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The Guardian - UK
The Guardian - UK
Politics
Andrew Sparrow and Graeme Wearden

Budget 2017: Philip Hammond faces row over tax rises for self-employed - as it happened

Budget 2017: What it means for you

Political summary

Until now Theresa May’s government has enjoyed a charmed life in its relations with the Tory press. The Daily Mail adores her, and the Daily Telegraph and the Sun have given her very positive coverage. But, thanks to this budget, relations could be about to sour. Philip Hammond’s decision to increase national insurance contributions will affect prosperous self-employed people who might be thought of as archetypal Mail/Telegraph readers and tomorrow’s papers could make awkward reading in the Treasury. The Resolution Foundation has welcomed the move, which it says is a progressive proposal which will “ensure the tax system catches up with the modern world of work”, but the fact that it breaks a Conservative manifesto commitment will make it particularly hard to defend. How Hammond responds to this row over the next few days will tell us quite a lot about the state of his backbone.

This issue has dominated the headlines this afternoon partly because, in other respects, it was an unexceptional budget, which included relatively minimal spending commitments. At the weekend Hammond was talking about the need to keep enough “gas in the tank” (see 11.36am) to see Britain through any potential Brexit difficulties. He chose not to restate that argument in his statement (possibly because suggesting that the economy might head south is a Brexit thoughtcrime in government circles), but the thinking nevertheless informed his budget. In that respect, it was a bit wait and see.

That’s all from us for today.

Thanks for the comment

In summary... the broad economic message from today’s budget is that the fiscal journey may be different, but the destination is the same.

Despite the improved growth forecast for this year -- 2%, up from 1.4% -- lower growth in subsequent years means the UK will still probably run a £17bn deficit in five year’s time.

UK borrowing forecasts

These forecasts are subject to even more uncertainty than usual -- thanks to Brexit. But as things stand, the future isn’t much brighter than last November.

Updated

Small print alert: HMRC to update image guidelines after footballing probe

Referee Anastasios Sidiropoulos shows a yellow card

Professional footballers take note: the taxman is taking a close look at the practice of paying for image rights.

Today’s budget says:

The government is aware that some employers pay image rights in respect of employees under separate contractual arrangements to employment income.

HMRC will publish guidelines for employers who make payments of image rights to their employees to improve the clarity of the existing rules.

Back in December, it emerged that more than 40 football players are under investigation by the tax authorities over payments for image rights. The current rules allow them treat image rights as a separate income stream, and potentially have it taxed overseas if the player spent much of their career abroad.

HMRC suspects that this loophole could be being exploited...

Chris Sanger, head of tax policy, EY, predicts that new legislation may be needed to stop the practice:

“The taxation of image rights, and particularly the image rights of footballers, were a focus of a Public Accounts Committee hearing in December 2016, with a perception that non-domicile footballers playing for UK clubs were able to receive payments for image rights without paying any UK tax.

“The taxation of such rights is currently based on tax case law, so it is hard to see how the tax treatment can be substantially changed without legislation. But for footballers currently benefitting from the favourable treatment of image rights it looks like they may be in the last few minutes of the match and any added time is unlikely.”

Here’s our news story from last December:

Small Print alert: Planned spending on new grammar schools much higher than previously announced

Often governments are accused of overstating their spending commitments. But, curiously, the budget red book shows that Phillip Hammond has been understating his commitment to the free school building programme, possibly because he is aware of the political opposition to building new grammar schools.

Two days ago the Treasury said the budget would contain a £320m investment that would fund new schools. The red book also mentions this figure, saying it is invesment over this parliament (ie, before 2020).

But the red book scorechart (see 3.34pm, line 2 on the chart) shows that in 2021-22 spending on new free schools soars, going up to £655m. That may be because by that point the government expects to have changed the law, allowing new grammar schools to open.

Tim Roache, the GMB general secretary, said:

The prime minister says she wants to support all schools, but the flow of money tells a very different story. She is being as selective with the truth as she is with school admissions policies.

Without fanfare, the chancellor has stashed away a £1bn slush fund to provide for the government’s free school and grammar school obsession.

These figures reveal the true extent of the Prime Minister’s plot to impose an unneeded, unwanted and damaging top-down imposition of selective education.

The National Audit Office has said £6.7bn is required to bring existing school buildings up to scratch and yet the Government press ahead with diverting money to its pet projects. Our schools simply cannot afford such neglect - and yet the government seems dead set on running them into the ground.

Writing for the Conversation, Prof Costas Milas of the University of Liverpool has said economic forecasts should be treated very cautiously indeed.

He writes:

Policymakers’ ability to predict UK GDP growth has been rather poor. This can be seen in the way the forecast moves in the opposite direction to the actual outcome.

UK growth forecasts

This makes two further worrying readings. First, UK policymakers have been overconfident in their predictions. The Bank of England has, on average, over-predicted annual GDP growth by a massive 1.52% over the past nine years. Second – and perhaps much more worryingly – the Bank’s officials (and many other economists) completely missed the 2008-09 recession.

So what this tells us is that models are not good – at all – when they are needed the most. If this is indeed the case, what is the purpose of going through the somewhat futile exercise of presenting budget forecasts three to five (or even more) years into the future? Was this train of thought going through Phillip Hammond’s mind when he announced that there will only be one, rather than two major budget statements a year?

So we should remain sceptical that the economy will get through the Brexit negotiations relatively unscathed, Prof Milas adds. More here.

Updated

This is from Gerard Lyons, who was economic adviser to Boris Johnson when Johnson was London mayor.

Small Print alert: Tax break for people renting rooms Airbnb-style could be closed

Currently people who rent out a room through Airbnb and other websites can benefit from rent-a-room tax relief. But now it looks as though they could lose that tax break. This is from the red book (page 34).

The government will consult on proposals to redesign rent-a-room relief, to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings.

In the Commons some Tories have expressed concerns about the national insurance contributions increase.

Jacob Rees-Mogg said he was “very cautious” about the plan. He told MPs:

I see the logic for why the government wants to do this, that there is an unfairness between self-employment and employment. I’m not sure that making a minor change at the edges is the right way of going about changing the relationship.”

And Andrew Murrison, a former minister, said he had some “concerns” about the policy. He said:

It’s very important to ensure that we don’t disadvantage self-employed people. This party on this side always has been, I hope always will be, the party that supports white van man and, may I say on this particular day (International Women’s Day) also white van woman.

I hope very much we can have some reassurance from the Treasury frontbench later on that plumbers and electricians and plasterers and people of that sort are not going to be disadvantaged.

Here is Stewart Hosie, the SNP’s Treasury spokesman, on the budget.

This is a right-wing Tory government which remains wedded to austerity, driving the biggest inequality since Thatcher, and the biggest threat to the economy- the Brexit shambles the UK is facing- was the elephant in the room.

Today we see that forecast debt, deficit and borrowing levels are as bad or have barely changed since last autumn – with little hope for any significant improvement.

The Tories talk about helping working people, but inaction on rising inflation and slower wage growth means living standards will be squeezed. The chancellor is tinkering around the edges, rather than addressing the very real concerns of households and businesses throughout the UK.

Scotland’s budget faces a real terms cut of £2.9bn as a result of ten years of a Tory government that the people of Scotland did not vote for, and now we face being taken out of the European Union despite the majority of people voting in Scotland to remain. The chancellor failed today to set out how he will mitigate the Brexit bombshell we are facing.

Small print alert: How 100 rich people dodged Osborne's dividend tax changes

Britain has lost £800m in tax revenue because wealthy people shifted their dividend payments to avoid paying more to the Treasury.

That’s according to the Office for Budget Responsibility, which has investigated the reaction to the abolition of the 10% tax credit on dividends in the July 2015 budget.

George Osborne decided that the measure would kick in from April 2016, creating a window of opportunity. The Treasury assumed that £7.6bn of payments would be dragged forwards into the 2015-16 financial year... in reality, it looks like £10.7bn was moved.

The upshot is that net self-assessment tax bills will be £800m lower than otherwise, the OBR estimates. And more than £100m of that is thanks to just 100 wealthy people!

The OBR explains (on page 111 onwards):

On the basis of the counterfactual we have used, our latest estimate is that dividend income shifting increased 2016-17 self assessment receipts by £4.0 billion (higher than the initial estimate of £2.6 billion) but will reduce future receipts by £4.8 billion.

