Previewing the Autumn Statement for the BBC at the weekend, one leading asset fund manager said “Chancellor Philip Hammond will stand up, and announce very little”. So was he right?
Well, Mr Hammond made it clear that the Office for Budget Responsibility (OBR) is expecting the economy to weaken over the next year, so his hands were largely tied when it came to spending significant amounts of money. Here is a summary of what he did with the cash he has to spare.
This was hardly mentioned by the Chancellor although, in his response, the Shadow Chancellor immediately called for a soft Brexit with the maximum access to the Single Market.
The Budget will move to autumn from next year with the Autumn Statement cancelled, although there will be a Spring Statement responding to OBR forecasts but with no tax changes (probably). The Chancellor says he will not make significant changes twice a year just for the sake of it.
UK growth is forecast to be 2.1% this year but just 1.4% in 2017 (not as good as hoped but “still higher than many of our European neighbours”).
George Osborne’s hopes for a surplus by 2019/20 disappeared some time ago but it is still planned to be in balance as soon as possible. A new draft Charter of Budget Responsibility will have three pillars.
To be in surplus in the next Parliament with borrowing down to 2% by the end of this one.
To get net debt falling by the end of this Parliament.
To keep welfare spending below a set limit.
The National Living Wage will increase to £7.50 from April 2017 (representing a pay rise of over £500 a year to a full-time worker).
The Government will cut the Universal Credit taper rate from 65p to 63p to allow people to keep slightly more of their benefits as they move into employment.
The Chancellor plans to double UK Export’s financial capacity.
A Housing White Paper will be published in the near future but, more immediately, land will be made available for housing and £2.3 billion will provide for 100,000 homes in high-demand areas through a new Housing Infrastructure Fund.
In addition, the Government will provide £1.4 billion in order to deliver 40,000 extra affordable homes while London gets £3.15 billion to build 90,000 affordable homes.
There will be a ban on upfront fees charged by letting agents in England.
The Government will commit to spending between 1% and 1.2% of GDP from 2020 on economic infrastructure. By comparison, it is currently spending 0.8%.
The Ministry of Justice will get extra funding for another 2500 prison officers to meet the current crisis.
The Chancellor wants to improve the UK’s productivity, given that we lag behind the United States and Germany by some 30% and are 8% behind Italy.
A new National Productivity Investment Fund will be set up with £23 billion to focus on innovation and infrastructure. There will be more investment in R&D, rising by £2 billion a year by 2020.
The gap between London and other major cities is still too wide so more help is promised for East Midlands and the Northern Powerhouse. A new city deal for Stirling is being negotiated which means that every city in Scotland will be on course to have one.
There will be more funds for local enterprise partnerships (LEPs) set up to bring together local authorities and businesses.
With rates available to savers at record lows, the Chancellor has announced a new savers bond to pay 2.2% interest.
Corporation tax will fall to 17% (as already planned) and rural rate relief will increase to 100% (a tax break worth up to £2900 per year).
The taxation of different ways of working will be examined and consulted on. Salary sacrifice on benefits-in-kind will no longer be allowed although ultra-low emission cars, childcare and cycle-to-work schemes will not be affected.
HMRC will shut down inappropriate use of the flat VAT scheme and introduce a new penalty for people who use a tax avoidance scheme it successfully contests.
The tax-free personal allowance will go up to £11,500 in April 2017 and to £12,500 by the end of this Parliament. The 40p threshold will rise to £50,000 over the same period. From April 2017, the employee and employer NI thresholds will be aligned at £157 per week.
There will be an extra £1.1 billion invested in English transport networks, “where small investments can often achieve big wins”. So £220 million will be made available to reduce traffic pinch-points and the go-ahead given to a programme of major roads schemes in the north.
The Government will cancel the fuel duty rise for the seventh successive year saving the average driver £130 a year, and the average van driver £350.
Aiming to become a world leader in 5G, the Government will invest over £1 billion towards a full-fibre network. From April there will be 100% business rates relief for new fibre infrastructure.
Most of the above points were expected or have been leaked in the run up to the Autumn Statement. However the Chancellor did save a couple of announcements.
Comic Relief is to get £3 million from the Tampon Tax Fund to distribute to a range of women’s charities and the Government will save Wentworth Woodhouse near Rotherham, a model for the house in Jane Austen’s Pride and Prejudice. It will provide a £7.6 million grant to help safeguard this “key piece of northern heritage”.