Philip Hammond paves the way for tax hikes as he warns he WON’T borrow to fund huge £25bn cash injection for NHS
- Hammond is making his annual Mansion House speech to the City tonight
- He will tell bankers an NHS funding pledge this week will be funded by new taxes
- Chancellor will also seek to reassure the City about its role after Brexit happens
Chancellor Philip Hammond will pave the way for tax rises to fund a £25billion cash injection for the NHS tonight as he tells bankers he will not borrow the money.
In his annual Mansion House speech to the City, Mr Hammond will insist the major boost to health spending will not knock his target of clearing the deficit of course.
The Chancellor is determined to balance the books by around 2025 after already pushing back the target because of Brexit uncertainty.
He will also use the speech to promise bankers they will remain a cornerstone of the British economy outside the EU.
Chancellor Philip Hammond (file image) will pave the way for tax rises to fund a £25billion cash injection for the NHS tonight as he tells bankers he will not borrow the money
The Chancellor makes a speech to bankers in London’s financial district (pictured) every summer to lay out the latest thinking on the economy
In tonight’s address, Mr Hammond will say: ‘We are getting debt down, while investing in Britain’s infrastructure, supporting our vital public services, and helping hard working families, across the United Kingdom.
‘So, as the Prime Minister said, across the nation taxpayers will have to contribute a bit more in a fair and balanced way to support the NHS we all use.’
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The Chancellor has until the Budget – expected to be in November – will spell out exactly how the money will be raised.
Speculation has centred on higher income tax bills for workers, with frozen tax allowances or higher National Insurance a likely target.
Mr Hammond signed off on the NHS package on the condition the health service publicly welcome it and with a warning it would leave the cupboard bare for other departments.
Mr Hammond (left as the extra spending was announced on Monday) signed off on the NHS package on the condition the health service boss Simon Stevens (right) publicly welcome it and with a warning it would leave the cupboard bare for other departments
In the speech, Mr Hammond will also reiterate his appeal to Brussels to come to the table to discuss a future relationship on financial services, something the EU side has so far refused.
He will say: ‘Global Britain is not just a strategy for Britain’s economic future, it’s a statement about what kind of people we are and about the economy and the society we want to be.
‘Connectivity was always at the heart of London’s success. And to succeed in the future, we must remain connected to the world, including the important emerging markets.
‘So while some question the benefits of openness, being open to the world, and being a global capital of finance, will continue to be the foundation of the UK’s economic success.’
He will say the new strategy will bring together governments, regulators, and industry to build a system to support firms’ access to international financial markets, while reducing business costs.
‘Our vision is for a set of new partnerships combining new tools, like free trade agreements, and existing ones, like our financial dialogues, looking across sectors of the industry and positioning the UK as the most global financial services market in the world,’ he is expected to say.
How tax will rise to pay for NHS boost: The six main ways £25bn is likely to be raised
The NHS funding boost could mean thousands more workers must be pulled into the tax system – or face bigger bills.
The Institute for Fiscal Studies (IFS) has dismissed the idea that there will be a ‘Brexit dividend’ over the coming years – setting out several tax rises that could be used instead.
There are six main ways the money could be found by Chancellor Philip Hammond at the Budget later this year:
1. Income tax: Adding a penny to the rate of income tax would raise £5billion a year
2. National Insurance: A 1 per cent hike to National Insurance contributions paid by workers, the self-employed and employers would net the Treasury about £9.9billion
3. Corporation tax: Labour has promised to unwind deep cuts to corporation tax introduced since 2010, bringing £18billion back to the Treasury
4. Personal Allowance: Freezing the personal allowance in 2020 – when it is due to be £12,500 – would raise £1.8billion. Cutting the basic rate allowance by £1,000 a year would raise £5.8billion.
5. Rich people: Separate research by former Tory minister David Willetts calls for a new inheritance tax system raises billions from the wealthy
6. Borrowing: If none of the above options are politically palatable or possible, the Chancellor can always borrow more money
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