Autumn Budget 2018: what to expect in today's speech

A freeze on Fuel Duty, more money for roads, interest-free loans and a Universal Credit boost are on the cards in a Budget dominated by Brexit.

Today the Government will unveil its Autumn Budget, and details are already starting to emerge of what could be included.

The Budget comes a whole month earlier than usual and is expected to include a number of public spending announcements to reassure backbenchers about Brexit, the roll-out of Universal Credit and Theresa May’s promise to end Austerity, the Guardian reports.

“This budget is going to be a very interesting one to watch because there is so much uncertainty around the UK economy at the moment,” explains Mike Jakeman, senior economist advisor at consultancy PwC.

“Economic growth picked up in the second quarter of 2018 and looks to have sustained this momentum in the third. And the budget deficit was lower in the first half of the year than the Government expected.

"These factors could give Philip Hammond some wiggle room to spend more money.”

We’ve taken a look at the expected and possible outcomes of the Autumn Budget.

Note that we'll have a comprehensive review of all the key announcements affecting your pocket in tomorrow's loveMONEY newsletter.

Good news for drivers

Hammond is expected to unveil a £30 billion upgrade to Britain's roads, and a freeze on fuel duty, according to the Daily Mail.

Investment in roads is a welcome relief for drivers whose vehicles are constantly damaged by potholes, and has been welcomed by the RAC.

Fuel Duty will likely be frozen for the ninth consecutive year, although this won't prevent price rises due to commercial and supply/demand factors.

There have been suggestions that Insurance Premium Tax could be raised – leading to higher premium payments for drivers – but this is unconfirmed.

You can read more about finding cheap fuel and claiming pothole compensation by clicking on the links.

Interest-free loans and benefits

The rollout of Universal Credit has been the target of much criticism and is expected to be the target of a 'rescue package', although the exact details are as yet unknown. 

The Government will look at interest-free loans to help people trapped in problem debt, reports the Guardian.

Three million people in Britain borrow from high-cost lenders such as payday loan firms and credit card providers.

There's also been a rapid growth in credit card borrowing with households spending £900 more on average then they received in income last year, the first time this has happened since the 1980s.

We've put together a list of where to get free debt advice here.

Tax hike for the NHS

One of the major headaches for Hammond will be finding the cash to honour Theresa May’s promise to inject another £20bn into the NHS by 2023 – 3.4% annually.

This, however, is still less than the average of 3.7% the health service has received since its establishment in 1948.

The Prime Minister refused to confirm how this cash injection would be funded and the chancellor has been equally tight-lipped on the matter.

However, in his recent speech to the Conservative Party Conference Hammond hinted that it could involve tax hikes. “If we want a well-funded NHS fit for the future, we will have to find a little more tax to fund it in the future,” he said.

“I shall say more at the time of the Budget.”

It is not clear whether this will affect the Government's long-stated ambition to raise the personal allowance – the amount you can earn before tax is paid – and raise the higher rate threshold.

Worried? Here are 20 ways to pay less tax, including Income Tax, Council Tax, and Inheritance Tax

A raid on pensions

Ed Monk, personal investment expert at Fidelity Investments, suggests Hammond could target the pensions system to pay for it by scrapping pension tax relief or reducing the annual allowance.

“There is mounting speculation that…Philip Hammond will take aim at tax relief on pension saving as a way to pay for the extra funding for the health service, Local Government or anything else he’s under pressure to give more money to,” he says.

“The most dramatic move he could make would be to alter the tax relief available on pension contributions.

"But short of that are many limits, thresholds and allowances that can be tweaked to make the system less generous but in a less explosive way. Indeed, the system has already been getting less generous in these ways for years.”

Monk says it could be an “attractive target” given it is mostly higher earners who benefit from the current system, so that any windfall could refocus cash towards the young and lower earners.

Certainly, earlier in October the chancellor told delegates at the IMF annual meeting in Bali that current pensions tax relief giveaways were “eye-wateringly expensive”.

Nevertheless, given the Government announced its biggest Budget surplus for the month of July for 18 years, the chancellor may be able to find the cash from elsewhere.  

Pension Lifetime Allowance: are you sleepwalking towards a massive retirement charge?

Help for high streets, but ‘Amazon’ tax on ice

A £1.5 billion boost for the UK high streets is expected to be announced, in the form of lower business rates for independent retailers.

There will likely also be money to improve infrastructure and a relaxation of planning laws.

However, no more information has yet emerged of the so-called 'Amazon tax' being called for by high street retailers

This appears to be dependent on the chancellor securing international cooperation for extra taxes on digital firms such as Amazon and Facebook.

Hammond has also signalled his intentions to make a unilateral British move if international agreements cannot be hammered out, stating that the “time for talking is over”.

However, business groups warn that the Government needs to tread a fine line to avoid reducing the competitiveness of British firms, given that many bricks and mortar businesses also trade online.

“Ideas such as a digital tax could backfire on entrepreneurs and the high street if developed without proper consultation and should go hand-in-hand with business rates reform,” says Carolyn Fairburn, CBI director general.

“The UK’s approach to tax must reflect a fast-changing economy. Wherever possible, the UK must move in step internationally if we are to address the tax balance in a way that is sustainable and doesn’t damage the UK's global competitive advantage.

Read why one loveMONEY writer is finally ditching their Amazon habit

Brexit looms large

The elephant in the room is Brexit and this is why the Budget has been brought forward – to avoid any clashes with negotiations and ensure tax and other financial considerations are hammered out before a deal is reached with the EU.

Indeed, Hammond’s speech will be the last major fiscal announcement before the UK leaves the EU.

Hammond has already warned that a 'no-deal' Brexit would mean another Budget would be needed.

“Other the other hand…[Hammond] will want to keep some money in reserve in case the economy needs a boost after Brexit,” explains PwC economist Jakeman.

“On balance, we expect the chancellor to be cautious in his spending plans until more is known about the terms of the Brexit deal.”

With the final terms of the EU divorce still an unknown quantity, the chancellor may want to maintain a financial buffer to soften any post-Brexit transition shocks.

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This article has been updated from the original