This implies that pre-announcing the policy allowed taxpayers to reduce their bills by around £0.8 billion at the same cost to the Exchequer.

HMRC analysis suggests that around one pound in seven of that saving benefited just 100 individuals who were able to withdraw dividends averaging £30 million each from their companies before the higher tax rate took effect.

QC Jo Maugham is most unimpressed....

Ed Miliband, the former Labour leader, has retweeted this from David Cameron.

With this comment:

I just had a chat with Matthew Taylor, the former Tony Blair adviser who’s carrying out a review of the changing face of the labour market for the government. He says one central thrust of his review will be that over time we should move to a system of taxing labour, not employment; so eventually it won’t matter if you’re self-employed or an employee - you would be taxed at the same rates.

He revealed that he wrote to the chancellor at the weekend, pointing out that the abolition of Class 2 NICs, which is due to happen in April, would move in the opposite direction, widening the gap between the self-employed and salaried workers, and urging Hammond to take action.

While today’s Labour frontbench has condemned the chancellor’s decision as a “tax on sole traders”, Taylor welcomed it, saying those on the lowest incomes - under £16,250 - had been protected. He said:

There is clearly an issue about the tax gap between the treatment of employees and the self-employed people, which encourages businesses to shape their business model around tax arbitrage. Over the medium-term, the government should move from taxing employment to taxing labour ... [Hammond has] done it in a way which is progressive.

Here is John McDonnell, the shadow chancellor, commenting on the budget.

Philip Hammond has used his first budget to claw £2bn in tax on those self-employed who are on low and middle incomes. But he continued to boast about the £70bn worth of tax giveaways at the top announced by his predecessor.

Labour will oppose this unfair £2bn sole traders tax on the self-employed low and middle earners.

Rather than provide the funding that would end a social care crisis in which 1m vulnerable people go without adequate care, or calling an end to the state of emergency in our NHS, the Tories are doing next to nothing and don’t seem to recognise the scale of the crisis they have created.

The Tory rigged economy continues for households in our country, who face being £1,800 worse off by the end of the forecast period, and if you are on the national living wage by the end of this parliament you face a 25p per hour cut.

This budget does not address the problems created by seven years of Tory failure, and it has failed the fairness test for women who will be hit by a cuts in public services, and the national living wage.

Instead of equipping our country for Brexit, he is building our economy on sand, and the little he has announced today will mean we are less prepared for the challenges we face outside of the EU.

McDonnell is describing the national insurance tax increase as a £2bn rise on the grounds that, if you add together the amount it will raise over four years, that comes to £4bn. See line 15 on the chart at 3.34pm. But this is not the normal way anyone would cost a tax rise. The usual practice would be to take the annual figure, in this case £600m by the end of the decade.

The chancellor’s team took a mauling from journalists at the “huddle” afterwards, in which they go through the budget red book line by line and take questions.

Hammond’s special adviser, pressed repeatedly, insisted the chancellor’s decision to increase class 4 National Insurance Contributions for the self-employed did not breach the Conservatives’ manifesto — because “tax lock” legislation, published after the election, did not include details about which classes of NICs were included.”

“The manifesto is not the place you should be looking for it; you should be looking for it in the legislation,” she said.

Osborne’s “tax lock” was a way of strengthening the party’s tax promises by passing them into law. But the manifesto said clearly that the Conservatives would, “commit to no increases in VAT, National Insurance Contributions or Income Tax”.

The idea that Osborne’s bill, not the glossy booklet published in the election campaign, was the place to look for manifesto pledges, was greeted with widespread derision.

The Treasury argued that the changes to national insurance and the cut in the tax-free allowance for dividends, were progressive, affecting mainly higher earners: self-employed GPs, QCs and partners in law firms were offered as examples.

Their rationale was that self-employed workers now receive the same state pension rights as employees, so fairness would suggest they should pay the same tax rates; while HMRC believes part of the motivation for switching to self-employment is tax avoidance.

In his speech, Hammond also pointed at yet-to-be-published findings from Matthew Taylor, a former Blair adviser who is currently looking at extending workplace rights, and the social safety net, for the self-employed.

But increasing the tax as a quid pro quo before those new rights have been implemented, or even outlined, seems an odd political strategy.

What the Budget lacked in policy changes it made up for with jokes - mainly at the Labour party’s expense.

This gag had Tories rolling on the green benches:

Mr Deputy Speaker, a strong economy needs a fair, stable and competitive tax system, creating the growth that will underpin our future prosperity.

My ambition is for the UK to be the best place in the world to start and grow a business.

Under the last Labour government corporation tax was 28% – by the way, they don’t call it the last Labour government for nothing.

Net migrants will make up most of the Budget’s projected extra 700,000 people who will be in employment in Britain over the next three years, according to the Office of Budget Responsibility.

The OBR says that despite the expected post-Brexit tightening of immigration policy net inward migration will account for three-quarters of that projected rise in employment.

The budget watchdogs say in their economic outlook report accompanying the budget that they continue to assume that Britain will adopt a tighter migration regime after the UK leaves the EU in 2019 but it “will not be sufficiently tight to reduce net inward migration to the desired ‘tens of thousands’.”

The OBR say the continue to use the Office of National Statistics ‘principal’ projection which assumes that net inward migration will fall to 187,000 by 2021 - the same as a year ago but well short of Theresa May’s 100,000 target. It says:

The latest estimate for net inward migration in the year to September 2016 was 273,000 - the first time it has fallen below 300,000 since the year to September 2014.

In past years the OBR has highlighted the role of immigration in fuelling economic growth and reducing the government’s deficit.

One of the few certainties in economics is that most forecasts will be revised (or ‘wrong’, to be blunt).

The Office for Budget Responsibility address this by showing how likely a particularly outcome is:

Small Print alert: Household disposable incomes forecast to 'stagnate' in 2017

According to the OBR (on page 60 of its report), household disposable incomes are forecast to “stagnate” in 2017. It says:

Relatively weak earnings growth, together with higher CPI inflation, means that real household disposable incomes are expected to stagnate in 2017.

Real household income growth.
Real household income growth. Photograph: OBR

The OBR says, partly as a result of this, it has revised up its forecast for gross household debt.

We expect gross household debt – which includes both mortgage and unsecured debt – to reach 153 per cent of household disposable income by the start of 2022, up slightly from 149 per cent in our November forecast. This reflects a small upward revision to the stock of household debt and a downward revision to household disposable income.

The Resolution Foundation says average disposable income per person is now expected to be £900 lower in 2021 than was forecast a year ago.

Bosses have hit out at the chancellor for not doing more to mitigate the upcoming rise in business rates.

David Jones, a senior director at property consultancy GVA, said:

“The chancellor has simply not listened to the majority of business facing significant uplifts from the 2017 revaluation.”

Sir Peter Rogers, the chairman of New West End Company, which represents many firms in the capital, echoed this:

“We are disappointed by the chancellor’s announcement. He has missed the opportunity to deal with a major concern for London businesses.

Here’s the full story:

Small Print alert: Hint that tax on diesel cars could go up next year

The budget red book suggests that tax on diesel vehicles is likely to go up next year. (For many, obviously, this would be a rare example of good news being buried in the small print.) This is what it says (on page 48.)

The government is committed to improving air quality, and will consult on a detailed draft plan in the spring which will set out how the UK’s air quality goals will be achieved. Alongside this, the government will continue to explore the appropriate tax treatment for diesel vehicles, and will engage with stakeholders ahead of making any tax changes at autumn budget 2017.

Our economics editor Larry Elliott has magisterially declared that this was a pretty boring budget.

He suspects chancellor Hammond is holding back the fireworks for his new autumn budget - in case negotiations with the EU go badly.

Larry writes:

Brexit was not mentioned in the speech although it was the 1,000lb gorilla in the room. Hammond has no idea how the economy will be affected by the two-year article 50 negotiations but is less gung-ho about the outcome than some of his colleagues. He has kept his powder dry in case the economy takes a bigger growth hit than the OBR expects.

More here:

Here is the full budget scorecard, showing what every measures costs or raises in revenue over the next five years, from the Treasury’s red book.

Budget scorecard
Budget scorecard Photograph: Treasury/Treasury red book
Budget scorecard
Budget scorecard Photograph: Treasury

Robert Chote, who runs the Office for Budget Responsibility, is briefing the press about the budget right now.

