Budget date yet to be confirmed due to lack of Brexit deal
24 September 2018
We heard recently that the Chancellor has delayed announcing a date for the UK Autumn Budget in hope of a Brexit deal, but what are the implications of this delay?
The Chancellor was reported to have said that he doesn’t want the budget to clash with the last stage of negotiations with the EU, and that the Office for Budget Responsibility, which is usually given 10 weeks’ notice of budget dates, is currently on “standby.”
There is a useful article from the Financial Times about the key Brexit dates, but in summary:
On 18 and 19 October an EU summit is to be held, which has been seen as the most likely opportunity for a final agreement on the UK’s departure from the EU. However given the current state of affairs and the fact that it takes place only a couple of weeks after the Conservative Party conference, it has been speculated that this date is too early for a deal to be reached.
In November a further EU summit is planned, if any details in the agreement need to be ironed out – it is fairly safe to assume at this stage that this summit will be needed.
And then we have the final 2018 meeting of the European Council taking place on 13 and 14 December. This is widely seen as the last practical date for the UK and the EU to sign an agreement. At this point there is just over three months before the UK’s scheduled departure ‘Brexit Day’ on 29 March 2019.
By February 2019 the House of Commons must approve whatever Brexit deal Theresa May agrees in Brussels and MPs must also pass an Implementation and Withdrawal Bill that puts the exit treaty into law.
By 29 March 2019, for the exit treaty to take effect, the withdrawal agreement needs to be backed at an EU summit by a supermajority of leaders of member states (representing at least 20 of the other 27 EU countries and 65 per cent of their population). That decision must also be approved by the European Parliament in a plenary vote. Any legally questionable elements of the withdrawal treaty could also be referred to the European Court of Justice by MEPs.
But what of the UK’s Budgets
The Office for Budget Responsibility (OBR) would like to include the conclusions reached in the Brexit agreement in its Economic and Fiscal Outlook (EFO) forecast for 2018 which is normally announced at Budget; however a ten week period is the usual length of time allowed between the OBR being given notice of the date for the Budget and its production of the EFO.
In a letter to the Treasury Select Committee, Robert Chote of the OBR said that assuming the final exit agreement is not published until the conclusion of the European Council meeting on 18-19 October, he still thinks it will be possible to produce an EFO including Brexit measures by the first week in December if cross-department resources could be pooled to assist the process.
The Budget process in Scotland cannot be finalised until the UK Budget has been released. Amongst other measures, the Scottish Government needs to make provision for Scottish Income Tax rates and bands by way of a ‘Scottish Rate Resolution’ and this must be voted in before the start of the new tax year.
Enough time needs to be allocated to draft all the Scottish Budget proposals and factor in time for the Scottish Parliament to vote in the measures and this is a three-stage process, so it isn’t a quick process. The Scottish Government is committed to delivering its draft Budget within three weeks of the date of the UK Budget and if this doesn’t happen until early December then 3 weeks take us right into the festive season and holiday time which delays the process even longer.
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CIPP comment Brexit is an important negotiation, an all-dominating negotiation; however the signs of an agreement being reached by 18-19 October seem unrealistic. We would urge government to make an announcement of a date for Budget in the near future as the details of any changes to processes for payroll and pensions payroll must be provided well ahead of the start of the 2019-20 tax year to allow software developers to make necessary amendments. Employers also need time to factor in any changes within their business/finance plans and to communicate these changes internally to staff and employees and to any stakeholders. We recognise that there is a bigger political piece going on around our departure from the EU but we would hope that the EFO including Brexit information is not made a priority over and above the more routine Budget measures needed by businesses to provide certainty for future everyday operations. |