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Spring Budget 2017 BulletinThursday 9th March 2017
A Budget for a ‘stronger, fairer, more global Britain’? Or one that revealed ‘utter complacency about the economy’? Initially billed as just a ‘box-ticking exercise’ by the Chancellor himself, the 2017 Spring Budget was not expected to pull any surprises.
With only a glancing mention of our future outside the European Union, Phillip Hammond simply referred to a ‘more global Britain’ and said ‘we can’t rest on our past achievements;’ that ‘we must focus relentlessly on keeping Britain at the cutting edge of the global economy.’
Clearly enjoying himself and taking aim at the Labour front bench on a couple of occasions he delivered a Budget that reiterated policies announced at the Autumn Statement, launched consultations – and made some eyecatching proposals.
Stating that Britain was the second fastest growing economy in the G7 in 2016 (to Germany), he said the growth forecast for 2017 had been upgraded from 1.4% to 2%. But he acknowledged productivity was low and families were feeling the squeeze.
To help close the productivity gap he announced more spending on education with investment in existing schools as well as funding for new free schools and specialist maths schools.
He said that all the funding pledges announced would be paid for by tax changes and not more cuts, with measures again announced to target tax avoidance schemes and those advising the use of them.
Central to his Budget was a pledge to create a fairer tax system – he announced an investigation into tax treatment by Matthew Taylor of RSA – which heralded some sharp focus on the self-employed and small businesses.
One of the most significant announcements was the rise in self-employed National Insurance contributions – something that has already been interpreted as going against a manifesto pledge of 2015.
And there is to be further change to the tax treatment of dividends – a reduction in the tax-free dividend allowance from £5000 to £2000 per year.
He also addressed the cacophony of resistance regarding the changes to business rates not by putting a halt to them but by softening the blow. And he confirmed that Corporation Tax was expected to fall to 17% by 2020.
For individuals, he confirmed the personal tax allowance would rise to £11,500 next month (the higher rate threshold will rise to £45,000) and would continue to rise in line with previous proposals.
And there was money for the NHS, although his claim that his party is the party for the NHS is one that will undoubtedly raise eyebrows – it certainly raised a laugh from the Opposition.
Labour has already taken issue with many of the proposals and announcements and asked how he was able to talk of a ‘resilient economy’ when the reality of Britain today is zero-hour contracts, food banks and working families reliant on tax credits.
- His proposals will be analysed over the coming days but here are the key points:
- UK growth up this year – 2% growth for 2017, up from 1.4%
- Borrowing is down – £51.7bn in 2016/17, £58.3bn 2017/18 then £20.6bn 20/21 and £16.8bn 21/22 (previously forecast in November as £59bn 2017/18, and £21bn 20/21 and £17.2bn 21/22)
- Tax free dividend allowance to be cut from £5000 to £2000
- Class 4 NI contributions rate for self-employed to increase by 1% to 10% from April 2018 and to 11% in April 2019
- Confirmed Class 2 NI contributions to be abolished from 2018
- Start of quarterly tax reports for smallest businesses (those with a turnover under the VAT registration level) delayed by a year
- Confirmed personal tax allowance would rise to £11,500 and higher rate threshold to £45,000 in April this year
- Confirmed Corporation Tax will fall to 17% by 2020
- National living wage rises to £7.50 in April
- Confirmed launch of National Savings & Investment bond in April this year (paying 2.2% on three years on savings up to £3000)
- Business rates: for small business coming out of business rate relief tobacco duties monthly increase in rate capped at £50; pubs with a rateable value of less than £100,00 (90% of pubs) will get £1000 discount on business rate bills; £300m fund available to local authorities for discretionary use in their area
- Wants to find a way to tax the digital economy – will set out preferred approach in due course
- New minimum excise duty on cigarettes based on a pack price of £7.35. No change to previously planned uprating on alcohol and tobacco – will be in line with Retail Price Index
- Freeze in excise duty for hauliers and HGVs
- Sugar tax set at 18p and 24p as previously announced but it has raised less revenue than expected as manufacturers have reduced sugar content
- £5m funding to help people return to work after a career break
- Consultation on parental leave for the self-employed
- £2bn for adult social care; green paper on funding to be published later this year
- £325m of capital for the first of the new sustainability and transformation plans (STPs) intended to improve healthcare; £100m for 100 GPs at A&Es
- Announced new T levels – technical skills alternative to A levels (for 16-19 year olds), intended to give parity of esteem to technical qualifications
- £320m to fund new free schools and maths schools; £216m to maintain existing schools; white paper to be published; free school transport to be extended to all children receiving free school meals and travelling to a selective school
- £300m for 1000 new PhD placements (particularly in STEM subjects)
- £270m for ‘disruptive’ technology (robotics and driverless cars)
- £16.5M 5G tech hub
- Midlands Engine strategy to be published
- £690m competition for local authorities to tackle urban congestion
- £350m for the Scottish government; £200m for the Welsh government; £120m for the new Northern Ireland executive
- £5m for projects to celebrate the Representation of the People Act 1918; £20m fund to combat violence against girls
- Green paper on protecting consumers to be published