In the lead up to the Budget, Philip Hammond faced intense pressure from all directions: difficult economic forecasts, public services under pressure and, of course, Brexit. Nevertheless, he began his Budget speech with a clear message: Britain is looking forwards, not backwards. The Budget focused on seizing opportunities and creating a clear vision for what a global Britain looks like.
Unlike the Spring Budget, when the Chancellor did not mention Brexit once, today he addressed the UK’s departure from the EU head-on and confirmed that an extra £3bn is to be set aside for Brexit contingency planning over the next two years and to allow for “every possible outcome.”
Investing in infrastructure was a key focus of the announcement, with Hammond declaring that “raising productivity is the central mission of the Treasury.” As part of this, a further £2.3bn will be invested in R&D, with R&D tax credit increasing to 12 per cent amid efforts to drive up R&D investment across the economy to 2.4 per cent of GDP.
On personal taxes, Hammond declared that the individual allowance would rise to £11,850 from April, making the typical basic rate taxpayer £1,073 better off compared to 2010. The Chancellor did not follow up on his (subsequently dropped) Spring Budget proposal to reform NI to level the playing fields between the different employment forms.
Addressing the issue of multinational digital businesses avoiding tax, Hammond announced that from April 2019, the Government will apply income tax to royalties relating to UK sales, when royalties are paid to a low tax jurisdiction. This will apply even if they do not pay tax in the UK under current rules.
Changes to the way business rates are calculated were also among the measures announced in today’s Budget. Business rates will be increased by the CPI in April 2018; two years earlier than expected. The Chancellor said he expects inflation to peak at 3 per cent, and fall back towards 2 per cent in 2018. It’s hoped these changes will help businesses manage what is a “significant fixed cost” for investors.
The Chancellor made a radical bid to attract more young voters in his Budget today with reforms to Universal Credit, house-building and youth railcards. The news story dominating the headlines, however, is the announcement that the government will abolish stamp duty for first time buyers up to £300,000 and on the first £300,000 of the purchase price of properties up to £500,000.
One sector which the Chancellor did not focus on was the financial services industry. Outside of the Government’s ongoing committed to use banking fines over the next 3 years to support Armed Forces and Emergency Services charities and other related good causes, the sector was largely marginalised today.
Authored by Emily Roe