On Tuesday afternoon, the Chancellor delivered his Spring Statement, lasting twenty-six minutes in total. As expected, it was an altogether pared back affair in comparison with previous events.
Hammond stayed true to his word and did not use the statement as a means of presenting a ‘mini budget’. No new legislation was announced and he refrained from tinkering with the tax system.
Major tax or spending changes will now be made once a year at the Budget held in Autumn. For businesses, this will hopefully deliver improved (albeit still limited) stability and hence the opportunity to plan more effectively for the future.
Despite upgrading growth forecasts for 2018 from 1.4% to 1.5% and predicting falling inflation, debt and borrowing he did also acknowledge that there would be no abrupt end to austerity.
This is reinforced by the expected £37.1 Brexit divorce bill, as published in the Office for Budget Responsibility’s background papers. Most of this – about £28bn – is due over the next five years. However, pension promises mean the UK will be paying around £2.5bn each year up to 2064.
The Chancellor did, however, imply that increased spending would feature in the Autumn Budget, which will be published later this year.
Hammond instead used Tuesday’s address to unveil a series of consultations scheduled to take place.
These consultations will invite views on future policies, including:
- measures to eliminate late payments for companies
- the future of cash and digital payments – including plans to potentially scrap 1p’s, 2p’s and £50 notes
- plans for a new method of VAT collection
- a reduction in tax on for the least polluting vans to “help the great British white van driver go green”
- a possible tax on single use plastic
- a new ‘tech tax’ looking at how firms like Google and Facebook are taxed
- a call for evidence “on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas”
The Chancellor also took the opportunity to reconfirm some of the changes previously agreed, in last year’s Autumn Budget, which will take effect in April.
The National Living Wage (NLW) will increase to £7.83 along with the National Minimum Wage (NMW) which will increase for all age groups – in total, over 2m people are expected to benefit from these changes. The Personal Allowance – the amount you earn before you start paying tax – will also increase from £11,500 to £11,850.
In addition, as previously announced, the next revaluation for business rates will be brought forward to 2021. After this point, the government will move to revaluations every three years which, it is hoped, will ensure bills more accurately reflect the current rental value of properties.
All in all, despite a seemingly upbeat statement and the Chancellor referring to himself as feeling ‘positively Tigger-like’ about the country’s outlook (as opposed to his ‘Eeyore’ opponents), there are undoubtedly still uncertainties that lay ahead for individuals and businesses alike.
Mr Hammond himself, even despite the above, acknowledged that the economy ‘does still face uncertainty’ as we continue negotiations with the EU.
A summary of the Spring Statement can be found on the Government website here.
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Find out more about how we can help businesses to find some stability in the face of setbacks, here.