He’s explaining that the OBR’s overall forecast for the UK economy is little changed over the next five years, with stronger growth this year but a slowdown from 2018.

Our colleague Katie Allen is there, and tweeting the key points:

Rupert Harrison, who was chief of staff to George Osborne when Osborne was chancellor, has used Twitter to suggest that Philip Hammond should not be distracted by the row about NICs.

Small print alert: wage growth forecasts revised down

Bad news... the Office for Budget Responsibility has trimmed its forecasts for wage growth, because it thinks more people will become self-employed over the next five years.

It says:

On the income side of GDP, wages and salaries are forecast to grow by 3.4 per cent a year on average between 2016-17 and 2021-22, down slightly from November. This partly reflects changes to our forecast of the composition of employment growth, which has been tilted towards more self-employed and fewer employees, in line with recent trends.

A year ago, the OBR expected average wage growth of 3.9% over the period.

But the watchdog admits today that “our forecasts since 2010 have tended to be over-optimistic” - a point backed up by this chart:

OBR

Labour will oppose the increase in class 4 national insurance contributions, John McDonnell, the shadow chancellor, says.

This is what the Conservative party manifesto (pdf) said about not increasing national insurance. The manifesto repeats this promise four times.

A Conservative government will not increase the rates of VAT, Income Tax or National Insurance in the next parliament.

And this is what David Gauke, the chief secretary to the Treasury, told the BBC’s budget programme when asked to explain why the government was raising class 4 national insurance contributions (NICs) when it said in its manifesto that it would not raise NICs

The intent of the manifesto commitment was legislated for [in the government’s tax lock legislation], and that covered class 1 national insurance contribution, which is the rate that applies to employees. It didn’t cover class 4, which is what we are increasing today.

One of the reasons for that was at the same time we were abolishing class 2. So you’ve got to remember that for most self-employed people, if you look at all the reforms to National Insurance contributions that we are making over the next couple of years most of them will be paying less in National Insurance contributions, not more. The relatively higher earners will be paying more - that is true. But the majority of self-employed will pay lower levels of NICs in three years’ time than they do today.

As my colleague Heather Stewart reports, at the post-budget briefing Philip Hammond’s spokesperson tried a novel argument when asked why the government was breaking a manifesto promise.

Or, to put it another way, ‘the manifesto is not what matters’. As defensive lines go, that is fairly weak.

According to Huffington Post’s Paul Waugh, the briefing was grim.

And here is the assessment from the BBC’s Norman Smith.

Updated

Small print alert: Hammond missing one of his targets

The OBR has given the government three ticks, and one cross, for today’s budget:

OBR

Why the cross?

Because Philip Hammond is still planning to run a deficit of around £16bn in 2021-22, which will be well into the next parliament (assuming this one runs until 2020).

The OBR also fears that the public finances will be under greater pressure after the next election:.

It says:

The Government does not appear to be on track to meet its stated fiscal objective to “return the public finances to balance at the earliest possible date in the next Parliament”.

The deficit falls little in 2020-21 and 2021-22, while the ageing population and cost pressures in health are likely to put upward pressure on the deficit in the next Parliament.

Updated

Could this be tomorrow’s headline?

It only works if the readers twig that NIC = National Insurance Contributions, of course...

Here’s some reaction to the Budget from the voluntary sector, from Hannah Terrey, Head of Policy and Campaigns at the Charities Aid Foundation:

“The Chancellor today affirmed that he has listened to the voice of businesses in setting out the country’s post-Brexit financial plan. Government now needs to listen to the voice of charities and set out a post-Brexit social plan.

“Although the Chancellor did not mention the Prime Minister’s vision of a ‘Shared Society’, his pledge to make Britain stronger, fairer and better will require the Government to work hand in hand with charities in order to deliver this promise and to bring a divided country back together.

“Charities are playing an ever-increasing role in supporting people across society and are seeing demand for services rise against decreased funding. We know that one in five chief executives say that their organisation is struggling to survive.

“It is good news that the government has given funding to some charities in today’s Budget but there needs to be more to the plan than temporary funding measures.”

Updated

And here is a panel from Guardian Comment on the budget, with verdicts on it from Zoe Williams, Faiza Shaheen and Kate Maltby.

Here is the page on the Treasury website with all the budget documents. Here is the budget red book (pdf), the main document.

And here is the OBR’s Economic and fiscal outlook (pdf), its budget report.

The Resolution Foundation thinktank have calculated that the changes to national insurance rates will hit higher earners hardest:

Duncan Weldon of the Resolution Group (the financial services firm) suggests that the changes are progressive:

Updated

Small Print alert: National living wage not forecast to hit target of £9 an hour by 2020

When George Osborne introduce the “national living wage”, he said he expected it to be worth at least £9 an hour by 2020.

But the OBR has now revised down its forecast of what the NLW is likely to be. This is what it says in a footnote on page 58 of its report.

The level of the National Living Wage consistent with our forecast has been revised down slightly since November – from £8.80 to £8.75 an hour in 2020, reflecting revisions to our earnings growth forecast.

The OBR does not set the NLW, but it makes a forecast of what level it it likely to be set at based on labour market figures.

Small Print alert: New rules for personal injury payments to increase government borrowing by £1.8bn

Last week Liz Truss, the justice secretary and lord chancellor, announced changes to the way personal injury compensation payments are calculated. We were told this would cost the NHS an extra £1bn a year, which the government will fund.

The OBR report (page 96) says the actual cost to the public sector will be £1.2bn a year.

But it also says the new rates will push up inflation, increasing the cost of interest on index-linked gilts, with the result that the total impact on government borrowing in 2017-18 will be to push it up by £1.8bn.

Skyscrapers in the City of London.

The pound and stock market both recovered some of their earlier falls during the course of Hammond’s speech, but the reaction is muted.
Sterling, down 0.38% at $1.2153 against the dollar and 0.25% at €1.1519 at the start of the speech, recovered to $1.2178, 0.25% lower, and €1.1543, down 0.03%, as the chancellor sat down.

Investors liked the improved growth forecasts and the reduction in public borrowing.
Meanwhile the FTSE 100, which was down around 19 points at 7319, recovered to 7329, down 9 points as he finished his speech.

Liberal Democrat leader Tim Farron reckons the rise in national insurance bills for the self-employed will hurt an important political demographic....

Pupils at King Edward VI School Handsworth start their GCSE examination in Biology

There are few surprises on education in the budget, with “T-levels”, investment in technical education and more money for free schools, including grammars, all well covered in recent days. But any hard-up head teachers hoping against hope for an announcement from the chancellor of more money for their schools will be disappointed.

While there were some warm words for the government’s commitment to technical education, there was real anger that what money is available is being targeted at new free schools, some of which will be selective, rather than existing mainstream schools that are facing a £3bn funding squeeze.

Russell Hobby, general secretary of school leaders’ union NAHT, said the chancellor had failed to deliver at a time when 72% of school leaders had said their budgets would be unsustainable by 2019.

“Schools are being pushed beyond breaking point. The budget today does nothing to change that.”

Kevin Courtney, general secretary of the National Union of Teachers, added:

“School budgets have been cut to the bone, class sizes have increased, subjects have been dropped from the curriculum, materials and resources are scarce yet nothing has been done to address this very serious problem.

“Instead of tackling this crisis of their own making, we now learn that extra funding will pour into the opening of new free schools and grammar schools for which there is absolutely no need. Parents and teachers will be deeply dismayed at this flagrant and irresponsible waste of money.”

John Pugh, Liberal Democrat education spokesman, was equally critical.

“This is unbelievable. Two weeks ago the free schools programme was shown to have overspent to the tune of billions of pounds, at the same time as existing schools struggle to pay for books, cut teachers and their buildings decay around them.

“The Tories absolutely have their priorities wrong on education, if they think this is the right way to spend money. Investing in free schools and grammars is only going to make the divides between local areas, and between richer and poorer children, worse.”

Health groups, including the body representing children’s doctors, have welcomed the chancellor’s confirmation of the rates that will be slapped on sugary drinks through the “sugar tax” that his predecessor George Osborne announced in what turned out to be his last budget last year. It will be 18p per litre on drinks containing between five and eight grams of sugar per 100ml and rise to 24p per litre for drinks containing more than eight grams per 100ml, as originally proposed by the OBR.

