UK Budget sees extra £500m set aside to prepare for no-deal Brexit
Britain’s Chancellor Philip Hammond touted the possibility of a “double deal dividend” on Brexit during his final budget before the UK leaves the EU in March next year.
Hammond said that Britain could benefit from both a positive Brexit deal with the EU and the unlocking of funding the finance minister has set aside in case of adverse Brexit effects.
He is taking a three-pronged approach: He has already allocated funding to departments for Brexit preparations, and is increasing that from £1.5bn to £2bn.
Second, he will maintain the headroom to his fiscal rules, retaining firepower to intervene if needed in the coming months.
Third, if the economic or fiscal outlook changes materially he will take action, if necessary upgrading the spring fiscal statement to a full Budget.
This will take the total amount set aside for Brexit planning to £4.2bn. He did not provide further details of how the extra £500m will be spent next year.
Deal or no deal
Britain’s economy could benefit from “a boost from the end of uncertainty and a boost from releasing some of the fiscal headroom that I am holding in reserve, at the moment” Hammond said.
“When our EU negotiations arrive at a deal, as I expect they will, that will provide a dividend for the spending review,” he said.
However he also warned if there is no Brexit deal, next year’s Spring Statement would become a Budget.
“We are confident that we will secure a deal that delivers that dividend,” he said. “Confident, but not complacent.”
In the past eight years we have secured £185bn that would otherwise have gone unpaid, and today we have another package of tax clampdowns to raise £2bn over the next five years, the chancellor said.
“We will make HMRC a preferred creditor, end the practice of purchasing services through overseas branches and routing services through offshore companies, and introduce a PAYE restriction for small and medium sized companies.”
Britain’s finance minister delivered the final budget before Brexit in the House of Commons in Westminster where he announced: “The era of austerity is finally coming to an end.”
Hammond plans to introduce a UK Digital Services Tax
He stresses it is not an online sales tax on goods bought online and will only be paid by profitable firms that have at least £500m a year in global revenues.
There will be a consultation first before the tax comes into effect in April 2020. It is expected to raise more than £400m a year, Hammond said.
The decision comes as the “painfully slow” negotiations around a new international tax agreement on digital platforms.
“The UK has been leading attempts to deliver international corporate tax reform for the digital age. A new global agreement is the best long-term solution. But progress is painfully slow. We cannot simply talk forever.
So we will now introduce a UK Digital Services Tax. This will be a narrowly-targeted tax on the UK-generated revenues of specific digital platform business models. It will be carefully designed to ensure it is established tech giants – rather than our tech start-ups – that shoulder the burden of this new tax.”
You can read more about the UK Budget here.