What to expect from the UK's Budget
FT editor Lionel Barber and political commentator Janan Ganesh discuss the likely outcomes of Wednesday's Budget, the first to be delivered by chancellor Philip Hammond.
Produced by Alessia Giustiniano. Filmed by Rod Fitzgerald.
Chancellor Philip Hammond is due to unveil his first fully fledged budget here with me to discuss what to expect is janeane nesh our chief political commentator Janine this is a big move and a big stage for Mr. Hammond.
JANAN GANESH: Yeah. His first budget. Circumstances seem to be a bit better than he was expecting in the autumn statement in November. The British economy has performed reasonably well since the Brexit referendum , and as a result, it's likely that he will announce he's got quite a bit of-- quite a bit more money to play with than he had previously assumed. What we won't see, I think, is a spectacular use of that money.
No big tax cuts. If anything, a tax rise on self-employed people. No big spending splurge, apart from maybe on health and social care, which are problematic areas right now. What he's going to do with that money is build up a contingency fund. So if Brexit does turn out to be economically difficult and a cyclical recession anyway is due at some stage in the next few years, this country goes into it with a bit of a buffer.
LIONEL BARBER: Yeah. Brexit war chest. But let me just come back to something very interesting you alluded to there, which is a tax on the self-employed. I thought that this was a government in favour of the strivers.
JANAN GANESH: This is the probably the seventh government in a row which has talked a good game about being in favour of the strivers, people who go out there and work maybe off their own bat. But there's this view in the treasury that if you're going to find money anywhere, it's in the self-employed sector. A lot of people who set up private limited companies may be, in the government's view, are being undertaxed relative to their earnings and they think they can squeeze a bit of money. it won't be a swinging policy but
LIONEL BARBER: No question of people abusing this?
JANAN GANESH: The view is that some people are setting up private limited companies when really under the strict letter of the law, they shouldn't be.
LIONEL BARBER: You're not referring to employees of the BBC, are you?
JANAN GANESH: Or the entire journalistic community, I don't know. But it's an area where they think they can get a bit of money.
LIONEL BARBER: And the other interesting area is the digital economy. There were some signals from Number 11 Downing Street-- that's where the chancellor resides-- that he thinks that the balance between manufacturing and digital is obviously changing, and also too much emphasis on corporate taxation levels. There's actually the digital economy is under-taxed.
JANAN GANESH: Yeah. And the view is that the UK has an even bigger digital economy than is officially held to be true. That this is one of the most digitised economies in the world, but a lot of it uncaptured by government statistics and therefore under-taxed. It's difficult, however, to do that, to get more money out of that sector of the economy and at the same time, maintain the rhetoric about being open for business and in particular, being open to dynamic, service-oriented high tech businesses
LIONEL BARBER: So, if I work for Google or I'm running Google or Facebook, should I be worried?
JANAN GANESH: I'm amazed I'm not worried about the fact that in two years time there's a good chance of losing access to a $500 billion strong European market, but that doesn't seem to be killing business confidence, even tech-specific confidence so far. But the tax and other regulatory policies of the government is talking about might be a bit more worrying than that.
LIONEL BARBER: Let's switch to the spending side. There is a lot of strain on the National Health Service. In particular, two words we're likely to hear a lot of is social care. There's lots of strain there. What do you think the Chancellor will do?
JANAN GANESH: There is an idea which has been mooted for quite a while now of essentially something like an inheritance tax, specifically, a hypothecated to social care. So as people get older and the costs of their care build, some of that can be funded by themselves. Paying taxes once they die on their estates.
| Hammond and other conservatives are pretty nervous about this, because it goes against the whole ideological grain of the party, which has always been almost fanatically opposed to death duties of any kind, beyond the point of reasonableness, I would say, and so they're caught between the absolute financial necessity to fund an underfunded service, which is only going to get more expensive as the population ages, and on the other hand, the intellectual and ideological nervousness to go ahead with that kind of tax increase.
LIONEL BARBER: Let's talk about Philip Hammond the politician. How does he differ from George Osborne, the chancellor who was in power for 6 plus years and always produced several rabbits out of his hat during his budgets.
JANAN GANESH: He's much more circumspect than George Osborne. I think George Osborne liked these big occasions, whereas Philip Hammond has already got rid of one, the autumn statement. Much less likely to define himself with a big world view in the way George-- George Osborne almost embraced austerity as the idea that defined his chancellorship. So circumspect, doesn't raise his voice very much, but incredibly attentive to detail.
And he's in a curious political position because he was a Remainer. He was actually a very persuaded Remainer, thought it was a bad idea to leave the European Union, and he now has to find a way of operating as the second most powerful person in a government which is not only pro Brexit, but really Pro quite a hard Brexit. So he could end up being the pivotal voice within the cabinet.
LIONEL BARBER: We look forward to what the book keeper in chief will unveil in his first fully fledged budget. Janan, thank you so much.
JANAN GANESH: Thank you.