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UK Spending Plans Put on Hold

The UK’s most important spending decisions will be delayed until the autumn this year. A combination of factors including the coronavirus outbreak and downgrades in the country’s growth forecasts have caused the government to decide upon this delay.

The Budget Is Due Soon

The 11th of March is when the Treasury is due to deliver the next Budget. New Chancellor Rishi Sunak has recently entered the role and is faced with a complicated economic outlook. Many companies are turning to international debt recovery as a weak global economy causes problems.

It has been reported that Sunak has told his aides to concentrate on making sure that the Budget meets certain promises from his party’s election manifesto. It has been described as being a way of building trust by showing that promises are being met.

This means that the pledge made in the election campaign to scrap the upcoming reduction in corporate tax will be upheld. This tax rate won’t now drop to 17%, if the latest reports on the subject are accurate.   

Another change to be introduced next month is the abolition of entrepreneurs’ relief in capital gains tax. This Budget will allow an increase in the threshold for paying national insurance to take effect, raising the starting point from £8,632 to £9,500. NHS spending may be increased as a result of this.

What Happens Next?

Some sources believe that the Budget in March will be the first in a series of three major statements on the UK economy this year.

A few of the important subjects to be shelved until later this year include ideas such as limiting pension contribution tax relief, increasing taxes on fuel and putting up tax rates on expensive properties.

All of these matters could be covered in the Budget in the autumn. A spending review that is planned for this time will also look at the crucial question of improving workforce skills. 

The global economic slowdown and the widespread financial effects of the coronavirus have led to 

Treasury officials treading a fine line in terms of government spending estimates. To add to this, the Office for Budget Responsibility issued downgraded forecasts that need to be taken into account.

The Institute for Fiscal Studies has recently suggested the current budget balance could be under threat by 2022/23. This is based on the fact that “a rising deficit and fiscal targets set out in the Conservative manifesto” have limited the options open to them in terms of spending.

The election manifesto doesn’t give substantial leeway for increasing spending beyond the current levels or the introduction of tax cuts. 

Possible Outcomes

The number of factors in play make it difficult to predict what will happen. It seems that the big decisions over tax, spending and borrowing figures will depend upon what happens in the next few months.

A swift resolution to the coronavirus threat and an upturn in the global economy should give the Chancellor some breathing space to introduce some of the changes that they hope will stimulate the UK economy. On the other hand, continued economic sluggishness could see the changes delayed for longer.