Chancellor Rachel Reeves is set to deliver her first Spring Statement this month but it is unclear whether there will be more tax changes.
The statement – where the chancellor traditionally sets out the government’s spending plans – is not intended to be a “big event”, said MoneyWeek, as the Treasury has previously committed to there being “one major fiscal event a year”. That event would have been the Autumn Budget.
But high borrowing costs and low economic growth have already “wiped out” the government’s £9.9 billion fiscal margin, said Bloomberg. This may put Reeves under pressure to do something to boost the economy as she “attempts to stimulate growth”, said The Independent.
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When is the Spring Statement?
The Spring Statement will be made by the chancellor in Parliament on Wednesday 26 March.
It will come after the Office for Budget Responsibility provides its own estimates on the economy to the Treasury, said the BBC, and whether it thinks the government will “stick to its self-imposed rules on borrowing and spending”.
The OBR’s findings will be key, said The Guardian, as they will show the chancellor “how much headroom, if any, is left”. Her policy decisions will then be incorporated into the outlook and published with the Spring Statement.
What will be in the Spring Statement?
Reeves has “repeatedly” described her fiscal rules as “non-negotiable”, said the BBC. They are not to borrow to fund day-to-day public spending and to get debt falling as a share of national income by the end of this Parliament.
This has left her “completely exposed” to global events, said the Institute for Fiscal Studies (IFS) and the world has changed a “great deal” since the Budget with Donald Trump “upending the global trade environment” among other things.
Some spending cuts seem to be “on the table”, said MoneyWeek, and “though concrete details are unavailable”, a reduction in health-related benefits is expected.
A “persistent rumour”, said Which?, is that the chancellor could extend the freeze on income tax thresholds beyond 2028, which could mean people move into higher tax brackets faster.
Others are speculating that the Treasury could reform inheritance tax gifting allowances so someone who gives assets away has to live for “10 or even 15 years” after transferring the gift, rather than the current seven, for it to be exempt from any taxes.
There have also been whispers that the cash ISA allowance could be “scaled back” in order “to encourage more people to invest in stocks and shares, which could boost growth in the UK”, said The i Paper.
The chancellor faces “two broad options”, said the IFS. Either prioritise “policy stability” and “delay any action” until the Autumn Budget, or “prioritise the fiscal rules” by announcing tax rises or “even tighter spending plans”.
It is not a “clear cut” decision and a lot of weight will be placed on “policy stability relative to that placed on adherence to the fiscal rules, and perhaps on economic versus political considerations”.
