Chancellor, Philip Hammond, has delivered his first Autumn statement. Most announcements came as no surprise, with core messages about continuity of financial stability and control of public spending.
The statement was considered and concise, which is encouraging at a time of uncertainty. However, business groups interviewed by the Guardian didn’t consider the statement bold enough, and were disappointed that it didn’t tackle business rates or provide support following the Brexit vote.
Here are some of the headlines:
Impact on business
To reinforce Britain’s competitiveness while negotiating Brexit, Hammond confirmed he will stick to the business tax roadmap that was announced in March, with Corporation tax reducing to 17% and a reduction to business rates worth £6.7bn.
In an effort to boost the long-term economy and reduce the ‘productivity gap’, £23bn is going into a new National Productivity Investment Fund, including:
- £7.2bn to tackle congestion and transport
- £7.bn to support house-building (including £3bn Home Builders Fund to unlock finance for over 200,000 homes)
- £4.7bn towards science and innovation
- £2bn to accelerate construction on public sector land
- £1.1bn for local infrastructure
- Over £1bn for digital infrastructure (to encourage the private sector to roll out more full-fibre broadband and support trials of 5G mobile telecoms. What’s more, full-fibre infrastructure will benefit from 100% business rates relief for five years from April 2017.)
- £27m development funding for the Cambridge-Oxford growth corridor (as recommended by the National Infrastructure Commission)
To make Britain the ‘go to’ place for science and innovation, these sectors will also benefit from an extra £2bn of funding per year for business research and development.
£400m is being invested into Venture Capital Funds from the British Business Bank, to:
- Unlock up to £1bn of investment in innovative firms planning to scale up
- Review to identify barriers to access to long-term finance for growing firms
- Funding from the Department for International Trade for FinTech specialists
Benefits in kind reformed
Tax will become payable by employees who sacrifice salary to receive ‘benefits in kind’, except:
- Cycle to work scheme
- Ultra-low emission cars
- Pension savings
HMRC expects to gain approximately £2m through this measure.
Economic forecasts downgraded
As a result of the EU Referendum decision, economic growth is predicted to be 2.4% lower than previously expected. Here are the revised OBR forecasts:
- 2016: 2.1%
- 2017: 1.4%
- 2018: 1.7%
Hammond made a distinction between borrowing to cover the deficit and borrowing to invest, and at £122bn, Government borrowing will increase significantly.
New fiscal rules
To protect against bumps during Brexit, Hammond announced three new rules:
- Cyclically adjusted borrowing to fall below 2% by the end of this Parliament, and public finances to return to balance as early as possible during the next Parliament
- Public sector net debt to fall as a share of GDP by 2020
- Welfare spending to be capped
Just About Managing (JAM)
Due to the state of the economy, Hammond avoided this phrase coined by Theresa May, but did announce:
- Freeze in fuel duty
- Offset the rising cost of foreign holidays
- Ban on letting fees being charged to tenants
- Income tax threshold rising to £12,500
- Higher rate threshold rising to £50,000
- Minimum wage rising to £7.50 (in 2017)
- Possibility of removing the pensions triple-lock (after 2020)
Budget moved to Autumn
To allow time for tax changes to be made in advance of the tax year, the Budget is moving to Autumn. That means no more Autumn Statements – from 2018, there will be a Spring Statement instead. At least that means major changes will only happen once a year.
If legal hurdles are overcome and Article 50 is triggered at the end of March 2017, the final Spring Budget will be a significant measure of the nation’s fiscal position.
Although there are many challenges and changes to the economic climate, the Government is committed to boosting business in the UK.
Philip Hammond said: “My priority is to ensure that Britain remains the number one destination for business – creating the investment, the jobs and the prosperity to protect our long-term future.”