Tech giants and PFI contracts targeted by Chancellor
Philip Hammond claimed “austerity is coming to an end but discipline will remain” in the last Budget before the UK’s planned exit from the European Union.
The Chancellor said it was a Budget that would “pave the way for a brighter future” in a 73-minute speech in which he studiously avoided using the word “Brexit” even once.
The introduction of a digital services tax, the abolition of future PFI contracts and support for smaller retailers were among the highlights, although as is now usual, many of the announcements had already been revealed.
Jay Boyce, partner at MHA MacIntyre Hudson in Birmingham, said: “The Chancellor took the opportunity to spend the £11bn lower borrowing requirement into higher future public spending. This appears to be good news for the infrastructure of the UK generally and particularly, the NHS.
“Individuals must also generally be pleased with the continued freeze on fuel duty and drinks, together with the much trailed giveaway in the form of increased personal allowances and tax thresholds.”
In his third Budget speech, Hammond followed Prime Minister Theresa May’s bold claim by himself saying “the era of austerity is finally coming to an end”.
“We have reached a defining moment on this long, hard journey,” said the Chancellor, “where we can look confidently to the future”.
While the end of austerity remains an ambition, he did use his Budget statement to call a definite end to PFI contracts.
He said: “I have never signed off a PFI contract as Chancellor and I can confirm today that I never will. I can announce that the Government will abolish the use of PFI and PF2 for future projects.”
He unveiled a digital service tax targeting the digital technology giants, such as Facebook, Amazon and Google, which will be taxed at 2% on the money they make from UK users.
“It will be carefully designed to ensure it is established tech giants – rather than our tech start-ups – that shoulder the burden of this new tax”, the Chancellor promised.
His support for the High Street included a £675m Future High Streets Fund and a business rates cut for small retailers.
All retailers with a rateable value of £50,000 or less, will have their rates bill cut by one-third that will produce an annual saving of up to £8,000. However the large retail chains, whose struggles have led to a number of CVAs, will not benefit from the change.
Hammond had more room to manoeuvre because public sector borrowing came in “significantly below” forecasts.
He promised higher public services funding on the back of a “significant improvement in the public finances”.
Despite a promise to increase NHS funding, he said that improvement allowed him to make positive changes for workers.
The tax-free personal allowance will rise again, to £12,500 next April while the higher rate threshold for income tax will also rise, to £50,000. From April, the National Living Wage will rise again, by 4.9%, from £7.83 to £8.21.
A full spending review will take place, as scheduled, next year but he indicated that the five-year period will see an average annual real growth of 1.2%.
Other key spending measures included:
– £1.6bn of new investment to support the modern industrial strategy
– the National Productivity Investment Fund to increase to over £38bn by 2023-24
– £420m for local authorities to fix pot holes, bridge repairs and other minor repairs in this financial year
– a £400m in-year bonus for schools, with a one-off capital payment directly to schools averaging £10,000 per primary school and £50,000 per secondary school
– increasing the Annual Investment Allowance to £1m for two years
– an increase in mental health funding by more than £2bn a year by 2023-24
– local councils in England will benefit from a further £650m of grant funding to address pressures on social care for 2019-20.
– another £1bn to the Military of Defence over the next two years