Theresa May might think that austerity is over, but Philip Hammond knows that it is not. ‘’Nearly over’’ could mean months but is more likely to mean a few years away. Nevertheless, her boast was undoubtedly the driver for his budget proposals. Not only did he have to find the massive extra sum she had pledged to the NHS but he also had to manage the public expectation that the end of austerity means more money in everyone’s pocket.
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Somehow he seems to have satisfied virtually everybody – well, not quite everybody; The Guardian thinks that his budget ”may just too good to be true’’ and explained that ‘’Throwaway Phil embraces austerity-lite to save his skin’’. But they would say that, wouldn’t they? The City likes the fact that he did not cut pensions tax relief, small business like the retail rates relief, and the voters in the streets like the increase in personal allowances and tax thresholds.
Hardly anyone has commented on the tax proposals though, perhaps because there were no significant changes. The ICAEW’s budget recommendations to the Chancellor was to do nothing, to give people space to get to grips with the myriad tax changes over the last few years. He sort of took this advice.
He did nothing significant, probably because Theresa May had already mopped up the available funds, but sadly made an awful lot of very minor changes that raise little or no revenue but will add a lot of unnecessary complexity to the tax system.
It is not quite true that no one commented on tax. The CEO of the ICAEW welcomed that the IR35 rules will be extended to the private sector but bemoaned the fact that we will have to wait until 2020 for this to happen. This was puzzling in the context that this body had exhorted HMRC pre-budget not to extend that tax rule, at least until the mass of problems with the public sector change have been worked through. The concept that the engager is in the best position to apply the IR35 tests is probably right, but in practice the public sector seems to have largely delegated that responsibility to HMRC (or rather HMRC’s dysfunctional CEST tool), which is clearly not what parliament intended. We expect many in the private sector to do the same. However, there is a big difference. Subcontractors are reluctant to sue a public sector body for ignoring the statutory duty that parliament has imposed on it and letting HMRC, who are ignorant of the facts, incorrectly categorise them as employees, as that public sector body is a major user of freelancers and the worker would like to work again for it in the future. Workers are likely to be a lot less reluctant to sue private sector engagers.
So, at least the Chancellor has created controversy even if he has not achieved much else with his budget in tax terms.