Lucozade and Irn Bru have already been reformulated to ensure that they escape the new tax, which will be introduced in April 2018, and Tesco have also decided to strip excess sugar out of their fizzy drinks to ensure they do not have to pay the levy either.

Small Print alert: Business rate income still rising

Despite the £435m of fresh help announced today, UK firms will be paying billions more in business rates over the next few years.

The OBR’s new forecasts show business rate income rising to £33.7bn in 2021-22, up from £28.8bn in the current financial year.

Budget 2017

The support for the hospitality industry comes with a catch too -- it may not apply to companies who own multiple pubs.

The budget statement says:

3.17 The government will also introduce a £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1 April 2017.

Small print alert: Giveaway, then take-back

The net impact of the measures in today’s budget is quite small.

There is an increase in spending of £1.5bn in the next financial year (mainly the extra support for social care), but this is balanced by tax increases from 2019.

Budget 2017

Here’s the detail (negative numbers show money leaving the Treasury, and positive ones are money coming in)

Budget 2017

Updated

The budget red book runs to just 64 pages. Last year’s was 146 page long.

The independent Office for Budget Responsibility will hold a press conference to discuss today’s statement at 3pm - here’s their initial response:

Snap political summary: A minimalist budget, with almost nothing to say on the key challenge for the UK

At least one promise was kept: we were told this would be a relatively dull budget, and Philip Hammond delivered. The headline announcement was an extra £2bn for social care (the Treasury had been happy to let people expect £1.3bn), but this is over three year and, in relative terms, it is about the bare minimum of what he needed to announce without generating another raft of “care in crisis” headlines. The extra money to alleviate the impact of the business rates revaluation will be welcome, although he was not talking huge sums, and the spending announcements for health and education, were minimalist. You can tell the chancellor did not have much money to spray around because he even highlighted some announcements worth a mere £5m, which, in Treasury terms, is a figure so measly as to amount to little more than an accounting error.

But there were at least two unexpected features. Hammond made a very bold claim for his new T levels, saying they would once and for all establish parity between academic education and technical education. This is something that policy makers have been aspiring towards for generations. On the basis of what Hammond proposed, it is hard to believe that a technical qualification will achieve equal status to a university degree, but he has set the government a high standard by which it wants to be judged.

More surprisingly, Hammond also devoted a long passage in the speech to explaining why he wanted to make the self-employed to pay more in tax. The standard procedure for a chancellor with an announcement like this to make is to mumble something quickly and bury the details in the red book, to be uncovered by the IFS late on Thursday afternoon. Hammond sounded like someone making the case for equalising tax treatment because he genuinely believed it was the right thing to do. He was equally blunt about the case for changing the tax arrangements for people who pay themselves through companies.

There was also a big omission in the speech. Hammond said almost nothing about Brexit. He is known to be wary of the government’s lurch towards a hard Brexit, so his reticence is understandable, and the speech can be seen as a good guide to the May government’s non-Brexit agenda. But over the next two years what happens on Brexit will probably matter more to the UK than anything announced today and so, as budgets go, this one was relatively peripheral.

A Treasury spokesperson is denying that the rise in national insurance rates for the self-employed is a breach of the 2015 manifesto.

Political editor Heather Stewart has the details:

You can see all the Treasury documents here.

Jeremy Corbyn is responding to the budget. He says that this was a budget of utter complacency.

He says millions wake up not knowing if their jobs are safe, and millions wake up struggling to make ends meet.

There are people relying on food banks. And last night 4,000 people slept rough. Yet the chancellor boasts about a strong economy.

It is not working for the NHS, or for school, where funding is cut, or for the police, who face cuts, leaving neighbourhoods in a perilous state.

And, for people with disabilities, who are being denied the support the courts say they need.

He says parents with grown-up children are having to pay their children’s debts.

He says the government is cutting services to fund tax cuts for the few.

(We will post more excerpts from Corbyn’s response soon.)

Snap economic summary: Deficit remains a three-parliament problem

Philip Hammond made a good fist of presenting today’s economic forecasts - peppered with a few jokes that went down terribly well on the Tory back benches (Labour probably enjoyed the line about Norman Lamont getting the boot in 1993 too).

But things only look marginally brighter than after Autumn Statement. True, Britain is on track to borrow £26bn less than expected over the next five years (this is the headroom against the headline target of a deficit of 2% of GDP).

That’s mainly due to a big improvement in this year’s figures.

But (and Hammond didn’t duck this fact), The UK is still going to borrow £100bn more than expected before the Brexit vote.

You’ll remember that another sacked chancellor, George Osborne, once promised to eliminate the deficit in the last parliament - on Hammond’s watch, we’ll still be borrowing half way through the next parliament (assuming no snap election…).

Here’s the new borrowing forecasts, compared to last November’s:

  • 2016-17: £51.7bn, down from £68.2bn in the autumn statement
  • 2017-18: £58.3bn, down from £59bn
  • 2018-19: £40.8bn, down from £46.5bn
  • 2019-20: £21.4bn down from £21.9bn
  • 2020-21: £20.6bn, down from £20.7bn
  • 2021-22: £16.8bn, down from £17.2bn

And what about the robust growth since the Brexit vote? Well, it’s not going to last (as S&P warned this morning). Instead of a sharp slowdown this year, the government now expects weaker growth in 2018 and 2019 - in the run-up to the exit from the EU.

Here are the new growth forecasts:

  • 2017: 2%, up from 1.4% in the autumn statement
  • 2018: 1.6%, down from 1.7% in the autumn statement
  • 2019: 1.7%, down from 2.1% in the autumn statement
  • 2020: 1.9%, down from 2.1% in the autumn statement
  • 2021: 2%, matching the 2.0% forecast in the autumn statement

Updated

Hammond says the government is continuing with its plan to improve the economy.

It wants to make Britain the best place in the world to do business.

We have a remarkable history, he says. But we look forward, confident our best days are ahead of us.

He says the government wants to build a stronger, fairer Britain.

And that’s it.

Here’s some instant reaction to the £2bn in social care help, from Labour’s Alison McGovern...

...the Observer’s Sonia Sodha....

..and journalist Jane Merrick:

Hammond turns to health.

  • A £100m fund set up to fund GP triage projects in A&E departments, to relieve pressure on them next winter.

He says, as the voters of Copeland understood, “we are the party of the NHS”.

Updated

Hammond says some NHS sustainability and transformation plans (STPs) will be available before the autumn. He says £325m will be available for them.

Hammond says just 24 local authorities are responsible for half of all delayed discharges.

So measures will be taken to ensure more joined-up working, he says.

The long-term challenges of funding social care require a strategic approach.

  • Green paper to be published later this year on long-term funding for social care.
  • Introducing Labour’s “death tax” will not be an option, he says. (The “death tax” was a proposal before the 2010 election for a 10% levy on estates to fund social care.)

Hammond announces an extra £2bn for social care over next three years

Hammond turns to social care.

The system is under pressure, he says, putting pressure on the NHS.

The government has given the system an extra £7bn already.

  • Hammond announces an extra £2bn for social care over next three years, with £1bn available in 2017-18.

Hammond says the Department for Education will pilot different approaches to encourage lifelong learning.

Updated

Hammond says there is still a lingering doubt about the parity of esteem between academic education and technical education.

  • Hammond says new T levels will once and for all establish parity of esteem between academic and technical education.
  • Time spent by students doing technical training is to be increased by 50%.
  • Technical students to have access to student loans, like students at university.

Updated

The BBC’s Laura Kuenssberg reckons Hammond can claim he is not breaking a manifesto commitment on national insurance, because he is only raising it for the self-employed.

But will voters feel the same?

Updated

Hammond says the academic route in the UK is one of the best in the world.

But technical education is near the bottom of the international league.

Updated

Hammond says 1.8 million more children are being taught in good or outstanding schools than in 2010.

The government will create more selective free schools, so academically gifted pupils can benefit.

  • Hammond announces funding for an extra 110 free schools, on top of 500 already announced. Some will be specialist maths schools, he says.
  • Free school transport to be extended to all pupils on free school meals at a selective school.
  • An extra £260m will be invested in improving school buildings.

Updated

Caroline Lucas, the Green MP for Brighton, has also welcomed the new support for business ratepayers.

But she still doesn’t see enough fairness in this budget.

Updated

Hammond turns to schools.

Investing in education and skills helps tackle the productivity gap, and delivers greater fairness, he says.

