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In his first and last 'Spring Budget', the
Chancellor of the Exchequer, Philip Hammond,
declared a "new chapter" in the UK's history as
the country embarks on its journey to exit the
European Union via Brexit. Much of the Budget's
focus was on social care and a rise in National
Insurance costs for the self-employed. There was
little that will significantly affect personal financial
planning apart from a reduction next year in the
£5,000 tax-free dividend allowance.
OBR Projections:
Mr Hammond stated that the Office for Budget Responsibility
(OBR) had confirmed "the continued resilience of our economy" and
their Gross Domestic Product (GDP) projection had increased to
2% from their previous estimate of 1.4% in 2017.
Overall borrowing for 2017 is forecast at £51.7bn, some £16.5bn,
lower than his Autumn Statement forecast of £68.2bn.
The Bank of England has a CPI inflation target of 2%; the OBR
estimates the actual rate will reach 2.4% this year, 2.3% in 2018
and then 2% in 2019.
National debt is estimated for 2017 at 86.6% of GDP, and then
88.8% for 2018.
The UK's national debt now stands at almost £1.7 trillion or a
sobering £62,000 per household.
Business Taxation:
He left unchanged the already announced Corporation Tax plans,
as the current 20% will be reduced to 19% from April 2017 and
then to 17% by the 2020/21 tax year.
The planned contentious changes in Business Rates, which
currently produce £25bn in revenue, will not be abolished.
However, he suggested some amendments. Those businesses
that had formerly been below the thresholds for the tax, but
under the revaluations starting to pay the tax, will benefit from
a £50 per month cap on any increase; whilst public houses, with
a rateable value of less than £100,000 (90% of all pubs), will also
benefit from a £1,000 discount. Overall, the concessions will bring
a reduction in government revenue of £435 million, as a £300
million fund will be established to distribute relief to businesses
via their local authorities.
There will be a freeze on haulage companies' vehicle excise duty
rates and HGV Road User Levy.
Personal Taxation:
On the personal taxation front, the Chancellor declared that the
government will "support ordinary working families". The personal
allowance, as previously announced, will rise from £11,000
to £11,500 for the 2017/18 tax year. For higher earners the
threshold for paying higher rates will increase from the current
£43,000 pa to £45,000 pa (not applicable in Scotland). These
thresholds will increase respectively to £12,500 and £50,000 by
the end of this parliament in 2020.
The self-employed and those operating out of a corporate
structure – currently 15% of the working population will see
substantial changes, as their National Insurance Contributions
(NICs) will radically change. Class 2 contributions will be abolished
as planned in 2018 and at the same time Class 4 contributions
will be increased by one percentage point to 10%. This will raise
annual revenue by £145 million.
The dividend tax-free allowance, currently £5,000 pa, is to be
reduced to £2,000 pa from April 2018; on the plus side, an
increase in the annual ISA allowance by £4,760 to £20,000 from
April 2017 had already been announced. Alcohol and tobacco
duty will increase only in line with the Retail Prices Index (RPI). The already announced NS&I bond will be made available from April
2017 and pay a 2.2% coupon, up to a total £3,000 investment
over a term of three years.
Free childcare for working parents with three and four year olds
will be doubled to 30 hours a week, costing the government £6bn
pa by 2020. At the same time, they announced that £5 million will
be invested in 'returnships' for people within both the private and
public sectors to help them back into the workplace.
Additional Spending & Consumer Protection:
On this Budget Day, which was also 'International Women's
Day', Mr Hammond pledged £100 million over this parliament to
support the campaign 'Violence Against Women and Girls', £12
million from Tampon Tax revenues to women's charities, and £5
million to celebrate the 1918 women's suffrage centenary.
He also announced the already headlined introduction of a
Green Paper to protect consumers by simplifying companies'
published 'Terms and Conditions', such as those with unclear
financial implications.
Productivity/Education:
The government want to raise productivity and skills in both the
education sector and workplace. He was quoted as saying that
they "want our children to enjoy the same benefits as we did."
There are now 1.8 million more children in 'good' or 'outstanding'
schools (as defined by OFSTED) than in 2010 and the number of
young people not in jobs or education is now at its lowest rate.
His wish is that academically gifted children from all backgrounds
will benefit from the 110 new 'Free Schools', adding to the existing
commitment to 500. Increases in free travel and school meals are
flagged and an additional £216 million investment over the next
three years into existing schools infrastructure was announced.
A new 'T Level' qualification is to be introduced aimed at
improving technical and digital education, directly linked to
employers' job requirements. Those within the 16-19 age group
will benefit from new maintenance grants amounting to £500
million being made available, in the same fashion as those
currently available to university students.
A sum of £300 million is to be made available to nurture research
talent and £270 million support for research projects into
biotechnology, robotics and driverless vehicles, £16 million for a
new 5G mobile hub and £200 million financial leverage for fullfibre
broadband networks.
Regions:
The regions and devolved parliaments of the Union also benefit.
Elected Mayors will be created for six major cities across the UK,
as local authorities will be devolved greater powers from central
government to control their own destinies.
The North will benefit from an additional investment of £90
million for road network improvements, whilst the Midlands will
see a further £23 million.
Of the devolved parliaments of the Union, Scotland will be
allocated an additional £350 million in funding, Wales £200
million and, Northern Ireland a proportionate £120 million.
NHS and Care:
Philip Hammond declared that: "We are the party of the NHS" as, to
relieve pressure on medical resources, he announced additional
grant funding of £2bn over the next three years for care of the
elderly and social care. He clarified that £1bn of this sum would
be allocated in the 2017/18 tax year.
He did, however, acknowledge that the whole subject of 'Social
Care Funding' needed a "strategic approach" and urgent redress.
To this end he proposed a Green Paper later this year.
Government funding in the NHS will increase by £4bn this year
and by £10bn this parliament.
With A&E identified as the pinch-point in the service, the
government will allocate part of the pledged funds to create
dedicated on-site GP Triage services at hospitals to reduce the
intake of non-urgent cases, to relieve pressure on the system.
The newly introduced calculation figures for 'Personal Injury'
compensation for successful insurance claims, could, potentially,
increase the NHS's liabilities in this area by over £1bn. It is the
government's intention to protect the system against such
additional costs, although the details of this were not made clear.
As he left the dispatch box, Mr Hammond declared: " … we embark
on this next chapter of our history. Confident in our strengths. And
clear in our determination. To build a stronger, fairer, better Britain."
Infographic
March 2017
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