[ad_1]
Hammond’s opening remarks
Peter Walker, political correspondent: Hammond’s starting paragraphs are openly political, and again herald the idea of an end to austerity. This will be, he says, “a budget that shows the perseverance of the British people finally paying off”. It will be, he promises, a budget for “the strivers, the grafters and the carers”. However, at the end of this section, Hammond says that the era of austerity is “finally coming to an end” – note the careful language; not “over”.
Brexit
-
Hammond announces an additional £500m for Brexit preparations in government departments.
-
This comes on top of £2.2bn already announced, and £1.5bn announced at the spring statement.
-
Hammond says he is prepared to upgrade the spring statement to a “full fiscal event” if necessary.
PW: Hammond is trying to not be too gloomy about Brexit – he talks of a “double deal dividend” for the economy if an agreement with the EU is reached – but still promises to be watchful, hence the idea of the spring statement becoming a “full fiscal event” if needed, which sounds very much like code for an emergency budget if there is no deal.
Growth
-
Hammond forecasts growth of 1.3% growth for 2018.
-
Then 1.6% in 2019, 1.4% in 2020, 1.4% in 2021, and 1.5% in 2022 and 1.6% in 2023.
-
In March, growth was forecast at 1.3% for 2019, 1.3% for 2020, 1.4% in 2021, and 1.5% in 2022.
Borrowing
-
Forecast for borrowing to be £11.6bn lower in 2018-19 than forecast at the spring statement. That is equivalent to 1.2% of GDP.
-
Borrowing forecast to be £31.8bn in 2019-20, then falling to £26.7bn in 2020-21, £23.8bn in 2021-22, £20.8bn in 2022-23 and £19.8bn in 2023-24.
-
Hammond says the government will meet its fiscal targets three years early, and will see borrowing as a percentage of GDP fall to 1.3% in 2021.
PW: A statistic-heavy section from the chancellor ends with a political flourish, as he calls the falling debt “a turning point in our nation’s great recovery”. He then adds a joke which gains great cheers from the Tory backbenches, but doesn’t entirely work if I heard it right: “Fiscal Phil says fiscal rules OK”.
Debt
-
Debt is forecast to be 83.7% as a share of GDP in 2018-2019.
-
As a share of GDP, debt peaked at 85.2%.
-
Debt as a share of GDP is forecast to fall to 82.8% in 2019-20, 79.7% in 2020-21, 75.7% in 2021-22, 75.0% in 2022-23, and 74.1% in 2023-24.
Defence budget
-
Hammond announces an additional £1bn for the defence budget for the remainder of this year and next, to boost cyber capabilities and anti-submarine warfare.
-
The chancellor says the Treasury will donate £10m to the Armed Forces Covenant Fund Trust to support veterans on the centenary of the first world war armistice.
PW: Hammond begins his section on spending by accepting it will contain few surprises, not least as the prime minister and others have briefed many announcements in advance, particularly on the NHS. The chancellor says those in his role usually like to have some “rabbits in the hat” for the budget, but adds: “This year, some of my star bunnies seem to have escaped just a little bit early.” There are, however, some new elements, not least the extra money for defence, as well as an immediate boost for social care – both areas likely to cheer his fellow Tory MPs.
Schools
PW: The schools money will be welcome, but some MPs will bridle at Hammond saying it will help “to buy the little extras that they need”, when plenty of headteachers complain they are short of money for essentials such as books and teaching assistants. It is also, notably, £20m less than the sum announced straight afterwards for potholes.
PFI
Small business
-
Hammond says he will halve the contribution to the apprenticeship levy for smaller firms from 10% to 5% in a £695m package to support apprenticeships.
-
He will extend the minimum qualifying period for entrepreneurs relief from 12 months to 2 years.
PW: Hammond devotes a fair amount of time to a fiscally relatively small section of the budget, as a way of hammering home the much-heard argument that the Conservatives are the party of post-Brexit enterprise – which he contrasts with the views of his Labour shadow, John McDonnell.
