Why Two Budgets Are Better Than One in Post-Brexit Britain

With a nickname like ‘Spreadsheet Phil,’ the U.K. Chancellor may not have the same hip-wiggling pizzazz former Labour politician Ed Balls has demonstrated on the BBC's 'Strictly Come Dancing.'

In fact, when he delivers his first Autumn Statement November 23, he will most likely aim for a no frills performance, free from political tricks, that sets him apart from the likes of his predecessor George Osborne.

That attitude is welcome. Since the U.K. voted in June to leave the European Union, the country has needed a numbers-lover like Philip Hammond to sustain confidence in the government’s Brexit plans.

What is not so welcome, though, is the Chancellor’s reported plans to pare back the importance of the Autumn Statement while the U.K. faces such a thick-bricked wall of uncertainty on its political future in the build up to the government triggering Article 50 of the Lisbon Treaty in March 2017.

Traditionally, as well as a chance to review previous economic forecasts, the Autumn Statement has been a straightforward summary of the U.K. government’s spending plans for the following year. 

But Gordon Brown’s 10-year tenure as chancellor saw him use his Pre-budget speeches as almost a second budget, an act that George Osborne followed for most of his time in Her Majesty’s Treasury.

The Chancellor may want to scrap this two-budget format, which has helped to complicate an already complicated U.K. tax system, but doing so would reduce the flexibility of Her Majesty’s Treasury to respond to domestic or global events at a time when it needs to be most flexible.

Think about it: A lot has changed since the U.K.'s 2016 budget was published eight months ago.

Back then, the U.K. seemed safe in the EU, and a certain Donald Trump was celebrating the results of Florida’s presidential primary election.

Sandwiched between Brown and Osborne, then-Chancellor Alistair Darling needed the two-budget format to help steer the U.K. through the recession that followed the 2008 global financial crisis.

The U.K.’s economy is expected to contract amid Brexit—more reason then for the Chancellor to keep options available to him—especially if the EU refuses the U.K. access to the single market.

And if Brexit isn’t Brexit, to twist Theresa May’s favorite phrase, who knows what will happen?

Perhaps we’ll see Spreadsheet Phil dancing the samba on ‘Strictly Come Dancing.’ In fairness, I wouldn’t bet on it—but then I wouldn’t have bet on seeing Ed Balls being on the show, either!

By Ben Stupples, Senior Reporter, International Tax

Sign up to Bloomberg BNA’s free report on the U.K. Autumn Statement: https://go.bloombergbna.com/autumn-statement-2016/?promocode=PITL585AB

See here for Bloomberg BNA’s round-up of tax practitioners’ key predictions: http://www.bna.com/uk-autumn-statement-n57982082725/