Despite a muted outlook for growth, Philip Hammond was in a jolly mood yesterday, repeating his view that there is “light at the end of the tunnel” for the government’s finances, and telling the chamber: “I am at my most positively Tigger-like today, as I contemplate a country which faces the future with unique strengths.”
The chancellor also stuck to his promise to keep things simple, resisting the temptation to deliver new taxes or spending commitments. He did, however, hint that a loosening of the purse strings could be on the way.
"If in the autumn public finances continue to reflect [recent] improvements I would have capacity to enable further increases in public spending and investment in the years ahead," he said.
Following last week's news that the state has eliminated its annual deficit on so-called "day to day" spending, Hammond's dovish sentiment did not come as a huge surprise. However, rather than instinctively looking towards higher spending, perhaps the government could further embrace the radical idea of letting workers keep a bit more of their wages.
The Conservatives remain committed to raising the 40p threshold to £50,000, and have lifted it to £46,350 from next month onwards. This is commendable, as are hikes to the personal allowance. But as far as the higher rate threshold goes, there is scope to push harder and faster.
Back at the start of the 1990s, 1.7m people in the UK fell under the higher rate bracket – roughly 6.5 per cent of all taxpayers. At the latest count, this had risen to 4.2m people, or 13.7 per cent of all taxpayers. A tax rate intended for “higher” earners has steadily become a demoralising reality for millions of workers, many of whom are responsible for supporting financial dependents.
When he dusts off his red box later in the year, Hammond should reveal a rise in the threshold to £50,000 from April 2019, alongside plans to keep increasing the bracket at a speed necessary to cut the number workers under its reach to 3m.
Hitting the target a year early would be a stellar advert for the Tories, and a welcome gesture to millions of employees who work hard to earn an above-average salary for themselves and their families.