Summary of Budget 2017

Philip Hammond has delivered his second Budget as Chancellor. Government Business provides a summary of the key points of his speech.

Brexit

The Chancellor began his announcement by talking about the current state of UK Brexit negotiations. Hammond revealed that an extra £3 billion will be set aside over the next two years to prepare the UK for every possible outcome as it leaves the EU. The Treasury has already invested nearly £700 million in Brexit preparations to date.

Housing

Hammond’s speech also revealed that stamp duty is to be abolished immediately for first-time buyers purchasing properties worth up to £300,000, and to help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty. 95 per cent of all first-time buyers will benefit from the cut, with 80 per cent not paying stamp duty. The reduction will apply immediately in England, Wales and Northern Ireland, although the Welsh government will have to decide whether to continue it when stamp duty is devolved in April next year. It will not apply to Scotland unless the Scottish government decides to follow suit.

Hammond said the government will provide £44 billion to boost construction to meet its target of building 300,000 new homes a year by the middle of the next decade. 100 per cent council tax premium is to be levied on empty properties, and compulsory purchase of land banked by developers for financial reasons. Hammond said reviews into delays in developments given planning permission will be taken forward, and there will be a new homelessness task force.

The Chancellor also announced £28 million for Kensington and Chelsea council to provide counselling services and mental health support for victims of the Grenfell fire and for regeneration of the surrounding area.

Taxation and Wages

Hammond announced that tax-free personal allowance on income tax will rise to £11,850 in April 2018, and the higher-rate tax threshold will increase to £46,350.

In addition, short-haul air passenger duty rates and long-haul economy rates are to be frozen, paid for by an increase on premium-class tickets and on private jets.

The state of the economy

Hammond said growth forecast for 2017 is to be downgraded from two per cent to 1.5 per cent, and GDP to be downgraded to 1.4 per cent, 1.3 per cent and 1.5 per cent in subsequent years before rising to 1.6 per cent in 2012-22. He also said productivity growth and business investment is to be revised down.

Hammond declared that the annual rate of CPI inflation is forecast to fall from its peak of three per cent towards two per cent later this year.

He also said another 600,000 people are forecast to be in work by 2022.

The state of public finances

Hammond revealed that annual borrowing for this year is £49,,9 billion, £8.4 billion lower than forecast in March, and that borrowing is forecast to fall in every subsequent year from £39.5 billion in 2018-19 to £25.6 billion in 2022-23.

He said public sector net borrowing is forecast to fall from 3.8 per cent of GDP last year to 2.4 per cent this year, then 1.9 per cent, 1.6 per cent, 1.5 per cent, and 1.3 per cent in subsequent years, reaching 1.1 per cent in 2022-23.

Debt will peak at 86.5 per cent of GDP this year, then fall to 86.4 per cent next year, then 86.1 per cent, 83.1 per cent, and 79.3 per cent in subsequent years, reaching 79.1 per cent in 2022-23.

Business

Hammond said the VAT threshold for small business is to remain at £85,000 for two years. He announced £500 million support for 5G mobile networks, fire broadband and artificial intelligence, and £540 million to support the growth of electric cars, including more charging points. An additional £2.3 billion has also been allocated for investment in research and development.

Hammond declared that rises in business rates are to be pegged to CPI measure of inflation, not higher RPI, and that digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction are to be subject to income tax as part of tax avoid clampdown, which is expected to raise about £200 million a year.

Pensions, savings and welfare

In regards to addressing concerns about the delivery of universal credit, the Chancellor is delivering a £1.5 billion package. The seven-day initial waiting period for the processing of claims is to be scrapped, and claimants are to get 100 per cent advance payments within five days of applying from January. The typical first payment will take five weeks rather than the current six, and the repayment period for advances will increase from six to 12 months. New universal credit claimants in receipt of housing benefit are to continue to receive it for two weeks.

Transport

Hammond announced £1.7 billion of the transport fund for city regions is to be spent by mayors, and that young person’s railcard is to be extended to 26-30-year-olds.

Regions

The Chancellor also announced a second devolution deal for the West Midlands, and £2 billion for Scottish government, £1.2 billion for Welsh government and £650 million for Northern Ireland Executive.

Infrastructure

£320 million is set to be invested in the former Redcar steelworks site.

Public services

Hammond revealed that the Scottish police and fire services are to get refunds on VAT from April 2018.

Health and social care

Finally, the Chancellor also revealed a £2.8 billion boost for the NHS in England - £1.2 billion less than Simon Stevens recommended - with £350 million immediately to address pressures this winter, £1.6 billion for 2018-19 and the remainder in 2019-20. He also revealed a £10 billion capital investment fund for hospitals.