A week is a long time in politics. At one level, on the tax front nothing much has changed since we published our Budget predictions last week. At another, the level of drama and hype has reached new highs. Will this Budget see a return to stealth taxes if expenditure plans create a hole in the public finances which must be filled? Could abolishing Entrepreneurs’ Relief yield a handy £2.7 billion per year for the Exchequer? What about pensions tax relief? And a mansion tax? And then there’s fuel duty – will the Chancellor brave vocal opposition to unfreeze this tax?
These are all perfectly reasonable questions. After all, who would want to take over as a new Chancellor in a government which has promised to freeze the rates of income tax, VAT and National Insurance? These commitments impose a real burden on the Chancellor because, as history has the habit of reminding us, the first Budget in a new Parliament is the least-worst time to increase taxes. But Mr Sunak should not interpret the fact that the main tax levers are locked and out of his reach as giving him liberty to stage a series of dramatic tax raids in the interests of shoring up the public finances.
Drama is something which Osborne’s Budgets were never short of. However, as we noted last month, Mr Osborne’s tax legacy is unravelling. Rather than taking to the Despatch Box on 11 March with grand gestures and memorable tax changes, Mr Sunak should remember the country’s expectation that he will set its finances on the right course in these profoundly uncertain times. It would be better to indicate a clear direction of travel, consult where appropriate and set out a timescale for decision-making rather than to impose immediate and dramatic changes which unravel during the life of this Parliament.