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The Briefing

Autumn Budget 2018

by Aiken PR

29/10/2018

Chancellor Phillip Hammond introduced his 2019 budget to the Commons today and positioned the financial plans as being based on a period of growth, economic stability and with a view to ‘end austerity.’

 

Autumn Budget 2018

Client

From

AIKEN 

Date

29/10/18

Subject

Autumn Budget Analysis

 

 

Introduction

 

Chancellor Phillip Hammond introduced his 2019 budget to the Commons today and positioned the financial plans as being based on a period of growth, economic stability and with a view to ‘end austerity.’

GDP growth for 2018 was upgraded from 1.3% to 1.6% in 2018 with 3.3m more people in work than in 2010.

Brexit featured relatively briefly his speech with an extra £500m set aside for preparations.

Northern Ireland is set to benefit from a city deal for Belfast, increased budgetary support and an additional £2m for Belfast City Centre following the recent fire at Primark.

Labour leader Jeremy Corbyn responded stating “the reality is that whatever the chancellor claims today, austerity is not over.” He added: “The government claims austerity has worked so now they can end it. That is absolutely the opposite of the truth. Austerity needs to end because it has failed.” He said: “What we’ve heard today are half measures and quick fixes while austerity grinds on. “And far from people’s hard work and sacrifices having paid off, as the Chancellor claims, this Government has frittered it away in ideological tax cuts to the richest in our society.”

 

 

State of the Economy

·         Era of austerity is “finally coming to an end”

·         2018 growth forecast upgraded from 1.3% to 1.6%

·         Growth forecast of 1.4%, 1.4%, 1.5% and 1.6% in four subsequent years

·         3.3 million more people in work since 2010

·         Wages growth at its highest in nearly a decade

·         Downing Street has insisted that the Budget’s spending announcements are fully funded, regardless of whether the UK secures a Brexit deal, in what has been viewed as a rebuke to the Chancellor.

·         Mr Hammond warned at the weekend that his economic plans depend on a successful outcome to the Brexit negotiations with Brussels.

·         Hammond states this is a ‘pivotal moment’ in Britain’s history and raises the prospect of a ‘double deal dividend’ as uncertainty will end when Britain leaves the EU.

·         Extra £500m for preparations for leaving the EU

·         Spring Statement next March could be upgraded to full Budget if needed

·         A commemorative 50p coin to mark the UK’s departure from the EU (announced on 29 October)

 

Brexit

·         Extra £500m for preparations for leaving the EU

·         Spring Statement next March could be upgraded to full Budget if needed

·         A commemorative 50p coin to mark the UK’s departure from the EU

 

Alcohol, tobacco and fuel

·         Beer, cider and spirits duties to be frozen – in a nod to his Scottish Tory colleagues. It would amount to 2p on beer, 1p on pint of cider or beer.

·         Wine duty to rise in line with inflation

·         Tobacco duty will continue to rise by inflation plus 2%

·         Fuel duty to be frozen for ninth year in a row (announced on 3 October)

Personal taxation and wages

·         Income tax threshold changes will amount to a tax cut for 32 million people, putting £130 a year in the pocket of a typical basic rate taxpayer meaning 1.7 million have been out of tax altogether and nearly 1 million out of higher rate tax since 2015.

·         Hammond says he will not be breaking his manifesto commitments – nor increasing people’s tax bills. He says the improvement made in the public finances means he does not need to do so.

·         He says the income tax–free personal allowance will rise to £12,500 and higher rate threshold to £50,000 from April 2019, and both to be indexed to inflation from 2021/22.

·         Thanks to the improved government finances, Chancellor says he will raise the personal allowance tax threshold a year early.

·         The personal allowance stands at £11,850, with the Higher Rate Threshold £46,350.

 

Stamp duty and housing

·         All shared equity purchases of up to £500,000 to be exempt from stamp duty

·         £500m for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built

·         Lettings relief limited to properties where the owner is in shared occupancy with the tenant

·         Stamp duty will be abolished for all first–time buyers of shared ownership properties valued up to £500,000, applied retrospectively to the date of the last Budget. 

 

Welfare and pensions

·         £1 billion package of measures over five years to support Universal Credit, and said he was increasing work allowances in Universal Credit by £1,000 a year at a cost of £1.7 billion annually, helping 2.4 million working families with children and people with disabilities by £630 per year.

Defence and security

·         On security, Hammond gives £1bn to the Ministry of Defence to cover this year and next.

·         He also promises £160m to counter–terror policing. He says he recognises that policing is ‘under pressure’ and promises that Sajid Javid, the home secretary, will review it in December.