If you talk to people, there is a recurring concern: will young people have the skills they need for life, and will they have the same opportunities we did?

The proportion of young people not in training or education is the lowest it has been, he says.

Updated

Hammond announces measures on congestion.

He says he has agreed with the mayor of London to devolve more power to him.

Tomorrow, the Midlands engine strategy will be published, he says.

Hammond says he is also announcing extra funding for the Scottish, Welsh and Northern Irish governments. We are stronger together, he says.

Updated

Hammond says there will be £200m for projects to get private sector investment in full-fibre broadband networks.

Hammond says rising living standards must be at the heart of an economy that works for everyone.

Today he is allocating £300m to support the brightest research talent, including for 1,000 PhD students in Stem subjects. He also will invest in driverless technology, a project the Labour party knows something about.

Updated

Lies, damn lies, and manifesto commitments, eh?

Updated

Hammond says he is taking steps to boost consumer rights.

These were briefed at the weekend.

Hammond says Jeremy Corbyn is so far down a black hole that even Steven Hawking has disowned him.

Labour MPs are criticising Philip Hammond for hiking the national insurance rate paid by self-employed people.

Here’s the former shadow chancellor Chris Leslie.

And here’s the MP Tom Blenkinsop.

Updated

Hammond says he can announce three additional measures for women, although the prime minister has announced two of them, he says.

Theresa May can be heard saying: “It’s international women’s day.”

Hammond says he will spend £5m on measures to mark the 100th anniversary next year of legislation giving women the vote.

Updated

The Conservative MP James Berry is pleased that Hammond isn’t spending the windfall in today’s fiscal forecasts.

His fellow Tory Damian Collins welcomes the help on business rates.

But the SNP MP Richard Arkless has spotted some alarm on the government backbenches about the tax changes in dividends.

Updated

Hammond says the NS&I bond announced in last November’s autumn statement will be available from this autumn and pay 2.2% on deposits up to £3,000.

Updated

Hammond turns to pay.

The national living wage will rise to £7.50 in April, he says.

The personal allowance will increase for the seventh year in a row and the higher rate threshold will also go up.

Hammond says the government remains committed to increasing the tax threshold to £12,500, and the higher rate threshold to £50,000, by the end of this parliament.

Updated

Hammond turns to duties and levies.

He says he is pleased to announce a reduction in the revenue from the sugar tax. That is because producers are reducing the amount of sugar in drinks.

Schools will get £1bn from the revenue expected for this.

  • Vehicle excise duty frozen for hauliers, and HGV road user levy frozen too.
  • No changes to previously planned duties on alcohol and tobacco.

Updated

Hammond turns to corporate taxation.

He does not want people forming companies just to reduce tax.

The gap in total tax and NICs between an employed worker and someone with their own company is even bigger than the gap between the employed and the self-employed.

This is not fair, and must be addressed, he says.

He says the dividend allowance has encouraged the proliferation of incorporation.

  • Tax-free dividend allowance to be reduced from £5,000 to £2,000 from April next year.

Hammond turns to the self-employed. There has been a big increase in the number of people working like this.

He has been self-employed, he says. There are good reasons for being self-employed.

Matthew Taylor is reviewing employment practices. Taylor has given his preliminary thoughts to the Treasury. He thinks the tax system is a big factor driving the move towards self-employment.

The self-employed used to have different tax rates because they had different pension arrangements.

But the new state pension has to a large extent removed this disparity.

He says the difference in national insurance contributions for two groups of workers is no longer justified. The employed and self-employed use public services alike.

The lower NIC rates cost the taxpayer £5bn a year, he says.

He says he will reduce the gap.

He has considered reversing George Osborne’s decision to abolish class 2 NICs.

But class 4 NICs will increase by 1% to 10% in 2018, with a further 1% rise in 2019.

  • Hammond says Treasury to raise an extra £145m by 2021-22 through extra tax on the self-employed.


Updated

Hammond says he wants taxes to be fair.

That means people have to pay what is due.

He says a series of measures will raise an extra £820m over the forecast period.

He says the top 1% of income taxpayers pay 27% of all income tax – a higher proportion than under Labour.

But there has to be fairness among individuals, he says.

Updated

Hammond announces three measures amounting to extra £435m cut to business rates

Hammond turns to business rates.

Business rates raise £25bn a year, he says. So they cannot be abolished.

But the digital part of the economy needs to be better taxed in the medium term.

He says he wants the business rates system to be fairer. The government will set out plans and its preferred approach before the next revaluation.

The revaluation has raised some hard cases.

He has three measures, he says.

  • Any business coming out of small business rate relief will benefit from an extra cap - meaning their rates will not increase by more than £50 a month.
  • There will be a £1,000 discount on business rate bills for all pubs with rateable value of less than £100,000 – 90% of all pubs.
  • A £300m fund will be made available to councils to allow them to provide discretional relief.

Hammond says, taken together, this amounts to a further £435m cut in business rates.

Updated

Hammond says he has accepted industry calls for reduction in burdens affecting R&D tax reliefs.

  • Introduction of quarterly reporting delayed for small businesses for a year, at a cost of £280m.

Hammond says the UK needs a fair tax system. He wants it to be the best place to start a business.

Under the last Labour government - “by the way, they don’t call it the last Labour government for nothing” - corporation tax was higher, he says.

Hammond says some have argued that lower borrowing justifies more unfunded spending.

But he disagrees. Britain has a national debt of nearly £1.7 trillion, equivalent to £62,000 for every household.

The only responsible course is to continue with the plan, undistracted by the reckless policies advanced by the opposition.

We on this side will not saddle our children with ever-increasing debt.

He says Labour proposes borrowing another £500bn.

Hammond turns to debt.

  • Debt forecast to be 86.8% this year, peaking at 88.8% next year - 1.4% lower than forecast.

Hammond says borrowing is forecast to be £16.4bn lower than forecast in the autumn.

He says the UK is forecast to meet its EU stability and growth targets for the first time in a decade. But he does not expect a congratulatory letter from the EU.

Hammond says the employment rate has risen. Unemployment has fallen fastest in Yorkshire and Wales.

He says inflation is forecast at 2.4% this year, 2% next year and 2% in 2019.

Hammond’s gag about Norman Lamont getting sacked in the 1990s has caused a stir:

He turns to the OBR forecast. This is the spreadsheet bit, he says. But bear with me, he says, he has a reputation to defend.

  • OBR has upgraded its forecast for growth next year from 1.4% to 2%.

He thanks the OBR for its report received today. And he thanks his ministerial team.

But there is no room for complacency, he says.

Debt is too high. Too many young people leave school without skills. And too many families are feeling the squeeze.

Hammond says in 2016 the UK’s growth was second only to Germany in growth amongs the major economies.

There is now a higher proportion of women at work than ever before, including in the parliamentary Conservative party.

Hammond says this is the last spring budget.

The Treasury reminded him he is not the first chancellor to announce this. Norman Lamont made the same pledge 24 years ago. But 10 weeks later he was sacked.

Hammond says the economy has continued to confound the commentators with robust growth.

He says the budget extends opportunity to the young, delivers investment in public service and continues the task of getting Britain to live within its means.

Philip Hammond's budget statement

Philip Hammond is about to start his statement.

May mentions the returnship scheme that is getting extra funding today. (See 10.23am.)

While we wait for chancellor Philip Hammond, here’s a reminder of the turbulent 12 months since the last budget.

As this chart shows, the pound is worth around 16% less than in March 2016 (and at a seven-week low of $1.215 right now)

Updated

May says new money will go into schools as a result of today’s announcement.

But this is not about creating binary choice in the eduction system.

Snap PMQs verdict

Snap PMQs verdict: The recording that emerged yesterday about the Surrey council leader suggesting that he had a “gentleman’s agreement” with the government about extra funding for the council suggests there is something distinctly fishy about this whole affair, and raises questions about quite how honest Theresa May was being when she dismissed the whole thing at PMQs a few weeks ago, but to actually prove at PMQs that May was in the wrong would have required great forensic skill, and Corbyn was not up to the task. Robin Cook might have managed it, or Yvette Cooper could have had a good go, but May brushed aside Corbyn aside with her first, lawyerly-worded answer, and Corbyn then never got much further. It is not easy to see how he could have done better, but perhaps he could have focused on when Surrey was told it could pilot the business rates retention system (before others?). Or pressed her as to how much this would benefit Surrey financially? After that Corbyn moved on to grammar schools, but although he had a perfectly good point to make, he could not convert this into a question that unsettled May. So, all told, she had a very easy run (which will be forgotten about as soon as the budget starts.)

