When he delivers his Budget Statement on Wednesday 8 March 2017, the Chancellor of the Exchequer Philip Hammond faces a paradox. In the medium term, he may have little choice but to raise taxes, but in the short term he will be well aware that the bewildering range of tax changes introduced by his predecessor have left businesses and individuals alike suffering from tax fatigue. So what can we expect?

 

Decent economic figures may give Mr Hammond some confidence about the short-term direction of travel in the UK economy, as will January’s record tax receipts. Nevertheless, the Budget Statement will reflect the continuing need to rebalance the public finances using a combination of expenditure cuts and tax increases. However, the Government’s promise not to increase rates of VAT, income tax or NIC during the current Parliament limits the Chancellor’s ability to increase taxes in a straightforward way. It’s therefore difficult to escape the feeling that any tax increases will be narrowly focused, technically complex and somewhat hidden from sight. When the Conservatives were in opposition, those were called “stealth taxes”.

 

Whatever else he does, the Chancellor must address public concerns about social care and also tackle the perceived shortfall in NHS funding. There are arcane thoughts that this might involve hypothecation – the attribution of specific taxes for specific purposes – with part of NIC receipts specifically …