As at the time of writing in early August, no date has been set for the Autumn Budget. This may be delayed yet again. It seems to be the fate of Autumn budgets that they get postponed by events.
The big dilemma for the Chancellor, at the moment, is actually a happy one. The strength of the economic revival as the country emerges from the covid pandemic is undoubtedly strong. All the signs are that the recovery is not only increasing the size of the economy rapidly but is also likely to create significant inflation.
The inflationary signs are all around; staff shortages in the hospitality sector, shortages of construction workers and building materials, increases in prices of raw materials such as timber and oil and intense activity in mergers and Acquisitions. These are all classic signs of an economic boom that could lead to inflationary problems later on.
In some ways this is welcome for the Chancellor. Unemployment is unlikely to rise substantially after the end of the furlough scheme on the 30th of September. The increase in economic activity will produce substantial tax revenues and we may see the public sector deficit fall faster than anticipated. Over the past decade, greater than expected economic activity has generally led to a better balance in public finances.
Inflation also creates fiscal drag as it pushes people into higher tax bands and therefore boosts tax revenues.
It therefore is understandable that the Chancellor may wish to give himself extra time before announcing the tax regime for the 2022/23 tax year. It may well be that by the Autumn he will need to concentrate on inflationary concerns rather than stimulating an overheating economy.
