The most exciting rabbit that emerged saw the Chancellor announce that, from next year, the Budget will now take place in the autumn, with a ‘Spring Statement’ responding to forecasts from the Office for Budget Responsibility rather than a full budget.
As was widely anticipated, there were gloomy predictions with downgrades to the forecasts for 2017 and beyond.
The March forecast of 2.2% growth in 2017 is now predicted to be 1.4% with growth recovering thereafter and, as was widely trailed, there has been a deterioration in the public finances. The economy looks set to be around 2.4% lower than it would otherwise have been before Brexit, severely limiting Mr Hammond’s room for manoeuvre. In line with this, Mr. Hammond reinforced the need to keep “fiscal discipline” on public spending which will please many on the Tory right.
To give himself some flexibility, however, the Chancellor also announced a new “Charter for Budget Responsibility” moving from plans for a surplus by 2019 /20, far later than was set out by his predecessor George Osborne.
As was widely anticipated, this statement was all about the JAMS, or those who are ‘just about managing’ as described by Theresa May on the steps of Downing Street just a few months ago.
For these people, ill-defined as they may be, there was a package of measures on housing to “increase the supply of homes for sale and rent” with a new £2.3bn housing infrastructure fund to build new homes in areas of high demand; a further £1.4bn for affordable new homes and a large-scale pilot of Right to Buy for housing association tenants and continued support through the Government’s Help to Buy scheme.
There will also be a ban on fees charged to tenants by letting agents, hitherto a totemic Labour rather than a Conservative policy.
There will be a welcome increase in the personal tax allowance to £12,500 and an increase to higher rate threshold both by 2020. In addition, there will be an increase in the national living wage next April by 4% to £7.50.
The Chancellor was keen to stress that Britain is very much still “open for business”, despite Brexit, with the launch of a new ‘industrial strategy’ by the Prime Minister earlier this week and a continued commitment for the Corporation Tax rate to be lowered to 17% by 2020. There will also be a £23bn National Productivity Investment Fund to spend on infrastructure and innovation over the next five years.
Other key measures included:
- There will be ‘extra’ spending on transport including £1.1bn in transport networks, £220m for traffic pinch points and £450m for rail and £390m to help research on low emissions and autonomous vehicles.
- A boost to internet connectivity and 5G with £1bn for faster connectivity.
- On welfare spending the Chancellor announced that there would be modest reductions into previously announced cuts in Universal Credit to increase the incentive to work.
- New measures to tackle tax avoidance and evasion were announced along with a clampdown on in work benefits in kind like gym memberships, although this will not include ultra-low emissions vehicles, cycle to work, childcare and pensions.
- Insurance premium tax will rise to 12 percent and the Government will clamp down on whiplash claims to reduce insurance premiums.
- A new savings investment bond where savers can deposit up to £3,000.
- There will be no fuel duty increase.
While this was a comparatively short statement it was critical politically for the Government. It comes at a time when questions are being raised about its strategy and ability to handle the running of the country as we approach Brexit.
Mr. Hammond took his chance to reassure voters that they are firmly in control, looking to manage the economy in ‘everyone’s’ interests and focus on managing the nation’s public finances despite the challenges faced.
The statement, said to be heavily influenced by Downing Street, also looked to firmly establish ‘Mayism’ and her support for those ‘just getting by’. It reflected Theresa May’s cautious approach to Government setting a different tone from the days of Government by the ‘Notting Hill’ set. As Mr. Hammond sagely noted “times have moved on”.
As a result today’s statement was not characterised by the showmanship of the past. This is, it seems, serious. There were few surprises. Indeed, no doubt the Chancellor will be hoping that this will be the case more generally for the economy in the months and years to come.