“An economy that works for everyone”

Sim Sekhon looks at the Chancellor’s latest budget statement

The Government denies that the decision to shift the Budget from its normal Wednesday slot to a Monday afternoon was anything to do with Halloween, but this Budget was never going to be a howler. Following closely on from the Prime Minister’s Party Conference message, which claimed that the end of austerity is in sight, stringent cuts in spending and tax hikes wouldn’t fit the mood. Furthermore, Theresa May has already made the big announcements – like removing the cap that stops local authorities investing in social housing, for example.

Having said that, Philip Hammond’s job isn’t an easy one. Finding the extra £20 billion promised for the NHS at the same time as allowing the electorate to keep more of their income? Ending austerity, but still maintaining the freeze on benefits? The chancellor has promised “an economy that works for everyone” and I’ll admit to having reservations about whether this can be delivered. The deficit may be reducing, but we’re not out of the woods yet. Although headlines are grabbed by the issue of a new 50 pence coin and the freezing of beer duty, the bigger picture is somewhat more complicated.

And it’s even more complicated because, with the devolution situation, tax-raising powers differ across the Union. The Scottish Government will be making its own plans for Income Tax public in its December budget. If that wasn’t enough, should we end up with a no deal Brexit, all spending plans will, most likely, be up for review again. There are big issues, and big unknowns, but Philip Hammond has been tasked with delivering a spending plan that leaves no one feeling that hard times could be around the corner.

Many will see this as a budget that tweaks things rather than shakes them up. Unless that is, you’re a tech giant who shifts jurisdiction to avoid paying corporation tax, in which case you’ve probably been making plans to deal with the latest announcement for years. The online shopping revolution has had a massive impact on the commercial sector. Today’s announced Future High Streets programme will slowly see more residential use in currently underutilised commercial properties. Agencies who have a high street presence may also find some comfort in the announcement of changes to business rate relief.

Announcements on housing were limited and there were no new measures specifically aimed at landlords or lettings agents. There is funding for the Housing Infrastructure Fund to further encourage housebuilding, and shared equity purchases of up to £500,000 will be exempt from stamp duty. Lettings relief against Capital Gains Tax is to be limited to those properties where the owner shares with the tenant.

Overall Philip Hammond’s message was upbeat. He had good news on the economy, good news on personal allowances, action on plastics and funding to support projects that many will welcome, but there were few real surprises. Perhaps the Property Rental Sector should be grateful we’ve not been thrown yet another huge challenge.

Summary of Budget 2018: Key points at-a-glance

Source: BBC News https://www.bbc.co.uk/news/uk-politics-46017125

Stamp duty and housing

  • All first-time buyers purchasing shared equity homes of up to £500,000 to be exempt from stamp duty
  • £500m for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built
  • Lettings relief limited to properties where the owner is in shared occupancy with the tenant
  • New partnerships with housing associations in England to deliver 13,000 homes
  • Guarantees of up to £1bn for smaller house-builders

Personal taxation and wages

  • The personal allowance threshold, the rate at which people start paying income tax at 20%, to rise from £11,850 to £12,500 in April – a year earlier than planned
  • The higher rate income tax threshold, the point at which people start paying tax at 40%, to rise from £46,350 to £50,000 in April
  • After that, the two rates will rise in line with inflation
  • National Living Wage increasing by 4.9%, from £7.83 to £8.21 an hour, from April 2019.

Alcohol, tobacco and fuel

  • Beer, cider and spirits duties to be frozen
  • Cost of a bottle of wine duty to rise by 8p, in line with inflation, in February
  • Tobacco duty will continue to rise by inflation plus 2%
  • A packet of 20 cigarettes will go up by 33p at 18.00 GMT
  • A ten gram pack of cigars goes up by 17p.
  • Fuel duty to be frozen for ninth year in a row
  • Remote Gaming Duty to increase to 21% for online gambling on “games of chance” from 2019

Welfare and pensions

  • Work allowances for universal credit to be increased by £1.7bn
  • 2.4 million working families with children to benefit by £630 a year
  • An extra £1bn to help welfare claimants transfer to the new consolidated benefit
  • Chancellor insists controversial system is “here to stay”

