The Tories have made some big-ticket promises over the past few months.
Not only did Theresa May vow that the health service would see a £20 billion annual budget boost by 2023 as a ‘70th birthday present’ to the NHS, but the Prime Minister used the stage at Conservative Party Conference to announce that after an eight-year squeeze on public spending “austerity is over”.
“Debt as a share of the economy will continue to go down - support for public services will go up,” she told the country less than a month before Chancellor Philip Hammond’s autumn budget was due.
Add to that Hammond’s target to eliminate the deficit by the mid-2020s and so-called ‘Spreadsheet Phil’ and the Treasury are left with a head-scratcher of a budget to come up with.
But what exactly is it that Hammond needs to do to end austerity?
According to pre-budget estimates, the government needs to find a significant chunk of cash in order to end austerity.
In a report published on Monday, the Resolution Foundation think tank said May’s plans to reverse almost a decade of cuts will cost £31 billion over the next five years, with commitments to maintain spending on the NHS, defence and international aid costing £26.3 billion alone by 2022/23.
Meanwhile, a decision by Hammond to cancel the final year of the benefits freeze and instead increase benefits by 2.4% - a move that would prevent low-income families losing out on £250 a year - would cost £1.7 billion, the think tank said.
Reversing cuts to work allowances in universal credit would add an extra £3 billion to the bill.
But the Resolution Foundation’s estimates look conservative when compared to a recent report from the Institute of Fiscal Studies (IFS).
What else is the Chancellor likely to promise?
As with every budget, political pundits have spent the days and weeks in the run up guessing about what might come up in the Chancellor’s economic plan.
Hammond gave a hint on Sunday that new funds will be announced to help repair England’s pot-hole inflicted roads, telling voters he would be making an “important announcement” on vehicle excise duty.
According to the BBC, he will outline a £25.5 billion fund for Highways England for major road upgrades between 2020 and 2025.
So…. Where Is All That Money Going To Come From?
Good question. There are a couple of theories on this, the first being that Hammond could be forced to implement dramatic tax hikes.
In order to raise the £19 billion a year needed to end austerity while still meeting targets to cut the deficit, the Chancellor would need to increase income tax, National Insurance and VAT by a percentage point, the IFS said.
But there are a couple of problems with this. Not only would this bring the overall tax burden that the public pay close to its highest level since the end of the Second World War, but the Tories lack a majority in Parliament, making it much harder to push through substantial policy changes.
The Chancellor himself said on Sunday that he plans to keep taxes “low”, telling Sky’s Sophy Ridge increased public spending would not come from taxation alone.
But it seems that Hammond could be gifted some much-needed wiggle room by the Office for Budget Responsibility (OBR), the independent body who check that all the sums add up.
Reports from the likes of the Financial Times suggest that the OBR underestimated the recent strength of personal tax receipts and corporation tax revenues, with the revised figures expected to cut the deficit by around £13 billion for the 2017/18 financial year.
But, but, but…
Don’t forget about Brexit (as if you could). With experts branding Britain’s exit from the EU an “unexploded bomb”, it has been suggested Hammond will be forced to produce a rather “on-the-fence” budget, with it still yet to be seen whether the UK will be able to strike a deal with the European Union.
May’s right-hand-man added to these rumours on Sunday when he revealed the budget would have to be scrapped in the case of a no-deal Brexit, with the economic plans based on the UK negotiating a deal with the EU.
In the case of the UK crashing out of the EU, “we would need to take a different approach to the future of Britain’s economy”, Hammond said.