Various rumours were swirling around Westminster in the days before Philip Hammond rose to deliver his first Budget – confirmed as the last time a major fiscal statement will be made in the spring.
The Chancellor, still scarcely nine months in the job, has a reputation as a cautious man and in advance many expected that much of today’s speech would be laying the ground for the Prime Minister to begin formal negotiations for the UK to leave the EU.
That said, the day before Mr Hammond stood up to address the Commons, the Organisation for Economic Co-operation and Development (OECD) upgraded Britain’s growth forecast, which inevitably raised questions about whether there was yet room for manoeuvre.
Would the Government prove willing to make money available to shore up struggling services or answer the growing criticism over business rates reforms? Would it be tax rises or surprise giveaways bothering the headline writers?
- Economic overview
- Business and enterprise
- Transport and infrastructure
- Personal tax
- Pensions and savings
- Public spending
- Tax evasion, avoidance and aggressive tax planning
- Summary
In his opening statement, the Chancellor said that the resilience of the UK economy had continued to defy expectations and the country had enjoyed robust growth. Indeed, he noted that last year Britain’s growth was behind only Germany’s among the world’s biggest economies.
Mr Hammond confirmed that the Office for Budget Responsibility (OBR) had raised its growth forecasts for the year, with the economy now projected to grow by two per cent in 2017, compared with the previous estimate of 1.4 per cent. The independent body suggests growth next year will be 1.6 per cent and in 2019, 1.7 per cent.
But he made clear that there was no place for complacency in the current climate, acknowledging that levels of debt were still too high (peaking at 88.8 per cent next year), productivity needs to be improved and many families up and down the country continued to feel the pinch almost a decade on from the financial crash.
OBR figures also suggest that inflation will peak at 2.4 per cent this year, with expectations that it will drop off as we approach the end of the decade.
Trying to strike a balance between prudence and positivity, the Chancellor told MPs that the Budget presented an opportunity to put money into public services while ensuring that the nation continued to live within its means. Crucially, he said, the tax and spending plans would form the bedrock of the EU negotiations ahead.
Following several weeks of sustained criticism over the burden that business rates changes would place on many enterprises, Mr Hammond announced a three-point plan which he said would amount to an additional £435million support.
Any firm losing existing rate relief will be guaranteed that their bill will not rise by more than £50 a month next year. In addition, there will be a £1,000 discount for pubs with a rateable value of less than £100,000 and the creation of a £300million fund which will enable local authorities to offer discretional relief.
The Chancellor made clear that a fair tax system was one of the best ways to make Britain a top destination for businesses. He reiterated the commitment made by his predecessor, George Osborne, to bring the Corporation Tax rate down to 17 per cent by 2020. A reduction to 19 per cent will take effect from next month.
Following concerns about the current timetable, he confirmed that quarterly reporting would be delayed for small businesses for a year (at a cost of £280million).
Acknowledging that congestion was an issue in large parts of the country, Mr Hammond said that some £690million would be made available to tackle traffic problems in urban areas and get local networks moving more freely.
The Chancellor also announced a £270million investment to keep Britain at the forefront of research into biotechnology, robotic systems and driverless cars.
An additional £200million will be ploughed into projects to help secure private sector investment in full-fibre broadband networks and £16million put aside for a 5G mobile technology hub.
Controversially, it was revealed that National Insurance contributions will rise for the self-employed.
Under proposals, Class 4 NICs will increase from nine per cent to 10 per cent next April and to 11 per cent in 2019.
Trying to defend what will undoubtedly be a contentious move, the Chancellor said that the “unfair discrepancy” in contributions between different groups of workers could no longer be justified. Critics have suggested the move has broken with a commitment in the 2015 manifesto.
In more positive news, the personal allowance will rise to £11,500 – the seventh consecutive increase.
The Chancellor reiterated the Government’s previous commitment to increase the allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament in 2020.
There was a boost for road users with confirmation that vehicle excise duty for hauliers and the HGV road user levy will both be frozen.
The Chancellor also announced there would be no change to the previous planned duties on alcohol and tobacco. There will, however, be a new minimum excise duty on cigarettes based on a £7.35 packet price.
In what is likely to be an unpopular move, Mr Hammond confirmed that the tax-free dividend allowance for shareholders would be cut from £5,000 to £2,000 as of April 2018.
The Treasury said that the change would “ensure that support for investors is more effectively targeted”, but critics fear it will could further hurt entrepreneurs.
Mr Hammond had faced some pressure from his own MPs to plough more revenue into public services.
In an attempt to address criticism that institutions were buckling beneath the strain, the Chancellor confirmed an extra £260million for improving school buildings and funding for an additional 110 free schools (on top of the 500 previously announced). There has been some controversy, however, that some of these are set to be selective.
In an attempt to address the mounting crisis in social care, Mr Hammond announced there would be an extra £2billion in funding over the course of the next three years. A Green Paper will be published later this year with a view to drawing up a long-term funding plan.
Tax evasion, avoidance and aggressive tax planning
The Chancellor said that a fair tax system required people to pay their dues and a series of measures to curb abuses of the system are expected to raise an additional £820million for the Treasury.
A raft of measures to tackle non-compliance were announced, including preventing businesses converting capital losses into trading losses, curbing abuse of foreign pension schemes, introducing UK VAT on roaming telecoms services and imposing new financial penalties for professionals who help facilitate a tax avoidance arrangement that is later defeated by HM Revenue & Customs.
In his closing remarks, Mr Hammond struck an optimistic tone. Whatever the uncertainties surrounding Brexit, he told MPs that the UK should be confident that our best days lie ahead of us.
It would be fair to say that the Budget was not strewn with giveaways, but the Chancellor did try and take the sting out of some of the main criticisms levelled at the Government in recent months – including its handling of business rates reform and the sluggish response to a mounting care crisis.
That said he is also likely to have stirred up fresh controversies and the decision to increase National Insurance for the self-employed is perhaps evidence that in the current climate tough choices will still have to be made.
View official documents and full Statement
Need more information on the latest tax updates? Get in touch with our team of expert accountants today or keep up to date with our latest Statement and Budget news on our blog.
TBL Accountants are your local accountancy firm operating in Southend and across Essex. We specialise in a variety of services as personal, business, and charity accountants. Want to find out more? Get in touch with our team today.
Here for you.
