Autumn budget 2017: what you need to know
Philip Hammond has revealed this year’s Autumn budget, which outlines government spending for the year ahead, and provides an outlook on how Britain is performing economically. The budget is the first since the general election, and since Brexit negotiations began.
“I report today on an economy that continues to grow, continues to create more jobs than ever before and continues to confound those who talk it down”.
The chancellor’s first prerogative was to set out the vision of a global Britain. With sixteen months to go until Britain’s scheduled departure from the EU, the front-loaded Brexit part of the speech was expected, and in the first ten minutes the chancellor laid out his vision for Britain over the next two years and beyond. He echoed the sentiment of the PM, saying that he intended to achieve “free and frictionless trading of goods” and insisted that Britain was aiming for a “strong mutual respect and friendship” with the EU. The chancellor pledged to set aside £3bn more towards Brexit preparations, saying he was prepared to invest more “if and when necessary”. Britain has spent around £700m on Brexit preparations so far.
As is now typical of Mr Hammond’s public appearances, he took the opportunity to accuse the Labour party of a negative stance on Brexit, saying that there was a choice, either to “embrace the future, seize the opportunities which lie within our grasp, and build on Britain’s great global success stories” or “as the party opposite advocates… reject change, and turn inwards to the failed and irrelevant dogmas of the past”.
Stunted growth in productivity
In response to the results published by the OBR, which revealed it had overestimated Britain’s growth in productivity over the last seven years, the chancellor said that he was “acutely aware that 1.4 million people out of work is 1.4 million too many”. He stated that the OBR had revealed there was more than 3 million new jobs, before turning once again to the opposition, pointing out that John Mcdonnell had wrongly predicted predicted that Britain would see 1.2 million job losses.
Further addressing the disappointing levels in productivity in the country published by the OBR, the chancellor said that “regrettably our productivity performance continues to disappoint”. The OBR had expected growth in productivity to return to pre crisis trend of 2% a year, but it has remained flat. The chancellor now expects productivity and GDP growth to be at 1.5% in 2017, 1.4% in 2018, and 1.3% in 2019/20, before rising to 1.5% and 1.6% in 2022. Original targets for inflation, GDP and productivity growth are now pushed back to a full three years after Britain leaves the European Union.
The UK’s debt levels were addressed next, with Mr Hammond proudly stating that the OBR expects debt to peak this year, and gradually fall as a share of GDP. The chancellor said he expected debt to fall to 79.1 percent of GDP by 2023, after peaking at 86.5% in 2017/2018. The chancellor also said that borrowing would also fall, from 2.4 percent this year, to 1.9 percent next year.
Help for Housing and Buyers
As expected, Hammond put housing front and center in the autumn budget. The chancellor gave a help to first-time homebuyers, axing stamp duty tax on properties worth up to £300,000. He has also pledged to deliver 300,000 homes a year on average by the mid-2020s. These changes are part of a package of measures to tackle the housing crisis; under growing pressure from his colleagues, the chancellor was expected to pledge real change on housing in Britain.
Public sector spending
The public sector will received a much needed boost in some areas such as education, with a £117m boost for maths and plans to train 12,000 computer teachers revealed in the budget.
The one percent pay cap for nurses was expected by many to be lifted, as it was lifted for police officers earlier in the year, but whilst the chancellor supported this in sentiment, saying nurses pay would increase, he claimed that it would only happen if the pay structure was ‘modernised’, and declined to say how much extra money would be given. There was also no mention of any extra police funding.
Extra cash for the NHS falls short
The chancellor announced that an extra £1.6bn would be paid to NHS England in 2018-19, and it will receive £900 more than planned in 2019-20 to help it cope with increased demand for care. However, this is less than half the figure that many experts have been calling for. Simon Stevens, the NHS chief executive, earlier in the month called on the chancellor to pledge an extra £4bn to the NHS, honouring the extra cash pledge put forward by the ‘leave campaign’ in the run up to the EU referendum.
Earlier this month Mr Stevens told an audience of hospital trust bosses: “The government has rightly supported the NHS through difficult times, it protected the NHS budget immediately after the financial crash, and funded modest growth ever since. But that growth rate is set to nosedive next year and the year after”.
Income tax and wages
The chancellor announced that the basic-rate income tax threshold will be rising 3% to £11,850 in April next year, up from £11,501 today, while the higher rate threshold will rise to £46,350, up from £45,001 today. The National Living Wage is to rise by 4% to £7.83 an hour from next April – up from £7.50 today.
Businesses across the country watched the budget closely expecting a revaluation of business rates and support for businesses in general. Mr Hammond announced that he will not reduce the VAT threshold for small businesses from £85,000, and will bring forward the uprating of business rates based on the CPI inflation index not RPI by two years, saving businesses £2.3bn.
Unlike April’s budget speech, where Hammond announced a tax grab of self-employed workers, before later backing down, the younger demographic of Britain’s entrepreneurs has some positives to take from today’s announcements.
Trimming the wait for universal credit
Mr Hammond cut the waiting time for universal credit by one week, and said that he would allocate a £1.5bn package to make it easier for claimants to receive an advance in payments. This partially caves in to backbenchers, who have expressed their concern about the impact of delays on those desperately needing payments to support their families. Labour’s Frank Field, chair of the work and pensions select committee, told the House of Commons last week: “I doubt many households in this country could get by for six weeks, and for many, much longer, with no income, never mind those striving close to the breadline. The baked-in wait for payment is cruel and unrealistic and government has not been able to offer any proper justification for it”.
The pledge to end homelessness
Among measures revealed in the budget was extra cash to solve the scourge of homelessness. The chancellor repeated a pledge that was originally made in the Conservatives general election manifesto, to tackle rough sleeping, ending it in Britain altogether by 2027. This will be done by investing £28 million in three new pilots of the “Housing First” program in the West Midlands, Manchester and Liverpool, as well as establishing a homeless taskforce, as announced earlier in the year.
Figures released by the Department for Communities and Local Government, based on nightly head counts undertaken in the autumn of 2015, identified 3,569 rough sleepers. This is double the number recorded in 2010. This number grows to around 300,000 people when taking into account those living in inadequate homes.
In the run up to the speech, senior Conservative party members warned that it could “make or break” the chancellor’s political career. The last few weeks have seen several embarrassing gaffes, including the axing of a publicity stunt in a driverless car and claiming in an interview with Andrew Marr on Sunday that there were “no unemployed people”.
Theresa May will no doubt be grateful to the chancellor, as mixed reviews from political commentators and MPs is far better than many feared the outcome of the budget could be. In a month which has seen resignations and senior cabinet ministers under fire for public mishaps, the PM will be poised to rally behind the positive news in the chancellor’s budget in the coming months.