The UK Budget may not be materially important now but it could be over the next few years
To most in the UK, the Budget is often just looked at to see how much more, and on what, we will be paying tax, and how much booze, fags and filling the car up will cost us. As Mike notes, rarely do the Budgets impact markets unless big fiscal spending plans are unleashed.
I don't think we'll get much more than a few airy fairy promises about the Brexit future, as I think Hammond will be keeping any real Brexit strategies under his hat for a while longer. While the Budget may not be that important for markets now, it will become increasingly important over the next few years.
One feather in the Chancellor's bow, aside from fiscal spending, is in corporate taxes, and this is an area that the EU is worried about. At the swish of a pen the Chancellor could slash corporate and some income taxes to not only keep firms in the UK but encourage others to move over.
For all the rhetoric we hear from companies about the positives and negatives of Brexit, firms moving or staying, for all the shouts from Paris, Frankfurt and Ireland offering a home to UK business, at the end of the day it will all come down to costs. To put it in simple terms, if Brexit suddenly costs a firm £10 to stay in the UK and access Europe but they can then save an additional £15 on taxes, there's only one choice they'll make. Countries in the EU have tighter restrictions on tax changes than those outside, and that could be a key strength for the UK when we're out.
As such, the Chancellor is likely to hold back from making any huge changes to corp taxes until the Brexit negotiations becomes clearer. It may even be used as a threat in those negotiations or as a tool afterwards, if we end up with a crappy deal.
This aspect is not the be all and end all of the Brexit dealings to come but it's going to be one of the weapons used, and that will have a real fundamental impact that will affect the market.
It's probably not something for today but one to file in the forward looking folder for another time.
