“. . . A NEW CHAPTER IN OUR COUNTRY’S HISTORY”
In his first Autumn Statement, the new Chancellor of the Exchequer, Philip Hammond, boasted that the UK will be the fastest growing major economy in the world.
He added that the Washington-based International Monetary Fund (IMF) stated it (the UK economy) had “confounded commentators at home and abroad with its strength and resilience.”
Overall he has pledged to tackle its long-term weaknesses and create an “economy for everyone.”
GROWTH OUTLOOK
The growth forecast from the Office for Budget Responsibility (OBR), has been increased to 2.1% this year, up from the previous 2%, but downgraded to 1.4% in 2017, from 2.2% and 1.7% in 2018, down from 2.1%. The government is no longer anticipating a budget surplus in 2019/20. The Chancellor does, however, promise the budget will balance “as soon as practicable” in the next parliament. Unfortunately, Brexit is expected to reduce growth in the UK by 2.4 percentage points over the next five years.
GOVERNMENT BORROWING
Public borrowing, according to the OBR, will be reduced to 3.5% of Gross Domestic Product (GDP) this year, compared with 4% seen in the last financial year and it will fall continuously during this parliament before reaching 0.7% in 2021/22 – the lowest level seen for two decades. In total this borrowing equates to £68.2bn in 2016/17, reducing each year to £17.2bn in 2021/22.
TAXATION
In keeping with his wish to encourage international business to the UK, the Chancellor confirmed existing plans to cut Corporation Tax to 17%, the lowest of any G20 nation, in April 2020. The business rates transitional relief cap will be lowered and rural rate relief increased to 100%. From next June, Insurance Premium Tax, currently the lowest in Europe, will be raised from 10% to 12%. The UK export finance capacity will be doubled.
The current Carbon Price Support for the oil and gas industry will be capped until 2020, while business rates reductions totalling £6.7bn will be introduced. The fuel duty rise will be scrapped for the seventh year running.
Personal Income Tax thresholds will rise to £11,500 per annum in April 2017 as planned and then to £12,500 by 2020. The higher rate threshold will rise to £50,000 by the end of this parliament. Employees’ current tax savings, on both salary sacrifice and many benefits in kind, will be ended, with the exception of pension contributions, childcare, ultra-low emission cars and cycle to work schemes. The National Living Wage will be increased from £7.20 to £7.50 in April next year for those aged 25 and over.
Employee and employer National Insurance thresholds will be equalised at £157 per week, but employees will pay no extra.
Mr Hammond reinforced his commitment to stopping aggressive tax avoidance schemes, stating: “We must constantly be alert to new threats to our tax base”. He believes his new measures on avoidance will have the effect of raising £2bn.
PERSONAL FINANCE
The rollout of tax-free childcare for those eligible will start in 2017. A new Savings Bond, open to those aged 16 and over, issued via
National Savings and Investments (NS&I) offering about 2.2% interest for a three-year term, will be made available from April 2017 for a period of 12 months: the minimum investment will be £100 and the maximum £3,000.
PENSIONS
The government will shortly publish a consultation document to address what they believe to be pension scams which have increased substantially since the April 2015 pension freedoms. This may include the recommendation to ban any cold calling in relation to pension products and develop greater powers for providers to block suspicious fund transfers.
For those who have already drawn-down their pension, the Money Purchase Annual Allowance will be limited to £4,000, as of April 2017. This is designed to stop beneficiaries from gaining double pension relief. The government will ‘consult’ on this proposal. Also, the tax treatment of foreign pensions will be brought into line with the UK’s current domestic tax regime. This will have the effect of bringing any pension payment or lump sums into the UK for tax purposes.
The triple lock applied to any increase in the State Pension will remain for this parliament.
INFRASTRUCTURE AND INNOVATION INVESTMENT
Mr Hammond has pledged £1.1bn for investment in English local transport, with £220m for national roads, together with £390m to help develop low emission vehicles. An East West rail link, connecting Oxford and Cambridge, our two greatest university cities, will be created to establish a new development and innovation corridor; £110m has been earmarked towards the cost. There will be a 100% business rate relief for five years for new fibre infrastructure to promote 5G network capability and an additional £1bn for developing our digital infrastructure. The ‘Barnett Formula’ will be boosted to offer the Northern Irish, Scottish and Welsh devolved parliaments additional development funds.
His government will prioritise what he describes as “high value investments” that will improve productivity and introduce a new National Productivity Investment Fund of £23bn over the next five years to cater for “innovation and infrastructure”, particularly targeted at science and high-tech initiatives.
WELFARE PAYMENTS
The Chancellor said that no further welfare savings are planned, adding that the Universal Credit taper rate will be reduced to 63 pence from 65 pence to help about three million families.
HOUSING
The Chancellor declared that home ownership remains out of reach for far too many and will be addressed in a White Paper to be published “in due course.” He confirmed his earlier statement that a £2.3bn Housing Infrastructure Fund will be created to free up new sites for housing development. He promised that 40,000 additional affordable houses will be built and announced the relaxation of government grants to assist housebuilding, together with the Right-to-Buy scheme being extended to housing association tenants. He will also double government capital spending on housing, in real terms, over the course of this parliament.
Importantly, he intends to ban fees charged to potential tenants of rented accommodation by letting agencies, passing this burden over to the landlords of the property.
REGIONAL FUNDING
The Local Growth Fund will allocate £1.8bn of funding via Local Enterprise Partnerships to the English regions. A series of City Deals were confirmed for locations elsewhere in the UK.
As his finale, the Chancellor declared that this would be his first and last Autumn Statement. Next year, he will abolish the tradition because the government intends to move to a single major fiscal event each autumn. The final springtime Budget will be delivered in 2017, which will also see the first autumn Budget.
He left the dispatch box with these words: “We have set our course. We are a great nation. Bold in our vision. Confident in our strengths. And determined in our ambition to build a country that works for everyone.”
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