The new Chancellor of the Exchequer, Philip Hammond, has just presented his first Autumn Statement, and he will follow this next March with his first Spring Budget. They will also be his last, as in 2017 the budget will be an Autumn Budget, to be followed by a Spring Statement. To quote Del Boy – “Quel Fromage!”. He stated that the economy was facing sharp challenges.
The Office for Budget Responsibility (“OBR”) has forecast an increase in government borrowing, which it predicts to reach £68.2bn this year. Economic growth is expected to increase to 2.1% for 2016, but then drop dramatically to 1.4% in 2017. The ‘Brexit effect’ is expected to reduce the growth in the economy by a total of 2.4%. Because of this, the Chancellor said, he was unable to meet the previous pledge given by the government to balance the books by 2020. Instead, he replaced this with a pledge to deliver a surplus ‘as early as practicable’ in the next Parliament.
To do this he said that he would prioritise investment in UK infrastructure and innovation, and including the creation of a £23bn National Productivity Investment Fund (NPIF) to provide additional funding for transport, digital communications, research and development, and housing.
The Statement also:
- confirmed that corporation tax will be reduced to 17% by 2020 as planned,
- confirmed the implementation of the business rates reduction package,
- announced that employee and employer national insurance thresholds will be aligned from April 2017,
- announced measures to reduce the tax advantages of salary sacrifice schemes with most schemes being subject to the same tax as cash income.
- announced that from April 2017 the Universal Credit taper rate will be reduced from 65p to 63p for every pound of net earnings. announced that the National Living Wage and National Minimum Wage will increase from April 2017, and
- confirmed that by 2020/21 the income tax personal allowance will increase to £12,500 and the higher rate income tax threshold to £50,000 by 2020/21.
Other announcements included further measures to counter tax avoidance, an increase in insurance premium tax from 1 June 2017, and a freeze on fuel duty for the seventh consecutive year.