Jeremy Corbyn presses Theresa May on Surrey council leaks at PMQs

Updated

Prime Minister Theresa May laughing during today’s PMQs, as Jeremy Corbyn asked about the Surrey ‘special deal’
Prime Minister Theresa May laughing during today’s PMQs, as Jeremy Corbyn asked about the Surrey ‘special deal’ Photograph: PA

Corbyn says May did not answer the question about new school places.

May says she wants to increase the number of good school places. There will be diversity. She wants parents to have a choice. Corbyn wants parents to take what they are given.

Corbyn says the NAO says 420,000 school places are needed. But May is putting new school places in the wrong place. It is a vanity project, she says.

Mays says it is no vanity project to want good schools to open. Most new schools are opening in disadvantages communities. This is about a fairer society. Labour want to weaken it. She is fighting for the best deal for Britain. Labour is divided, and unfit to govern the country.

Corbyn asks, if there is no special deal, why Surrey is the only council joining the business rate retention pilot.

May says this pilot is coming into effect in April. In 2019-20 it will be available to 100% of councils. As for next year’s pilot, all councils can apply.

Corbyn says May said there was a memorandum of understanding. Now she is unclear of this. There is another area of deep concern. How many new school places will be needed by 2020.

May says Corbyn said she did not answer the question about a special deal for Surrey. She did. There was no special deal.

Jeremy Corbyn starts by wishing all women a happy day. Labour has more women MPs than all other parties combined.

He says he raised the question of leaked texts between Surrey council and the government a few weeks ago. May accused him of peddling alternative facts. But what is the difference between a sweetheart deal and a gentleman’s agreement.

May says Corbyn is asking if there has been a particular deal with Surrey not available to other council. The answer to that is no. All councils can impose a 3% social care precept. Some councils will be able to take part in the pilot on business rates. She lists some of the councils involved and says they are all Labour. Surrey is joining them. Why shouldn’t a Conservative council get the same advantage?

Corbyn asks what deal was done with Surrey council. Can May tell every other council what gentleman’s agreement is available to them?

May says if Corbyn waits, he will find out in the budget what social care deals are being offered to councils. If he is asking whether Surrey was offered something not available to anyone else, the answer is no. If Corbyn wants to find a conspiracy, he should look behind him.

Sheryll Murray, a Conservative, says the government has a proud record of tackling domestic abuse. But what more can be done?

May says she takes a personal interest in this. But she wants to do more, and to transform the way these crimes are tackled. Today she has committed an extra £20m to the problem.

Theresa May starts by mentioning international women’s day, saying she wants to celebrate the contribution of women, and redouble efforts to address the issues women face.

You can watch PMQ and the Budget by clicking the video at the top of this liveblog (you might need to refresh the page).

PMQs

PMQs is about to start.

Here is the list of MPs asking questions.

Back to Michael Heseltine for a moment. This morning he said he had never met Theresa May. But Number 10 is suggesting his memory may be at fault.

According to Downing Street, Philip Hammond told cabinet that the main themes of the budget would be:

Helping young people get the skills they need to do high-skilled, high-paid jobs in the future;

Giving more children the chance to go to a good or outstanding school; and

Continuing the work of bringing down the deficit, so the country can “get back to living within its means”.

The pound is continuing to suffer some pre-budget jitters, dipping to $1.214 on the currency markets (from $1.22 overnight). That’s a new seven-week low.

Paresh Davdra, CEO and Co-Founder of RationalFX, blames Brexit worries, and concerns that a ‘hard exit’ will hurt growth.

. The pound is hovering just above 31-year lows against the dollar, as investors are vexed over the likely impact on the economy from a hard break from the EU and the trickledown effect of the low pound on consumers and businesses in the form of rising costs is now noticeable in the current structure.

Updated

Here is the picture of Philip Hammond posing with his Treasury team.

From the left, they are: Lady Neville-Rolfe, commercial secretary to the Treasury, David Gauke, chief secretary to the Treasury, Hammond, Jane Ellison, financial secretary to the Treasury, and Simon Kirby, City minister.

Neville-Rolfe, a former civil servant and Tesco director, may be the first member of Her Majesty’s government to have a blue streak in her hair.

Philip Hammond with his Treasury team.
Philip Hammond with his Treasury team. Photograph: Victoria Jones/PA

Theresa May has told cabinet that the budget provides “a long-term plan for Britain which puts the wheels in motion for a future of growth and prosperity”, Downing Street said.

May also said the budget “kept a strong hand on the fiscal tiller while addressing the key issues facing the country”.

“Wheels in motion”, “hand on the tiller” - Number 10 clearly has a thing for travel metaphors.

Still, to my ears, both are an improvement on what Philip Hammond said on the Andrew Marr Show on Sunday about how he wanted to ensure that the UK has got “enough gas in the tank to see us through that journey [Brexit]”, an image that may have been intended to conjure up the thought of a leisurely drive to Switzerland but instead reminded me of a 4x4 getting ready to set off across the Sahara.

Here’s a video clip of chancellor Hammond and team:

We posted the picture from the Tory MP Michael Fabricant earlier (see 8.51am) showing MPs queuing up to bag a seat in the chamber for the budget.

Fabricant has now posted a picture of the seat he has reserved with a prayer card.

Philip Hammond and his Treasury colleagues has just emerged from 11 Downing Street, clutching the famous red Budget box.

He’s posing for a few photos, before hopping into his ministerial limo for the short drive to the Commons.

Philip Hammond

The media shout a few questions, including “Saving for a rainy day, chancellor?”, “Any spare cash in there, chancellor?” and “Grinning and bearing it, chancellor?”.

Hammond keeps quiet (perhaps remembering how Hugh Dalton lost his job after revealing a few Budget secrets to a lobby hack back in 1947).

Updated

Sky’s Ed Conway says Disraeli delivered the shortest budget speech in history.

Sky’s Adam Boulton has some potential good news for those us doing the budget live blog frantic typing ...

PM Theresa May has left Downing Street and headed to parliament for Prime Minister’s Questions, at noon, followed by the budget.

Theresa May leaves for Prime Minister’s questions ahead of the 2017 Budget at 10 Downing Street on March 8, 2017 in London, England. Today’s Budget will be the last one to take place in the spring. It is being replaced by an annual autumn Budget, the first of which is to be held later this year. The current Chancellor wants to simplify the process of setting taxes and government spending. (Photo by Dan Kitwood/Getty Images)

Britain’s accountants are pleased that Philip Hammond is shifting the budget to the autumn, and instituting a simple ‘spring statement’ from 2018. But they want him to go further.

The Chartered Institute of Management Accountants (CIMA) argues that Britain should just have two big fiscal events per parliament, to limit the disruptive changes to economic, tax and regulation policy.

Andrew Harding, chief executive of CIMA, argues that business, society and government would benefit from a more long-term view:

“Until the Chancellor’s Autumn Statement announcement, the UK was the only major advanced economy to make significant changes to the tax system twice a year. This reform was certainly a step in the right direction, but it’s not nearly far enough.

“By adopting a Five Year Spending Review and Budget, a mid-Parliament review, and Annual Performance Reviews the Government would introduce a world-leading system that takes a longer term view, meddling less but achieving more.

Updated

The Financial Times’ political editor George Parker has written a good article about the relationship between Philip Hammond and Theresa May (subscription). Here’s an extract.

Mr Hammond’s friends say he has no wish to run a political empire from the Treasury or to announce policies for other ministers. He wants to run a serious operation for serious times. “Boring is good,” he advises colleagues ...

Brexit has caused strains. On several key calls, Mrs May and her team of former Home Office advisers have prevailed: controlling immigration and leaving the jurisdiction of the European Court of Justice are red lines. Despite deep Treasury misgivings, Britain is leaving the single market and customs union ...

Mr Hammond, who tried to keep open the option of staying in the customs union, has however been adept at winning battles with Number 10 where he feared there was a risk the government could make a bad situation even worse.

While Mrs May and her team took Brexit as a sign that voters wanted to tame global capitalism, Mr Hammond took the opposite view that if Britain was leaving its biggest market, it needed to prove it was still open for business.