Digital tax
-
The government will now introduce a UK digital services tax. Hammond says it will be expected to raise around £400m per year.
-
Digital tech giants will be taxed 2% on the money they make from UK users.
-
The chancellor said the tax will be “narrowly targeted” on UK generated revenues of specific firms, rather than UK tech startups.
PW: A much-heralded idea, and one where the real test will come via how much revenue it actually raises. But a politically safe new tax – not many MPs will receive constituents’ letters complaining about an extra burden on the likes of Google and Amazon.
High streets
-
The government will provide £675m to create a “future high streets fund” that councils can access to redevelop their high streets.
-
The chancellor says for the next two years, up to a business rates valuation, for all companies with rateable value of £51,000 or less the government will cut their business rates bill by one third. A saving for 90% of shops, restaurants and cafes.
-
There will also be mandatory business rates relief for public lavatories.
PW: A not especially expensive set of proposals, which will be politically popular, given the worries among many MPs about their local high streets. But, ever the pragmatist, Hammond adds that changes to shopping patterns are “irreversible” and it is mainly a case of adapting to decline, not reversing it.
Housing
-
Hammond says the government will provide a further £500m for its housing infrastructure fund, which will unlock 650,000 homes. The fund now stands at £5.5bn.
Plastics tax
-
The government will impose a new tax on the manufacture and import of plastic packaging that contains less than 30% of recycled plastic. Hammond says he will consult on the detail and timetable.
-
There will be no special levy on disposable plastic cups.
PW: This won’t be a budget to cheer green advocates. The new plastic packaging tax is interesting, but Hammond has ducked the “latte levy” and the only other environmental measure announced is £10m to tackle dumped waste – which in budget terms is money found down the back of the sofa.
Universal credit
-
The government will also increase the work allowance to £1,000 a year under universal credit, at a cost to the Treasury of £1.7bn a year.
PW: This is some succour to Tory backbenchers, many of whom praise UC publicly but worry gravely about its implementation and the political impact it will have. Thus the increase in work allowances will be especially welcome. But the £1bn extra for transition is half the amount some had hoped to see in the budget.
Income tax
-
Hammond says the government will meet its manifesto commitment to raise the personal allowance to £12,500 (currently £11,850) and the higher rate taxpayers’ threshold to £50,000 (currently £46,351) one year earlier than planned: April 2019.
-
The chancellor says this is because the OBR estimates for the public finances are better than expected.
-
The minimum wage will also rise by 4.9% from £7.83 to £8.21.
PW: Hammond says: “I didn’t come into politics to put taxes up” – and pledges to not do so. But it’s worth remembering that only this morning the health secretary, Matt Hancock, repeatedly refused to rule out the idea of tax rises to pay for increased NHS spending in the event of a no-deal Brexit.
Verdict
PW: An oddly low-key budget speech, not least as most of Hammond’s announcements had already been made, something he acknowledged. They arguably key line came somewhere in the middle, when the chancellor said: “The hard work of the British people is paying off. Austerity is coming to an end.”
The important bit is “coming to an end” – a formulation he used at least four times – rather than “has ended”. As Hammond ended: “Austerity is coming to an end, but discipline will remain.” This is still “sensible Hammond” in change.
On the new announcements, it was arguably a budget of politically popular if relatively low-grade commitments; for example, an end to PFI projects, extra cash for defence, a boost for high streets and a new tax on the digital giants. But there are pitfalls ahead; for example, whether the extra money for UC will prove enough.
And I also suspect the additional money for schools, in total £400m, might cause more anguish than joy. Cash-strapped schools will not enjoy being told this is for “the little extras” when many are struggling for the very basics.
Finally, as mentioned many times in advance, this is a budget which depends almost entirely on a decent Brexit deal being reached, with Hammond conceding that sudden changes – for example a no-deal departure – would effectively mean a whole new budget in the spring.