The state of the economy

  • Era of austerity is “finally coming to an end”, the chancellor says
  • 2018 growth forecast downgraded to 1.3% from 1.5% in March, due to impact of bad Spring weather
  • But forecast for 2019 raised from 1.3% to 1.6% and annual forecasts raised to 1.4%, 1.4%, 1.5% and 1.6% in 2020, 2021, 2022 and 2023 respectively.
  • 3.3 million more people in work since 2010 and 800,000 more jobs forecast by 2022.
  • Wages growth at its highest in nearly a decade

The state of the public finances

  • Public borrowing in 2018 to be £11.6bn lower than forecast in March, representing 1.2% of gross domestic product, (GDP) the total value of goods produced and services provided
  • Borrowing as a share of GDP to rise to 1.4% next year
  • Borrowing to total £31.8bn, £26.7bn. £23.8bn, £20.8bn and £19.8bn in next five years
  • Debt as share of GDP peaked at 85.2% in 2016-17, falling to 83.7% this year and to 74.1% by 2023-24
  • 1.2% annual average growth in departmental spending promised

Brexit

  • Extra £500m for preparations for leaving the EU
  • Spring Statement next March could be upgraded to full Budget if needed
  • A commemorative 50p coin to mark the UK’s departure from the EU

Defence and security

  • An extra £160m for counter-terrorism police
  • An extra £1bn for armed forces, for cyber-capabilities and the UK’s new nuclear submarine programme
  • £10m for mental health care for veterans, to mark the centenary of the Armistice which brought World War One to an end
  • £1m to fund school trips to World War one battlefields
  • £1.7m in Holocaust education programmes to mark the 75th anniversary of the liberation of Bergen-Belsen concentration camp, in northern Germany

Business and digital

  • New 2% digital services tax on UK revenues of big technology companies, from April 2020
  • Profitable companies with global sales of more than £500m will be liable
  • Private finance initiative (PFI) contracts to be abolished in future
  • New centre of excellence to manage existing deals “in the taxpayer’s interest”
  • Annual investment allowance to be increased from £200,000 to £1m for two years
  • Contribution of small companies to apprenticeship levy to be reduced from 10% to 5%
  • Business rates bill for firms with a rateable value of £51,000 or less to be cut by third over two years
  • Measure to benefit 90% of independent shops, pubs and restaurants, cutting bills by £8,000
  • £900m in business rates relief for small businesses and £650m to rejuvenate High Streets
  • New 100% mandatory business rates relief for all lavatories made available for public use
  • Extending changes to the way self-employment status is taxed, from the public sector to medium and large private companies, from 2020

Education and health (England only)

  • Confirmation of an extra £20.5bn for the NHS over the next five years
  • A minimum extra £2bn a year for mental health services
  • New mental health crisis centres, providing support in every accident and emergency unit in the country
  • More mental health ambulances and a 24-hour mental health crisis hotline.
  • An extra £700m for councils, for care for the elderly and those with disabilities
  • £10m for air ambulances
  • A one-off £400m “bonus” to help schools buy “the little extras they need” this year
  • Funding for 10 University Enterprise Zones

Transport, infrastructure and culture

  • A £30bn package for England’s roads, including repairs to motorways and potholes
  • A 30% growth in infrastructure spending
  • Opening the use of e-passport gates at airports – currently available to people from Europe – to those from the USA, Canada, New Zealand, Australia and Japan
  • Air Passenger Duty to be indexed in line with inflation

Environment and energy

  • A new tax on plastic packaging which does not contain 30% recyclable material
  • No tax on takeaway coffee cups but to be reconsidered if the industry doesn’t make enough progress
  • £60m for planting trees in England
  • £10m to deal with abandoned waste sites

Nations and regions

  • An additional £950m for the Scottish government, £550m for the Welsh government and £320m for a Northern Ireland Executive in the period to 2020-21
  • New City and Growth deals for Belfast, north Wales and the Tay Cities area, which includes the cities of Dundee and Perth as well as Angus and the north part of Fife,
  • £2m for Belfast to help recover from August’s Primark fire
  • £70m to develop the Defence and National Rehabilitation Centre near Loughborough

Source: BBC News https://www.bbc.co.uk/news/uk-politics-46017125