The chancellor, an economic liberal, went along with most of Mrs May’s industrial strategy, but succeeded in deleting some of the policies with which the prime minister had previously been associated.

Mr Hammond resisted the idea of placing workers on company boards, strict limits on executive pay and suggestions of a much more restrictive foreign takeover regime. “We’re not going down the Danone route,” he said, referring to French attempts to protect the “strategic” yoghurt company.

A view of the London skyline.

Over in the City, traders are getting nervous as they await Philip Hammond’s big turn.

The pound is still languishing at a seven-week low (now at $1.215), while the FTSE 100 index is becalmed at 7337 points, down 1 point today.

Chris Beauchamp of IG expects the chancellor to keep his powder dry, saving the likely improvements in borrowing forecasts in a warchest for a rainy day:

The uncertainty associated with the forthcoming Brexit negotiations means that Hammond is unlikely to go all out for now, instead holding back capacity to boost the economy if things turn sour down the line.

While Mark Carney jumped the gun, implementing new stimulus immediately after the referendum result, it makes sense for Hammond to withhold his finite resources until they are unmistakably needed.

Aberdeen Asset Management chief economist Lucy O’Carroll is worried that Hammond won’t do enough to tackle Britain’s economic challenges today.

The independent Institute for Fiscal Studies estimates that to meet pension promises and keep pace with rising demands for health and social care, spending will need to rise by around £20 billion a year in the next parliament.

To tackle this spending challenge, the economy would need to grow faster; public service delivery would have to be fundamentally re-evaluated; and/or taxes would need to rise. Brexit means the Chancellor certainly can’t rely on the first, and there’s no clear appetite for the second. So the best we are likely to get for now is a hint on the third. Details are likely to be thin on the ground until this year’s second Budget, in the autumn.

And Labour has tweeted a video message about the budget from John McDonnell, the shadow chancellor, about the budget.

Philip Hammond has posted a picture of the budget document on Twitter.

S&P: UK economy is losing momentum

S&P logo

Credit rating agency Standard & Poor’s has issued a warning that Britain’s economy is ‘losing momentum’.

In a report issued this morning, just in time for the Budget, S&P warns that the “consumer spending spree” is cooling off. That could have significant implications for growth, as consumers have driven UK growth in the last few quarters.

Demand for credit from businesses is also “softening”, which is likely to also indicate that growth may be weakening.

S&P warns that this is the first sign that growth is starting to slow, after being stronger than expected since last June’s referendum.

The agency predicts that the Bank of England will maintain loose monetary policy (ultra-low interest rates), but this won’t be enough to prevent a slowdown:

“Overall, we think credit supply conditions remain relatively favourable and are supporting the economy, in particular thanks to the BoE’s continued very accommodative stance.

“However, these favourable conditions will not be able to completely offset the expected adverse impact of pronounced Brexit-related uncertainty and the inflation squeeze on household budgets in particular.”

There’s no change to the UK’s credit rating, though. S&P slashed Britain’s credit rating by two notches to AA (the third-highest rating) the Monday after the Brexit vote, and it’s been unchanged since.

Updated

Mumsnet has a budget exclusive. It is international women’s day and, partly to mark this, the budget will contain a pledge to spend £20m on tackling domestic violence and abuse and another £5m to extend return to work schemes, for women and men, into areas where they are not in place.

Commenting on the return to work schemes, Theresa May told Mumsnet:

Women are driving our economy forward – securing 77% of new jobs last year, and now represent a higher percentage of FTSE Board membership than ever before.

Returnships are open to both men and women but we should acknowledge that, more often than not, it is women who give up their careers to devote themselves to motherhood, only to find the route back into employment closed off – the doors shut to them.

This isn’t right, it isn’t fair and it doesn’t make economic sense. So I want to see this scheme extended to all levels of management and into industries where women are underrepresented.

Apart from the budget, the other big story around this morning is the sacking of Lord Heseltine. As Paul Goodman writes in good blog on this for ConservativeHome, this is something even Margaret Thatcher never achieved. And it was not as if he simply had an honorary post of no consequence. He was working on five projects for the government, and spending three or four days a week on them, he told the Today programme. Goodman says that under David Cameron he was “arguably the most powerful politician outside cabinet in Britain”.

In a post on his Facebook page ITV’s political editor Robert Peston argues that there is a link with the budget, and that Theresa May is “almost as irked” with Philip Hammond as she is with Lord Heseltine.

Lord Heseltine has been sacked by Theresa May for exercising a judgement that will also underpin today’s budget - namely that no one has a clue about what Brexit deal, if any, she’ll negotiate over the next couple of years, or the health of the economy in 2019 ...

And here is the scrumptious paradox. It is that same Brexit uncertainty which has persuaded the chancellor to bank the bulk of the unexpectedly higher tax revenues he’s receiving rather than splashing the cash on hospitals, schools, policing and other public services that many fear are close to collapse - because he wants and needs a fiscal cushion (some additional spending power on the nation’s credit card) just in case Brexit goes bad for us.

For what it is worth, my strong impression is that May is almost as irked with Hammond and the Treasury, for refusing to do more now for creaking and fragile public services - though she has secured a billion quid or so for squeezed social care for the elderly - as she is with Heseltine.

In person May is polite and softly-spoken but the treatment of Lord Heseltine will confirm suspicions that she is turning out to be the most vindictive person to rule the country since Richard III. Rosa Prince’s new biography of her, Theresa May, the Enigmatic Prime Minister, is very good on this. Here’s a taste of what Prince has to say.

The real focus of May’s ire was reserved for those who disrespected her, or were rude in some way. Once crossed, she would always seek revenge. Her grudges could last years. A victim might find themselves frozen out or treated with cool disdain until a right moment could be found for more savage retribution ...

In her six years as home secretary, those May feuded with included her Conservative colleagues Cameron, Osborne, Gove and Kenneth Clarke - who memorably described her as a ‘bloody difficult woman’ during the 2016 leadership campaign - as well as the Liberal Democrats Nick Clegg, Vince Cable and Chris Huhne. She also clashed publicly with one of the three Liberal Democrat ministers assigned to her department, Norman Baker, and a Conservative, Baroness Neville-Jones. Brodie Clark, the head of the UK Border Force, and the entire senior management of the Police Federation were also put to the sword following perceived wrongs. It dawned on any number of MPs and former ministers that they had, at some point, been guilty of a perceived slight or insult against May, [Fiona Hill or Nick Timothy, her co-chiefs of staff] only when they found themselves unceremoniously dumped from her government when she entered No 10 in 2016.

Updated

It’s become traditional for satirical artist Kaya Mar to exhibit a new painting on Budget day, close to Downing Street.

Here’s this year’s effort:

Artist Kaya Mar holds one of his paintings outside Downing Street.

We’ve pulled together a few charts to explain the state of the UK economy.

This one shows how this year’s deficit is likely to be smaller than expected, thanks to stronger tax receipts, with annual borrowing expected to keep falling up to 2021.

Budget 2017 chart

But inflation is starting to bite, taking a larger chunk out of household incomes and threatening to wipe out real pay rises.

Budget 2017 chart

More here:

Updated

Many of the tax rises that are going to come into force in the next few years (see 9.15am) are already in the pipeline, in the sense that they are yet to take effect but that they are already in the pipeline. In its green budget the Institute for Fiscal Studies has a good summary. It says between 2015-16 and 20211-22 there will be a net tax rise of £14.4bn, or 0.6% of national income.

A measure of the size of the net tax rises can be taken from looking at the ‘budget scorecard’ in successive fiscal events. This gives an estimate of the revenue effects of each measure, in each year, relative to a counterfactual of not doing that measure. On this basis, tax changes coming into effect since 2015–16 involve a net tax rise, though this comprises a large gross tax cut offset by an even larger gross tax rise. These net tax rises are frontloaded in the current parliament and, in fact, are the biggest contributor to a falling deficit in 2016–17.

Of the £9.6 billion net tax rise in 2016–17, £5.4 billion is from measures announced before the 2015 general election (with the abolition of contracting out into defined benefit pension schemes announced in the March 2013 Budget raising £5.5 billion in 2016–17), with a further £4.2 billion announced in the four fiscal statements since the general election.

