The Prime Minister’s £20 billion “present” to the NHS is due to be funded by a combination of the Brexit dividend, borrowing and tax rises.
Until this announcement, the projections for the public finances was considerably healthier than predicted and the first two months of the tax year 2018/19 have shown a continuing trend of steady improvement in the public finances.
Indeed, had one needed to fund the NHS last year, that could have been funded completely by the undershoot in public finance borrowing. It is however considered unlikely that the public finance improvement would be sufficient to cover both the NHS and other potentially urgent increases in expenditure, notably defence, social care and prisons.
It is therefore likely that some tax rises will be announced in the November Budget, even if only to hammer home to the electorate that generous provision in public services provision will always come with a price-tag.
The Government is hemmed in in terms of its commitments of the personal allowance going up to £12,500 and the higher rate tax band going up to £50,000 by 2020. It also promised neither to raise or extend the scope of VAT. It has also pledged to reduce the rate of CT to 17%.
However, there is plenty of scope for revenue measures in terms of restricting reliefs such as capital allowances and interest reliefs and corporate taxes and potentially the introduction of a new turnover tax for digital businesses.
In terms of personal and employment taxation, the extension of the national insurance net to cover wider range of earnings and indeed an extension of employers NIC to those who are workers or potential contractors cannot be ruled out. Furthermore, the transfer of the responsibility of administering IR 35 engagements could move to the end user in the private sector which would raise significant additional revenues.
The NHS “present” could give additional political cover and justification to a number of other tax and NIC measures that Chancellors have shied away from in the past. It is therefore likely to be a more interesting November Budget.
Jeremy Mindell gives a number of talks on the Budget measures as well as in-depth analysis.
