Budget 2017: what can we expect?

Budget predictions have been coming thick and fast, ahead of Philip Hammond's Budget speech at 12.30. Much has been made of his reputation as a safe pair of hands, who isn't going to rock the boat in the run-up to Brexit, but with an unexpected windfall in his back pocket, and pressure to boost spending, there's a chance for some good news in his announcement.

See also: Windfall for Chancellor Philip Hammond ahead of Budget

See also: Housebuilding 'renaissance' call as '£2m a day' spent on temporary accommodation

See also: Fears raised that motorists could face further insurance hikes

Extra cash

Hammond has a bit of wiggle-room: the economy is doing better than expected. Schroders' Senior European Economist, Azad Zangana, comments: "The OBR had forecast growth of 2.1% for 2016, yet despite the slight undershoot in growth, it looks like the Chancellor will have a little more wriggle room than previously forecast in the 2016 Autumn Statement."

In an ordinary year - especially back in the days under George Osborne - we could have expected more cash to be splashed. Zangana highlights key areas that have been under attack in the media in recent months as the NHS, social care and the re-rating of business rates.

There is a chance he will pledge some funds in one or more of these areas, to take the political pressure off the government. Theresa May already hinted that there will be 'appropriate relief' for those hardest hit by business rate rises, while Hammond will be keen to avoid the backlash he felt after the Autumn Statement when he failed to pledge any extra money for social care. The NHS, meanwhile, has been promised cash to make up for an increase in clinical negligence costs - but it's not known whether it will get any more than the £1 billion it's going to need to cover these extra costs.

However, Zangana adds: "Given the significant downside risks to the economy, and the OBR's assessment that the government is not meeting any of its three fiscal targets, Hammond may opt to bank most of the unexpected gains that are found." He has said before that he isn't taking any chances in the run up to what could be a tricky economic time as we negotiate Brexit - and there's every chance he wants to keep his powder dry just in case.

As Jason Hollands, managing director of the Tilney Group points out: "The UK economy is in reasonable shape and not in urgent need of financial testosterone injections, the next General Election is some way off and in any case the opposition parties are in disarray. There is therefore no urgent imperative, either economically or politically, to implement radical initiatives at this stage."

This doesn't mean a Budget entirely composed of inaction. There are a few things that have already been announced.

What we know so far

There's going to be £500 million for skills training for young people. He has claimed it's going to be the biggest shake up in education for those over the age of 16 since the introduction of A-levels - which is quite a claim. The enormously disparate world of technical qualifications will be replaced with 15 routes, which he says will be better suited to business needs. It's the latest of the desperate attempts to boost productivity in the UK.

Theresa May has also announced money for Grammar schools will form part of the Budget announcement. This will come as £320 million more funding for 140 more Free Schools (on top of the 500 pledged for 2020) - this will include the Grammars.

We know there will also be more funding for higher education - focused on technology, robotics and innovation. Businesses and universities will get £270 million for research - alongside £90 million for new PhD places in science, technology and engineering; £200m for research fellowships, and £50m to attract global talent.

Hammond has announced a crackdown on small print, including 'subscription traps' - where people sign up for services without realising they have agreed to an ongoing subscription.

He has also said he will announce a £20 million D-Day memorial on Normandy Beaches - paid for though fines on banks.

And we can expect an announcement on investing in broadband - including tests of 5G. There has been talk of incentives for businesses investing in super-fast broadband.

We also know that the ISA limit is set to rise again - under a timetable laid out by George Osborne - so that the ISA allowance will be £20,000 in the next tax year. Hammond is unlikely to tinker with this - given that many voters will have made preparations in expectation - however, Holland says the chances of this government implementing any more rises are decidedly thin - given its promise to focus on those who are just-about-managing.

Instead we will see the Lifetime ISA launch in April - with just a handful of providers in place - and Hollands has suggested it could constitute 'an almighty flop'. This in itself could put the government off travelling any further down Osborne's planned ISA road.

More excitingly for many, Les Cameron, head of technical at Prudential highlights: "In the last Autumn Statement the Chancellor announced a new Investment Guaranteed Growth Bond, launched through National Savings & Investments with what was termed a "market-leading" interest rate of 2.2% before tax forecast. We expect the actual rate to be announced and the rate at which it is set will be of particular interest as it is a good benchmark on what the return on a "no risk" investment might look like."

We will also see the residence nil rate band for inheritance tax introduced from April - which will allow people to leave more of their property to their children.

The income tax threshold is already due to rise to £11,500 in April (and the higher rate threshold to £45,000), but we can also expect another announcement on a future rise in both - as the threshold is meant to be rising steadily to £12,500 a year, and the higher rate to £50,000.

Possibilities

There's a reasonable chance that pensions tax relief is in the firing line - especially given the fact that the Government consulted on the future of tax relief last year. Hollands says many commentators will look for signs in the Budget that tax relief will either be cut - or left alone for the foreseeable future in order to give people a chance to plan properly for their future.

There has been some talk of the possibility of national insurance rising for self-employed workers - from 9% to 12%.

There has also been a suggestion that there will be a minimum price set for cigarettes - so that the cheapest pack costs £8.68. And there is a chance of some alcohol duty rises - although these are unlikely to be across the board.

Zangana says that Hammond may also take advantage of record low interest rates to invest in public infrastructure, particularly in projects that help boost long-term productivity, adding: "There was a small nod in that direction last year, and public investment spending has increased, but more needs to be done."

Daniel Hegarty, CEO and Founder of habito, the UK's digital mortgage broker is hoping for an increase in the living wage. He says: "Increases in inflation looming and declining household income levels are making the first rung on the housing ladder an increasingly difficult goal for many families. Chancellor Hammond needs to increase the national living wage as a key step in helping reduce financial pressure for millions of people. This alone will not change the landscape, but relieving the financial strain many families face whilst increasing the breadth of government assisted home purchasing schemes may." He is likely to get something on this front, as the living wage is expected to rise slowly towards its target of £9 an hour.

Hammond has already hinted that he is considering the impact of a recent change in the 'discount rate'. This essentially increased compensation payouts that insurers had to make, which led the industry to insist it would add up to £100 a year onto insurance premiums. There's a chance, therefore, that he will announce a modification in the Budget - or some other initiative to take the pressure off insurance premiums.

He has also hinted that at some point he will abolish estate agency fees for rental properties. This was part of the Autumn Statement, and there is always the possibility that he announces a timetable for the change.

And May has said more will be done to support renters - by building more rental properties, so we could hear more about this in The Budget.

Wish list

There are plenty of other areas that commentators are calling for change. The Yorkshire Building Society would like to see stamp duty altered - with an increase in the £125,000 threshold.

Research by NFU mutual found that consumers would like to see a VAT cut, in order to boost spending.

Aegon has called for a commitment to the current pensions tax relief system for the duration of this government to avoid destabilising auto-enrolment and Defined Benefit schemes - plus the introduction of a pensions saving equivalent to auto-enrolment for the self-employed and those on zero hours contracts.

Cameron says: "On the pension side, one simple reform would be to allow members of pensions schemes and their beneficiaries to be able to use the open market option to access drawdown."

The other big change is that this will be the last big Budget announcement in the Spring. From now on, it will move to the Autumn, and in March the Chancellor will just issue a report on the economy - unless something drastic has happened to the economy that requires urgent changes. Of course, in the current political climate, we can hardy rule that out.