Budget 2017: Key Points and the Fallout

Today marks the last spring budget before a revised structure of budgets comes into play, moving from a spring budget and Autumn statement, to a yearly Autumn budget. In October, the pound hit its lowest level against the dollar since the Brexit vote, as markets anticipated a variety of outcomes, many of them bleak ahead of Britain’s departure from the EU, with many wondering what measures were to be put in place to brace against a possible fall in growth. This budget marks the first serious fiscal announcement since the article 50 ruling last month, which pushed the government to more transparency regarding its Brexit plan than it had previously been comfortable with.

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The Pound against the Dollar year on year. Photo: Thomson Reuters

International Women’s Day has been well absorbed by most speakers in the Commons today, leading to an interesting aside where Hammond stated that there was now a higher proportion of women in work than ever before, and that the Conservative party in particular had seen its highest proportion of women. This appeared to hit back at the rhetoric of Leader of the Opposition Jeremy Corbyn earlier in Prime Minister’s Questions, where he led with the statement that Labour has more women MPs than all other parties combined.

The Growth

This time in the spotlight, Philip Hammond has predictably cited the sentiment of ‘commentators’, who he says are ‘confounded’, in order to support his message that the UK is continuing to grow in the face of Brexit. In the ‘spreadsheet bit’ as the Chancellor referred to it, he states that the Office for Budget Responsibility (OBR) has upgraded its forecast for growth next year from 1.4% to 2%.

As predicted, the Chancellor quickly compared the UK’s growth to that of other European countries, specifically citing Germany as a comparable major economy. But he quickly followed up, saying that there is ‘no room for complacency’, addressing high debts, lack of skills among the student population, and families under financial pressure as issues.

Help for Services

The positive highlights in Mr.Hammond’s speech left a lot to be desired. Social care is going to be given 2million pound of emergency funding, though many have argued that the move is nothing more than a short term solution, which doesn’t come close to outweighing the cuts already inflicted on the system. Measures which were previously announced to support just managing families were announced yet again, though there was a distinct lack of new measures.

There is funding being given to specific areas which represent issues currently affecting Britain both on an economic and social level. The £100 million for A&E departments around the country should ease some of the pressure applied by a boozing Britain, as will the increase in tax on beers wines and spirits. Science and technology also gets a boost, championed by many in the government as a key to Britain’s prosperity in a post-Brexit environment.

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Light Relief for Business

Business were given some respite in yesterday’s budget, as Mr.Hammond announced there would be £435 million set aside to help businesses who were struggling with the controversial business rates, first introduced under Thatcher in 1988, which have hurt many small businesses since. Many political commentators have wondered how this budget would treat London, especially with regards to funding of housing, and big infrastructure. The capital saw little reason to be cheerful in this month’s budget aside from the business relief funding, as business rates remain in place, however the Chancellor did say business rates are a controversial issue which the government would consult on ahead of the next reevaluation.

Breaking the Manifesto Pledge

One issue, however, is now dominating the post-budget conversation, and that is the planned increase in National Insurance contributions from the self-employed. Hammond said he would be raising the rate on contributions paid by the self-employed from 9% to 10% next year, with a further increase to 11% in 2019. The move, being called a ‘tax grab’ by some, is now raising far more questions than the rest of the budget. Increasing the National Insurance contributions directly contradicts the Torie’s 2015 Election manifesto, in which they said NI would not be raised as part of a five-year tax lock. Yesterday the government responded that this had related to Class 1 NICs, which are paid by employed staff, whilst this raise is for class 4 NICs for the self-employed. Many have pointed out the obvious mixed messages of cheering rising employment, before taxing the employed.

Hammond also said that the government is so far successful in continuing with its plan to improve the economy, making a “Stronger, fairer, better Britain”. Jeremy Corbyn’s tone was almost wholly pessimistic. The Labour leader said it showed the government’s priorities were off once again with “tax breaks for the few, pubic service cuts for the many.”

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