Budget 2018: Hammond will struggle to end austerity and keep party happy

Chancellor Philip Hammond has some difficult decisions to make in order to end austerity and still keep the £100bn of recent policy promises made by Theresa May and her cabinet colleagues, according one respected thinktank.

The government is struggling to find money to keep May's pledge to “end austerity” by loosening the purse strings of all government departments as well as the £20bn-plus a year that it has promised for the NHS.

Trying to raise taxes in Brexit Britain with a government lacking a parliamentary majority will be "far from easy" the Resolution Foundation said but even Hammond defers big tax decisions he still has options available.

Although recent public deficit numbers indicate there will be more Budget wriggle room, the foundation said the Chancellor still needs to find the money to fund all the government's plans.

“Changes in personal tax rates – although a sensible way of raising money – seem unlikely," said Adam Corlett, senior economic analyst at the foundation. "Meanwhile, completely reforming the country’s dysfunctional property tax or inheritance tax – as we’ve recommended – is even less likely in the short-term."

The Resolution Foundation recommends cancelling the planned corporation tax cuts from 19% to 17%, which would raise £6bn a year, and freezing current income tax thresholds.

“The Conservatives have promised – but not yet funded – delivery of a £12,500 personal allowance and £50,000 higher rate threshold by 2020. But even freezing those thresholds after hitting those goals could raise significant sums by 2022-23 and 2023-24,” said Corlett.

PLASTIC TAX, HOUSING SOLUTIONS

The Resolution Foundation also suggested that the time “may be ripe” for more environmental taxes, such as a climate change levy or a carbon price floor which could raise significant sums.

There was also a suggestion that the Chancellor could increase the tax paid by offshore gambling companies, the Financial Times reported on Monday. The move would raise around £1bn over five years, the report stated, making up for lost revenue after the government's crackdown on fixed-odds betting terminals.

The Resolution Foundation also published another report on Monday analysing what the Chancellor could do in the 2018 Budget to help solve the housing crisis, with one option being to re-target the Help-to-Buy scheme at those who need the support.

“Reining in the programme by introducing an income cap of £60,000 per household would mean that the extra £10 billion committed to the scheme last year could be stretched to help those on middle incomes beyond the current end date of 2021,” the thinktank said.

The Chancellor could also increase funding for affordable homes to offer relief to young families and use tax to increase private renters’ security of tenure.

The Financial Times was reporting on Monday that Hammond was looking to altering the planning system to make it easier to convert empty shops into homes to help tackle housing crisis