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Spring Statement 2018: the big picture

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Philip Hammond’s quiet revolution isn’t just quiet, it’s slow. Although he called time on the hurly-burly of a two-fiscal-event year in November 2016, we still haven’t seen a full cycle of the new process. However, the delivery of the Spring Statement sees another element of the Hammond architecture fall into place.

So what are we to make of this first Spring Statement?

For starters, we need to judge it in terms of what the Spring Statement is intended to achieve: it has a particular role to play in Hammond’s new approach, and should not be viewed just as a time-shifted Autumn Statement.
In prosaic constitutional terms, the Spring Statement delivers the chancellor’s statutory obligation to publish an economic forecast twice a year. That was also the function of the Autumn Statement, and its predecessor the Pre-Budget Report, but over the years those versions had morphed into fully-fledged ‘mini-budgets’, replete with tax policy changes and spending decisions. In the build-up to this statement, the chancellor stressed that he would not fall prey to temptation and announce policy decisions, but merely inform and consult.
But this new non-fiscal event is more than just an economic update, as detailed in the Treasury’s new tax policy making model, set out just before Christmas. This confirmed that the Statement would also be an opportunity to raise items for early consideration, before more definitive consultation documents were launched at the Autumn Budget.
In the event, the Statement has pretty much stuck to this intention, launching over a dozen new consultations.

What do the consultations tell us about the direction of government thinking?

Firstly there is a real focus on digital, with a range of consultations (and calls for evidence) focused on different aspects of the digital challenge.
At the policy level, the Treasury has updated its position paper on Corporation tax and the digital economy, first issued following the November Budget. In a context where the European Commission and the OECD are racing to air their ideas on the future taxation of digital, Hammond has taken this opportunity to refurbish the UK’s stall in the light of input received since the November Budget. This reinforces the UK’s position in this global debate and deepens the discussion on issues such as how to identify and measure user-created value, and how international tax rules might be adapted to the new environment.
The Spring Statement also launches a number of consultations designed to bolster the administration of tax in the area of digital. These include:
  • the role of online platforms in ensuring tax compliance by their users;
  • cash and digital payment in the new economy; and
  • a split payments system, which would allow VAT to be extracted from online payments in real time.
Secondly, we have a significant discussion to come about the level of the VAT registration threshold. Having for some time made a virtue of the fact that the UK’s VAT threshold is the highest in the EU (thereby sheltering smaller businesses from the burden of VAT administration), the government now wants to examine the other side of the coin: does a high threshold act as a blocker to growth?
Finally – and particularly for those with an interest in the development of the Treasury’s policy approaches – we saw a call for evidence on single-use plastic waste. Prior to the arrival of George Osborne, the ‘Treasury view’ had always been against any form of hypothecation. But Tuesday saw Hammond committing (at least ‘some’ of) as yet unraised (indeed, even yet to be designed) taxes to fund green products and processes. An interesting precedent for those with a spending priority to fund!

So he broke the chancellorial mould, and resisted the lure of announcements?

Well, not entirely. On the ever-sensitive issue of business rates, Hammond could not resist announcing in another consultation document that he will bring forward, by one year, the next business rates revaluation to 2021, and have triennial reviews thereafter. But, back on the theme of the future, the consultation document does note that the government is reviewing the wider taxation of the digital economy, before raising the prospect of ‘considering the implications for the wider business tax system to ensure all businesses make a fair contribution to the public finances’.
Also, in the case of heated tobacco products, he took the opportunity to report on the outcome of his earlier consultation. On one level, that might be considered bad form (an outcome cuckoo in the consultation nest). On another level, though, it can be seen as an example of good practice, with the final outcome showing clear signs of having been shaped by the expert input of stakeholders from both the tobacco industry and the public health field.

What happens next?

With these new consultation documents launched, a few more to follow and a new consultation tracker to help us manage, we now enter the active discussion phase. This should provide the Treasury with the stakeholder input it needs to develop the proposals which will emerge at the Autumn Budget. At that point, we get back into the world of announcements, changes, winners and losers. All the fun of the policy fair!