What can we expect from the Autumn Statement?

Sarah Coles
Cabinet meeting
Cabinet meeting



Philip Hammond will deliver his first Autumn Statement next Wednesday. Over the years this has become something of a mini-Budget, so he may well take this opportunity to make his mark - and demonstrate how his Treasury is going to differ from George Osborne's. The question is, how is he going to do this?

It's worth highlighting that his first move might be to decide that the trend towards a mini-budget is unsettling, and leads to far too much uncertainty and disruption. In that case, he might make his move by delivering an assessment on the economy, and letting us know he won't be tinkering with anything until the Budget in March.

Alternatively, there are a number of changes he might want to make sooner rather than later.

End of austerity?

He may take the chance to move away from the austerity stance of his predecessor, who was keen to balance the budget at any cost. He has already explained that he is abandoning the timescale for balancing the budget, and he may make his position clearer.

As Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown, says: "The May government has already proved itself quite comfortable ditching Cameron legacy policies and developing its own voice and agenda. Even since the summer, the imperative to create distance from the previous administration has strengthened. Anyone in any doubt of the importance of recognising and accommodating the demands of the many voters who feel let down by the political elite, need only look at the 4 million votes cast for UKIP in the UK at the last general election, the UK's Referendum result and at the stunning victory of Donald Trump in America."

Tax breaks

This could mean postponing cuts or introducing more tax breaks. These could include tax cuts for consumers. NFU Mutual has suggested that a VAT cut would go down nicely, and help offset rising prices. Hammond could also choose to stimulate the economy by putting more money in people's pockets. McPhail suggests that he could opt to do this by bringing forward proposed rises in the personal tax allowances - or by raising the threshold at which National Insurance becomes payable (which is currently £8,060).

He also has the chance to ditch plans to end the tax relief on mortgage costs for people buying to let. This would help reverse the flood of money out of the sector. A similar policy has been dropped in Ireland, and he may decide that the housing market could benefit from the boost.

A number of business groups, meanwhile, have been pushing for tax breaks for businesses, to boost manufacturing and encourage companies to invest in the UK.

However, given that the Institute for Fiscal Studies (IFS), has warned we will be facing a £25 billion hole in public finances by the end of the current parliament - because of slower growth and higher inflation - this may not be the time for generosity. Thomas Pope, research economist at IFS says: "Given the levels of uncertainty, [Hammond] might be wise to respond cautiously for now."

It may well be, therefore, that we get no major tax cuts or spending commitments.

Employee share schemes

Theresa May has said she'd like to put an employee on every board, but this has gone down incredibly badly with business groups. As an alternative, Hammond could offer increased employee share ownership as a compromise. This could be done by extending SAYE schemes - possibly allowing companies to increase the discount on shares offered to staff.

Infrastructure

Hammond made this a major theme of his speech to the Conservative Party Conference, so we are likely to see some commitment. However, rather than simply spending more government money, he is keen to see businesses pull their weight. It's not clear how he would do this but McPhail suggests we could see a number of measures to persuade companies to invest. This could include, for example, a financial penalty for house builders who hoard land.

He also suggests final salary pensions may be harnessed by the government for spending in this area. He explains: "The Treasury spends billions in tax relief for these schemes (far more than it does on individuals' contributions) and at the moment companies are pouring huge amounts into schemes as deficit reduction contributions, all tax deductible. It wouldn't be surprising to see the Treasury impose some form of conditionality on these contributions, for example by requiring an allocation to infrastructure investment in exchange for the continued tax breaks."

Savings

The 7 day account switching guarantee currently only applies to Current Accounts, and McPhail points out that it would be an easy win for the government and a popular move (and cost-free as far as the Treasury is concerned) to extend this guarantee to savings accounts too. It would also help to address the problem of savers being seduced by teaser rates and then progressively fleeced over subsequent years after the rates have been quietly cut.

Meanwhile, AJ Bell's senior analyst Tom Selby suggests that the Lifetime ISA could be for the axe. He says: "The product has powerful enemies - most notably Baroness Ros Altmann in the House of Lords – who argue it risks undermining automatic enrolment. Furthermore, several major providers have said they won't be ready to launch in April next year. The Chancellor will not want a failed product that was conceived by his predecessor to become a millstone around his neck. He could conceivably scrap the Lifetime ISA and roll the Help-to-Buy Government bonus into the existing ISA product."

However, McPhail disagrees. He says: "I expect the Lifetime ISA to go live in April next year; with all the talk about intergenerational inequality, it would be a hard one to ditch."

Pensions

Selby says a ban on pension investment cold calling is looking increasingly likely, and would be a great outcome for pensioners. He explains: "A petition calling for the ban, which we wholeheartedly support, has now attracted over 5,000 signatures. The pension freedoms brought welcome flexibility to the retirement market, but they also opened up an opportunity for scammers to target pensioners. The Government has faced mounting pressure from the industry, consumer groups and MPs to take firm action to tackle pension fraudsters and it now, finally, appears to be taking the issue seriously."

"A Government representative has confirmed there "will be an announcement in a few weeks' time" on the issue, paving the way for the Chancellor to use the Autumn Statement to show he is truly on the side of savers by banning cold-calling for pensions."

The other change to pensions that has been talked about for months is a change to the tax relief. Hammond may decide to make some changes in the statement. McPhail says: "There could be more tinkering at the margins, for example on the Annual Allowance or the Lifetime Allowance, or possibly something more substantial, such as the fundamental principles of tax relief." However, he says that Hammond may decide to duck the issue for now instead. He explains: "I don't think we'll see a lot in this Autumn Statement; it feels too soon, so at most just possibly the announcement of a consultation. I'd look to the Spring Budget as more likely."

Don't hold your breath

This isn't the only change that might not make it to the Autumn Statement.

Some organisations have made hopeful suggestions for what they want to see announced. The Resolution Foundation, for example, points out that when May entered Number 10, her speech was all about reaching out to those who were struggling and only just getting by. It suggests that Hammond may look to make changes to improve their position - whether that's unfreezing benefits, or reversing cuts in Universal Credit.

However, there has been little forthcoming on this particular line in recent months, and given that Hammond has already said he's keen to control day-to-day spending, May might be hoping we let her forget all about her promise to be the party that helps everyone.

Anyone expecting changes to the State Pension triple lock could be in for a disappointment too. The DWP Select Committee has recently published a report arguing for a move to a double lock involving an earnings link with an inflation under-pin, and the ditching of the 2.5% element. However, as McPhail points out: "The triple-lock is a difficult policy to unpick. To do so would be to remove a totemic benefit from a cohort of the population with a high propensity to vote."

"The easy political answer would be to kick the can down the road and worry about it later; or better still, let a future Chancellor worry about it. There is also the Cridland Review due to report next year on state pension age, which might provide a handy scapegoat for any decision in this arena."

Similarly, women who have been particularly badly affected by the rising state pension age may be hoping that they see some measure to improve their position. Unfortunately, new pensions minister Richard Harrington has already gone on record saying there'll be no new concessions.

So far the jury us out, but there seems to be a growing consensus that what we can expect from the Autumn Statement will fall somewhere between 'not very much' and 'nothing at all'.

But what do you think? What should Hammond be offering us? Let us know in the comments.