·         An extra £1bn for armed forces, for cyber–capabilities and the UK’s new nuclear submarine programme

·         £10m for mental health care for veterans, to mark the centenary of World War One Armistice

·         £1.7m in education programmes to mark the 75th anniversary of the liberation of Bergen–Belsen concentration camp, in northern Germany

Business and digital

·         New digital services tax on UK revenues of big technology companies, from April 2020

·         Profitable companies with global sales of more than £500m will be eligible

·         Private finance initiative (PFI) contracts to be abolished in future

·         New centre of excellence to manage existing deals “in the taxpayer’s interest”

·         Annual investment allowance to be increased from £200,000 to £1m for two years

·         Contribution of small companies to apprenticeship levy to be reduced from 10% to 5%

·         Business rates bill for companies with a rateable value of £51,000 or less to be cut by third over two years

·         Measure to benefit 90% of independent companies, cutting bill by £8,000

·         £900m in business rates relief for small businesses and £650m to rejuvenate High Streets

·         New mandatory business rates relief for all lavatories made available for public use, whether publicly or privately owned

·         Extending changes to the way self–employment status is taxed, from the public sector to medium and large private companies, from 2020

·         Employment Allowance to be targeted at small and medium businesses with an Employer NICs bill under £100,000 a year from April 2020.

·         He announces £10m to pick up plastic waste – and starts a complicated joke about shadow chancellor John McDonnell, who tripped over some flytipped waste and injured his face.

·         There will be a new tax on plastic packaging that contains less than 30% of recycled plastic, he says.

·         However he moves away from a ban on plastic cups – as there is not enough evidence to show it would make a material difference, he says.

·         The chancellor announces a new tax on the manufacture and import of plastic packaging that contains less than 30% recycled plastic.

·         Philip Hammond says the government will consult on the detail and implementation timetable.

·         However, he says it has no plans to introduce a levy on disposable plastic cups: “I have concluded that a tax in isolation would not, at this point, deliver a decisive shift from disposable to reusable cups across all beverage types.”

·         Hammond has now moved onto business rates. For the next two years, he will cut business rates by a third for businesses that have a rateable value of £51,000 or less. This is aimed at smaller cafes, pubs, restaurants and shops.

Health

·         Philip Hammond refers to the already announced £20.5bn increase for the NHS over the next five years.

·         “There are many pressing demands on additional NHS funding but few more pressing than the needs of those who suffer from mental illness,” he tells the Commons.

·         The Chancellor announces that the NHS 10 Year plan will include “a new mental health crisis service”, with “comprehensive mental health support available in every major A&E”, as well as “children and young peoples’ crisis teams in every part of the country”.

·         He also promises “more mental health ambulances” and more “safe havens in the community” and a 24–hour mental health crisis hotline.

·         But he says he will act now to give *new money* – £650m of grant funding for English authorities in 2019–20 and £84m over the next 5 years to expand children’s social care programmes.

·         A minimum extra £2bn a year for mental health services

·         New mental health crisis centre, providing support in every accident and emergency unit in the country

·         An extra £700m for councils, for care for the elderly and those with disabilities

·         £10m for air ambulances

Education

·         A one–off £400m “bonus” to help schools buy “the little extras they need”

·         He says he recognises that ‘school budgets do not extend to those little extras’ that schools need and announces £400m to help schools out. His comments are likely to anger some teachers, as many argue that they are really stretched.

Transport, infrastructure and culture

·         A £30bn package for England’s roads, including repairs to motorways and potholes (announced on 27 October)

·         A 30% growth in infrastructure spending

·         Opening the use of e–passport gates at airports – currently available to people from Europe – to those from the USA, Canada, New Zealand, Australia and Japan

Environment and energy

·         A new tax on non–recycled plastic packaging

·         No tax on takeaway coffee cups but this will be reconsidered if the industry doesn’t make enough progress

·         £60m for planting trees in England

·         £10m to deal with abandoned waste sites

Northern Ireland

·         An extra £320 million for a Northern Ireland Executive

·         Chancellor announces £2 million help towards the recovery of Belfast city centre and £300 million for shared and integrated education in Northern Ireland.

·         Northern Ireland will be the last remaining part of the UK to get a city deal – there are already more than 30 across Britain.

·         First used in 2012, they are designed to give more spending and decision–making power to local authorities.

·         Negotiations on the Belfast Region City Deal have been ongoing for about a year.

·         A package worth £1bn over 10 years was being discussed, with £450m sought in ‘new money’ from HM Treasury.

·         The Executive was to pledge £400m, with the two Northern Ireland universities and six partner councils the remaining £150m.

·         But with such a long list of projects, leveraging in a further £4bn of private sector finance is probably essential.

·         The concept has a lot of buy–in.

·         Political parties and business groups support the idea, particularly in the continued absence of working devolution at Stormont.

·         In England, the National Audit Office has suggested it is too early to assess the impact of City Deals.

·         Derry/Londonderry is also seeking a deal, but its negotiations commenced at a later stage.

·         On that basis, its proposal is not quite as advanced.

 

 

Other UK regions

·         Additional £950m for Scottish Government

·         Additional £550m for Welsh Government