Rishi Sunak is considering pushing the budget into next year so the Treasury can weigh up the economic impact of ending the furlough scheme and the third wave of the pandemic over the coming months.
The chancellor is planning to tell MPs before next week’s parliamentary recess that he will hold a three-year spending review in the autumn but he is thinking about delaying tax measures until the spring, government sources have confirmed.
While a final decision on the budget has yet to be made, the chancellor is being told there is a case for waiting until the spring.
Sunak has known for months that the period from September to the end of the year will be crucial to the economy because a range of government support – including wage subsidies and financial support for the self-employed – will have ended.
A sharp rise in cases of the Delta variant in recent weeks has created extra uncertainty, with some tentative evidence that rising infection rates are making consumers more cautious.
The Treasury is particularly concerned about how the labour market will respond to the ending of the furlough scheme, under which the government pays the majority of employees’ wages. But official figures for October – the first month without wage subsidies – will not be available until November or December.
That would make it harder for the independent Office for Budget Responsibility to make an assessment of the outlook for the economy and the public finances. The OBR requires 12 weeks’ notice to provide budget forecasts.
If the budget is delayed, it would be the third year in a row that plans for an autumn package have been postponed. The 2019 budget was delayed owing to the general election while the Covid-19 crisis meant plans for an autumn 2020 event were also abandoned.
In 2016 Philip Hammond, the former chancellor, moved the budget forward permanently from the spring to the autumn on the grounds that an earlier announcement would give individuals and businesses time to prepare for tax changes due to come in at the start of the new financial year in April.
The chancellor has stressed the importance of repairing the damage to the public finances after a year that saw the highest peacetime borrowing on record and has already signalled that he wants to save £3bn by scrapping the triple lock on the uprating of the state pension this year.
But he is also aware that there will be need to be continued government help after blanket support for the labour market ends in September. Officials are considering ways to provide help to those workers unable to go back to their old jobs or lack the skills or qualifications for new opportunities that arise.
Treasury sources said the decision was finely balanced but the chancellor is being told that forecasts for the state of the economy may be less reliable in the autumn than they will be a few months later.
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While Sunak is encouraged by the economy’s recovery from the lockdown earlier this year and said this week Britain was “bouncing back”, the most recent Office for National Statistics flash estimates of credit card spending, restaurant bookings and online job adverts suggested a loss of momentum in the past few weeks.
A government source said the Treasury “expected the chancellor to launch the multi-year spending review for conclusion in the autumn but did not expect an announcement on the timing of the budget.”
The spending review will cover the three years from 2022-3 to 2024-5 and give Sunak’s cabinet colleagues an indication of the total the Treasury thinks can be afforded for the rest of the current parliament. Discussions with individual departments will take place over the coming months.