and modest – handouts, there are suggestions the Chancellor will announce a thorough review of how social care is funded in the future.

Shadow chancellor John McDonnell told the BBC yesterday that required funding could be put into the NHS and the minimum wage boosted to the voluntary living wage rate and disability benefits restored.

He said costs for these measures could be met by reversing £70bn worth in corporation, capital gains and inheritance tax cuts from recent years.

Budget 2017: Chancellor to unveil £29bn borrowing boost

Philip Hammond is on course to deliver a boost to his borrowing forecasts of as much as £29bn over the next four years, Resolution Foundation says.

According to the think-tank, the government could borrow £56bn in this financial year to the end of March - £12bn less than forecast in November.

The forecast is back in line with the pre-Brexit vote Budget forecast last March, which reflects the resilience in the economy facilitated by stubbornly high consumer spending, says the Daily Telegraph.

Resolution's longer term prediction is for borrowing to be £29bn better over the five years to 2020/2021 as a whole.

But it says there will still be a deficit of £16bn by then, which is far worse than the surplus of £11bn that former chancellor George Osborne was targeting before the EU referendum.

Since taking over in No 11, Hammond has revised the government's fiscal charter with the aim to lower the deficit to two per cent by the end of this parliament and to reach surplus "as soon as possible" in the next.

This means the government finances are still worse than expected, with an economic slowdown expected to start this year as higher inflation prompted by a slump in the pound hits household finances.

Resolution Foundation warned Hammond "must use his budget to wean the economy off its reliance on consumer spending", says The Guardian.

The think-tank said: "With last year's growth driven entirely by consumption, the prospect of a significant slowdown in household income growth in the coming years raises serious questions over sustainability."

Javid: Budget 2017 will 'level the playing field' on business rates

23 February

It's official: there will be further measures announced in next month's Budget to soften the blow of business rate rises coming in April.

Speaking to parliament yesterday, Communities Secretary Sajid Javid said more needed to be done "to level the playing field and make the system fairer".

He also promised help for those "facing the steepest increases", says the BBC.

He added: "We expect to be in a position to make an announcement at the time of the Budget, in just two weeks' time."

Javid's apparent U-turn - he staunchly supported the rise and dismissed criticism to it "scaremongering" - is said to have followed intervention from Theresa May.

According to the Prime Minister's spokesperson, May asked both Javid and Chancellor Philip Hammond "to work to ensure that there was appropriate relief in place for the hardest cases".

From 1 April, business rates, which are based on the value of commercial premises, will change to reflect property price developments over the last seven years.

How the tax is set has also been reformed and the new rates represent a substantial rise.

The government claims three-quarters of firms will pay the same or see their bills fall - but half a million will have to pay more, in some cases several hundred per cent more, with businesses in the south-east and London the worst affected.

There has also been anger that while small firms struggle, rates will fall for the likes of Amazon in relation to its warehouses.

A £3.6bn fund will phase in any increases over five years, but lobby groups say more needs to be done.

Shadow communities secretary Gareth Thomas called it a business rates "crisis" that had taken Javid "apparently until now to grasp its seriousness".

Budget 2017 will see action on business rates

22 February

Chancellor Philip Hammond is now expected to take action to soften the blow of business rates rises on the companies that will be worst affected, says The Guardian.

The paper "understands" that Communities Secretary Sajid Javid, one of the most vocal advocates of the changes, will face MPs in parliament on Wednesday and is "likely to promise to take action".

"Javid has discussed the issue with Hammond, and the Chancellor is now likely to use March's Budget to lengthen the transitional period for companies that will face an increase in rates," it says.

"There is also a suggestion that the government could agree to a wholesale review of the system, which levies the tax based on the size of property rather than a companies’ profits."

The row over April's changes to business rates has been escalating in recent weeks, culminating in a revolt among backbench Tories representing affected constituencies.

Under the reforms, the government claims three-quarters of businesses with physical premises will either see rates stay the same or fall, while increases for others will be phased in over five years thanks to a £3.6bn transition fund.

Javid has repeatedly dismissed the opposition to the reforms as "scaremongering" and "half-truths" by ratings agents attempting to drum up business.

But business groups say half a million companies, a large number in the south-east, will see bills rise by as much as several hundred per cent.

There are also complaints that many small firms will face hefty increases while the likes of online retailer Amazon receives a rates cut on its warehouses. NHS hospitals are also facing much bigger bills.

However, the Daily Telegraph's Sam Bowman says that based on figures from 1990 to 2010, rates revaluations tend to influence demand for commercial property in certain areas and so, over three to five years, increases are often offset by decreases in rent.

He adds: "Under the government's plans London is the only region that would see a rise in rates overall… The changes would encourage greater property investment in the country outside of London."

Budget giveaways unlikely despite January borrowing boost

21 February

Philip Hammond got a pre-Budget boost today with the best January surplus figures for 17 years.

The government took £9.4bn more in taxes than it spent, greater than for any other start of the year since the turn of the millennium, says the Office for National Statistics.

Self-assessed income tax and capital gains tax receipts came in at £19.8bn, up £2bn from last year and the highest total since records began in 1999, says The Guardian.

Last November, the Office for Budget Responsibility had estimated £68bn of borrowing for the year to the end of March. After these results, Hammond could "undershoot" this by as much as £10bn says the BBC's Kamal Ahmed.

That in turn is prompting speculation of giveaways to ease the financial pressure on families whose incomes have stagnated in recent years.

However, "anyone thinking that today's better news on the state of government's finances will lead to any Budget largesse is likely to be disappointed," Ahmed adds.

"Brexit is still, in the Treasury's mind, a risk to the economy that looms large and any buffers built up now are likely to be kept back for future rainy days - if they come - rather than be spent now."

Suren Thiru, an economist at the British Chambers of Commerce, agreed, saying: "If UK growth becomes more sluggish, as we expect, the UK will find it increasingly challenging to… deliver real progress in cutting the deficit."

That is not to say there will be no new spending, merely that it is likely to be modest.

Ahmed says: "The chancellor could spread a bit of salve on that toxic issue of the day - business rate increases due in April which are leaving some firms with significantly higher bills - and still hit his deficit target.

"Business rate relief could be made more generous and transition periods extended so that any abrupt increases are put on a smoother trajectory. Which might be good politically.

"And… Hammond could offer something for the National Health Service and social care. Which might also be good politically."