This £4.2 billion of net tax rises in 2016–17 from measures announced since the general election arises from tax cuts that amount to a total giveaway of £3.7 billion and tax rises that amount to a total takeaway of £7.9 billion. The tax cuts include above-inflation increases in the income tax personal allowance and higher-rate threshold (costing £1.2 billion in 2016–17) and a freeze to rates of fuel duties (£0.4 billion). The larger tax rises include the introduction of a new dividend tax regime (raising £2.8 billion in 2016–17), an increase in the rate of insurance premium tax (IPT, £1.6 billion) and a higher rate of stamp duty land tax for those purchasing second and subsequent residential properties (£0.7 billion).

Beyond 2016–17, further tax cuts arise, most prominently, from a further increase in the personal allowance and higher-rate threshold (in April 2017), a further freeze to rates of fuel duties (in April 2017), a new main home allowance in inheritance tax (in April 2017) and cuts to the rate of corporation tax (in April 2017 and April 2020), while the larger tax increases include the introduction of the apprenticeship levy (in April 2017), increases in vehicle excise duty on the purchase of new cars (in April 2017), yet another increase in the rate of IPT (in June 2017) and a restriction in pension contribution limits for those on very high incomes (which came into effect from April 2016, but raises significantly more from 2018–19 onwards).

Overall, a net tax rise of £14.4 billion (0.6% of national income) is set to take place between 2015–16 and 2021–22. This comprises a gross tax rise of £34.7 billion and a gross tax cut of £20.3 billion. Between 2015–16 and 2019–20, the net tax rise is actually slightly larger, at £16.7 billion, while between 2019–20 and 2021–22 there is a small net tax cut planned overall (in particular from a cut to the rate of corporation tax).

This is why the IFS has said that on current plans the tax burden is set to rise to its highest level since the mid-1980s.

This is what a Treasury source was saying about the budget last night.

The chancellor is expected to give an upbeat assessment of the future of the British economy, offering a positive backdrop to his first budget ahead of the start of new chapter for the country outside of the EU.

He will say that a strong economy is built on resilience, so the government will continue reducing the deficit, not shirking the difficult decisions on tax and spending, while still investing in Britain’s future.

He will go on to say he knows that many are still feeling the pinch, almost 10 years on from the financial crash and that the government will do everything it can to help ordinary working families to get on.

He will say that in building the foundations of a stronger, fairer, better Britain, outside the EU – the government understands the concerns of those who worry about their children’s ability to access the opportunities they themselves enjoyed, in our rapidly changing economy.

He will say that that this government will tackle this challenge head on by investing in young people’s ability to go to a good school, get good qualifications and get the right skills, equipping them for the jobs of tomorrow so they have real economic security.

“Difficult decisions on tax and spending” is not-especially-subtle code for tax rises and spending cuts.

Pound hits seven-week low as budget looms

Over in the (rainy) City, sterling has slipped to a seven-week low as trader await today’s budget statement.

The pound has shed 0.25% against the US dollar to $1.2165, its weakest point since January 17th (the day Theresa May laid out her Brexit plans).

The pound vs the US dollar over the last year
The pound vs the US dollar over the last year Photograph: Thomson Reuters

Traders are anxious that Hammond sets aside plenty of headroom to protect Britain from the impact of Brexit.

Paul Sirani, chief market analyst at Xtrade, explains:

“It’s going to be a turbulent few hours for markets, as the Chancellor delivers his first ever Spring Budget in the UK. Key to affecting the strength of the pound could be the expected announcement of a so-called ‘Rainy Day Fund’.

The more money, supposedly around £60bn, that Philip Hammond can set aside for steadying the ship as it sails out of the single market, the more likely the pound is to hold its own.

Last night’s drama in the House of Lords, where the government was defeated over its Brexit bill, is also dragging on sterling.

Kathleen Brooks of City Index believes the pound will come under more pressure once Britain triggers its exit from Europe.

While sterling may stage a recovery post-Budget, there are plenty of factors that could weigh on the pound in the future. Other themes that could hurt sterling aside from the contrasting fiscal stance of the UK and the US...is the triggering of Article 50, which is expected to take place by the end of this month.

Updated

Under Philip Hammond the Treasury seems to be less interested in briefing the papers ahead of the budget than it was under some of his predecessors. In fact, that is also true of the government generally under Theresa May. For better or worse, media management has been deprioritised.

As a result only two papers have splashed on budget stories today.

The Financial Times says Hammond will present a bullish outlook.

Here’s an extract from the splash (subscription).

Mr Hammond’s Budget will be buoyed by stronger-than-expected growth and tax receipts. But the chancellor will acknowledge the risks by building up his £27bn Brexit “insurance fund” pencilled in for 2019. Officials said he “would not shirk difficult decisions on tax and spending” to shore up the public finances.

Downing Street declared: “We go into Brexit negotiations from a position of strength.”

And the Daily Telegraph says Hammond will tell people that taxes will rise.

The House of Commons famously doesn’t have enough seats for all its members, and some ultra-keen MPs are already queuing dutifully to get a prime spot.

Lichfield MP Michael Fabricant tweets the scene.

One backbencher has wished the chancellor all the best.

Economics preview: Better forecasts expected

Members of the media outside 11 Downing Street, London, this morning.
Members of the media outside 11 Downing Street, London, this morning. Photograph: Dominic Lipinski/PA

The City is expecting a relatively low-key performance, with Philip Hammond likely to talk up the UK’s economy while also sound suitably cautious about the uncertainty ahead.

Economists predict that Britain may actually ‘undershoot’ its borrowing target this year by around £12bn, meaning a deficit of around £56bn compared to the target of £68bn.

And in another boost for the government, the independent Office for Budget Responsibility is likely (although not certain) to upgrade the growth forecasts it produced for last November’s autumn statement.

Faster growth should mean stronger tax receipts, and thus lower borrowing over this parliament.

That has prompted talk of a Brexit warchest - with Hammond setting aside fiscal firepower in case the economy stumbles, rather than putting more into public services.

But don’t be fooled. This ‘warchest’ is just the flexibility to borrow more in future years, not actually cash in the bank. As Paul Johnson of the Institute for Fiscal Studies tweeted, Hammond would simply be giving himself more ‘headroom’ in case the economy stumbles.

The chancellor himself has promised that today’s measures will help to build a “stronger, fairer, better Britain. But that could include tax rises, possibly through raising the national insurance rate paid by self-employed workers from 9p in the pound to 12p.

That would bring them into line with employees - although Hammond will face criticism if he doesn’t protect low-paid self-employed workers in the Gig economy.

Bosses across the country will be crossing their fingers and hoping for some help in business rates, following the storm of protests in recent weeks.

Ultimately, today’s budget is overshadowed by the shadow of Article 50. Whatever fiscal tweaks changes Hammond announces today will be have little effect on the UK economy, compared to the impact of Brexit.

We shouldn’t lose sight of the big picture either.... Britain’s national debt is still £1.7 trillion and rising, the productivity puzzle remains unsolved, and real wages are going to fall as inflation picks up.

Introduction: Hammond the Roundhead

Chancellors, like most other figures in English public life, can be divided into Cavaliers and Roundheads and Philip Hammond is one of nature’s Roundheads. While chancellors like George Osborne and Gordon Brown revelled in the showmanship of budget day, with announcements conveying boldness and authority, Hammond is more an adherent of cautious, undemonstrative, accountancy politics. It can make him a bit dull, although there is quite a lot to be said for ‘boring’ in public policy making.

And, even in the Hammond catalogue, this is not set to be one of his biggies. Technically it is his first budget, but the autumn statement has become identical to a budget in fiscal heft and so in practice this is his second. It is also his last spring budget because, under a reform he introduced, from this autumn the annual budget will take place towards the end of the year. (So there will be two budgets this year.) According to some Whitehall briefing, he considers the one later in the year as his main one for 2017. This will be a mere warm-up.

Still, it is impossible to shuffle billions of pounds of public money around without doing and saying something of great interest and today I will be covering the budget, and reaction to it, with my colleague Graeme Wearden.

Here is our main budget preview story.

And here are the main timings.

12pm: Theresa May faces Jeremy Corbyn at PMQs.

12.30pm: Philip Hammond gives his budget statement.

3pm: Robert Chote, chair of the Office of Budget Responsibility, chairs a press conference.

As usual we will be covering the pre-budget briefing and analysis, covering the speech as it is delivered, and then focusing on reaction and analysis, paying particular attention to the budget “small print”.

If you want to contact us on Twitter, we are on @AndrewSparrow and @graemewearden.

Updated

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