£12BN VAT CUT HOPE
Hammond’s hint
Chancellor will signal a VAT cut in spring to boost high streets £1.3bn will go on roads in fight to reduce crippling traffic jams Elderly could face the end of ring-fenced yearly pension rises Income tax threshold set for rise to £12.5k, and 40p rate at £50k
CHANCELLOR Philip Hammond will pave the way for a £12billion cut in VAT in his mini-budget on Wednesday.
He fears slower growth, a weakening pound, creeping inflation and £100billion lost to the economy through Brexit will stall consumer spending next year.
So his Autumn Statement will hint at a temporary reduction in VAT from 20 per cent to 17.5 per cent to boost high street sales. Analysts say he will implement the cut in the March 2017 Budget if needed.
Mr Hammond will also announce in the mini- budget that he will spend £1.3billion on improving roads.
The Chancellor will say traffic jams cost £13billion a year in lost output and if this is not tackled 100 million working days will have been lost by 2040.
Projects include a £27million expressway connecting Oxford, Milton Keynes and Cambridge.
But economists believe Britain faces more austerity.
Mr Hammond had a surprise boost last month, when figures showed the economy grew by half a per cent in the third quarter, above expectations.
But only two weeks later the Institute for Fiscal Studies warned of a £25billion hole in public finances by 2020 as growth slows. Inflation is predicted to rise above two per cent next year.
IFS economist Thomas Pope warned: “Significant further austerity after 2020 looks on the cards.”
A £4billion cash injection into the NHS is likely to be revealed during the Autumn Statement.
But Mr Hammond is under pressure to look again at the triple lock which guarantees the state pension rises each year.
He will ban pensions cold callers to protect people’s savings from fraudsters. But Corporation Tax will not fall from 20 per cent to 15 per cent as previous Chancellor George Osborne promised. Mr Hammond plans to cut it to 17 per cent by 2020.
And there will be investment in housing to meet a Tory target of 225,000 new homes.
Moves to look after key voters Whitehall has dubbed Jams – just about managing – are likely.
That means a freeze on fuel duty, saving 2p a litre. But a cut in air passenger tax will have to wait for the Budget.
There may be another rise in the income tax threshold from £11,000 to £12,500 and a 40p tax rate beginning at £50,000.
And Mr Hammond could wrongfoot Labour if he raises the minimum wage by more than the £10 an hour they promised.
Shadow Chancellor John McDonnell said Mr Hammond’s investment in the nation’s fabric is likely to fall far short of the £250billion needed over 10 years.