This coming Wednesday will be the first budget since the Article 50 notification and the Bank of England’s rate rise. What should the Chancellor announce?

National Insurance

The gap between generations, particularly millennials vs their parents and grandparents, should be a key theme in the budget. One way in which the Chancellor could address this would be to remove the exemption from National Insurance which applies once you reach state pension age.1 This has always struck me as unfair – why should you pay less tax just because you are over a certain age? Plenty of pensioners have higher incomes than those in work, and often their incomes are guaranteed and ultimately backed by the state. There is a threshold below which you are not charged National Insurance regardless of your age, so this change would not affect poor pensioners.

The only issue with this change is that it would probably be branded as another ‘granny tax’, which is a political issue for a party whose support is almost entirely based in the over 50 age bracket. However, wealthy pensioners have emerged almost unscathed from austerity, and I think the Chancellor has good grounds to ask them to pay a bit more into the pot.

Although I think that the Chancellor should also align the rates for self-employed earnings with those for employed earnings – currently there’s a difference of three percentage points for earnings between approximately £8,000 and £45,000 – he has tried this before and had to row back due to a backlash from backbenchers. Given that the government doesn’t even have a majority in the Commons, I don’t think he will give this another go for several years.

Universal Credit

Something has to be done about Universal Credit, as already it is causing serious problems to recipients – or perhaps potential recipients would be more accurate given how long it takes to get a claim processed and paid. The implementation is being attacked from both sides, with charities claiming it will make people homeless and landlords complaining that it will cause huge arrears.

Three changes which would make a positive difference are:

  1. Reduce the time from claim to payment. At present this takes around 6 weeks, which is too long for people struggling to get by with no savings. Alternately, make an immediate payment after some basic checks, and then pay the rest after the full assessment process.
  2. Allow people to receive benefits weekly. Many people on low incomes are paid weekly and budget based on the cash they have in their hand. With automated electronic payments there is minimal administrative overhead in offering this flexibility.
  3. Reduce the rate at which benefits are lost if income increases. At present, if your earnings increase a combination of benefit tapering and tax can result in you losing between 63p and 82p of every extra pound you earn. That’s a poor incentive to find work, which is the whole point of tapering.

If Hammond wants some political cover for changes to Universal Credit, he could always point out that many people on benefits are in work, and so he can claim to be helping ‘hard-working families’. He might even get some credit if he can say that he has looked at the experiences in areas where UC has already been rolled out and decided to make changes based on those pilots.

Insurance Premium Tax

This has become a budget favourite recently, as it ticks all the boxes for raising revenue:

  1. Most people aren’t even aware of IPT, unlike income tax, VAT etc.
  2. It’s extremely hard to avoid.
  3. Insurance is often a compulsory purchase.

Basically IPT is like putting up taxes on alcohol and cigarettes, except it’s harder to avoid and less politically sensitive. I wouldn’t be surprised if Hammond has a plan to gradually align it to the same rate as VAT, i.e. 20%.


As the first budget since the Article 50 notification, Hammond will no doubt feel it prudent to hold something back in reserve to provide headroom should negotiations fail and we crash out of the EU with no deal – a situation which sadly seems more likely as time goes by.

Overall, I don’t think Hammond will try anything too spectacular in this budget. The spectre of Brexit is hanging over every decision made by the government, and he doesn’t strike me as someone to charge off in one direction without carefully considering the consequences, even if I might disagree with his conclusions.