Contrast the sound and fury surrounding the Brexit legislation, the narrow votes, the last minute concessions, resignations and the horse trading with the progress of Finance Bills which seem to proceed serenely without much controversy or publicity.
Since Theresa May lost her overall majority, her Government has passed two substantive Finance Acts with hardly a squeak from Parliament. It appears that as long as the Government keeps its strictly limited manifesto pledges it seems to have carte blanche to do almost as it pleases in terms of taxation.
In normal times, the substantial improvement in public finances would mean that there would be decreasing pressure on the Government to consider substantial taxation changes however this may not be the case in the Autumn of 2018.
The £20 billion pledge to the NHS needs to be funded and whilst there is a possibility that the improving finances could finance this without further increases in taxation this may not look particularly attractive to the Chancellor as if this could be financed without tax rises, the pressures for more spending would grow even stronger. In essence, a price needs to be paid for the pledge and needs to be seen to be paid for the pledge in order to stop the pressure for greater expenditure to become even greater.
Secondly, it does seem unlikely that the Government will not accede to pressures in other expenditures such as in defence, prisons and education.
Third, although the overall reductions in public spending since 2010 have been relatively modest, they have hit the non-ring fenced areas of Government disproportionately hard.
So the NHS pledge will give political cover for a number of tax rises that the Treasury may have wanted to earmark in previous years.
Notable on that hitlist could be:
1. The extension of employers’ NICs to “workers” (dependent contractors).
2. A renewal in inflation linked increases in fuel duty.
3. Freezing the personal allowances once the £12,500 threshold has been reached in 2020.
4. Further restrictions on interest relief for large corporates
5. Restricting pension tax relief
All these areas are likely to be discussed and may be floated by the Treasury through the media in order to gauge public reaction.
The Treasury may want to educate the public that spending comes at a price. The November Budget might be the time to do that.
