Spring Budget 2017: Chancellor looks to put Britain on a global footing
Philip Hammond used his first and last Spring Budget to set out how the Government will build the foundations of a “stronger, fairer, more global Britain”.
He said even before taking to the floor that the Treasury’s priority would be to make sure “our economy is resilient, that we’ve got reserves in the tank” as the Government prepares to enter Brexit negotiations with EU.
Addressing a packed House of Commons, Hammond announced tax rises to meet some of the his spending commitments, instead of increase borrowing, in what was a fiscally neutral Budget.
The Government had already committed not to raise income tax, VAT or national insurance in the Conservative manifesto but taxes were increased for the self-employed.
The abolition of Class 2 NICs for self-employed people, announced by Osborne in 2016 and due to take effect in 2018, will remain. However, when the Class 2 NIC is abolished, the main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further 1% increase in April 2019.
Hammond said the change, which is expected to raise an additional £145m a year by 2021/22, would bring the self-employed more in line with those taxed by their employers and cost an average of around 60p a week per self-employed person in this country.
“Historically, the differences in NICs between those in employment and the self-employed reflected differences in state pensions and contributory welfare benefits. But with the introduction of the new state pension, these differences have been very substantially reduced,” he said.
He will use the additional funds to help pay for a £300m fund which will be allocated to local authorities for discretionary handouts to companies hit hardest by the controversial rise in business rates.
Hammond said that he is “listening to the voice of business” and that for those businesses coming out of business rate relief there would be a cap to ensure their bill did not increase by more than £50 a month. Meanwhile all pubs with a rateable value of less than £100,000 (90% of all pubs) will receive a £1,000 automatic discount.
Meanwhile, more than £2bn was earmarked to help tackle the social care crisis over the next three years, with £1bn of that available in 2017/18.
The former transport secretary announced £19m for the North and £23m for the Midlands to be spent on easing pinch points on our roads, while a £690m competition will be launched for local councils to tackle urban congestion.
As expected, there was an additional £500m funding for education of 16-19 year olds, with the introduction of vocational T-levels to boost technical education, with a 50% increase in training ours and a three month workplace placement for students.
There will be another 110 new free schools – including the new grammar schools promised by Theresa May – on top of the current commitment to 500 free schools, along with an additional £216m over the next three years for existing schools.
The Chancellor used International Women’s Day to highlight that a higher proportion of women are employed than ever before and announce a £5m fund for women’s equality projects.
Dubbed “spreadsheet Phil” for his cautious, analytical approach to balancing the books and keen eye for numbers Hammond describes himself as a fiscal conservative.
“This is the spreadsheet bit but bear with me because I have a reputation for it,” he joked before launching into economic forecasts.
The Office for Budget Responsibility upgraded growth for this year to 2%, from 1.8% last year but said it would be downgraded in each of the next three years.
Borrowing this fiscal year will be lower than previously thought and debt as a proportion of GDP will peak at 88.8% in 2017/18 before falling. National debt stands at £1.7trn, with £50bn being spent on debt interest.
Hammond said: “Today’s OBR report confirms the continued resilience of the British economy. And at this Budget we continue with our plan. Building on the foundation of our economic strength. Reaching out to seize the opportunities that lie ahead. Backing our public services. Supporting Britain’s families. Investing in the skills of our young people. And making Britain the best place in the world to do business,”
The next Budget will take place in the autumn to provide more time ahead of the new tax year in April. A Spring Statement will be used to respond to the twice-yearly OBR report but Hammond has promised “no major fiscal changes” next spring.
Ian Borley, East Midlands senior partner at KPMG, said: “The Chancellor’s speech was often lacking in detail, but I welcome the confirmation of the introduction of T-Levels. We see time and time again that the skills shortage is holding businesses back and I look forward to hearing more about this new measure.
“I was, however, disappointed with the lack of action on business rates. He didn’t address the point that bricks and mortar retailers are paying more than online retailers, but maybe this will come out in the paper the Government is set to publish.
“The £23m announced for Midlands transport infrastructure is less than a third of that promised to the North, although it was encouraging to hear that the Midlands Engine Strategy will be announced soon.
“I didn’t think the Budget was particular friendly to entrepreneurs, which is a surprise. The abolition of Class 2 NICs and the lowering of the the directors’ dividend threshold seems a backward step.”