It’s safe to say that Philip Hammond has experienced less tumultuous periods during his political career. Brexit, a snap election, the re-emergence of Labour under Jeremy Corbyn’s leadership and continuing austerity has made life difficult for the Conservatives of late.
However, the Budget speech delivered today was one from a man who appeared at the top of his game. Early jokes at the opposition were vehemently taken up by his back-benchers and the mood was once again bullish on the Tory side of the chamber. Indeed, even the Prime Minister got in on the act by providing the Chancellor with cough sweets; a rather staged affair, but one taken with good humour by the majority of politicians crowding the House.
Even the reduction in the Office for Budget Responsibility’s growth forecasts for the UK, falling from a hopeful 2% for the year to just 1.5% now, did little to dampen the mood. However, for all of the early bluster there were some very real announcements made.
Housing, the NHS and the younger generation
A previous interview on the Andrew Marr Show informed us that there would be a big push on affordable housing, with promises to increase the number of new homes being built to 300,000 a year by the mid-2020s. This would mainly be in urban areas to accommodate the needs of younger buyers, but also to create additional housing in the Oxford/Cambridge/Milton Keynes belt, in what the Chancellor referred to as the “growth corridor”.
However, the biggest cheer (and cries of “more!” from the opposition) was for the announcement that stamp duty for first time buyers would only start on houses over £300,000. Importantly, this tax relief will also apply for first time purchases of houses up to £500,000, and this makes for a real shot in the arm for the younger generation.
Following the spring launch of the Lifetime ISA (a replacement for the Help-to-Buy ISA), which has largely fallen flat since its inception, this could be the impetus it needs to take a foothold within financial wellness programs for employees. This new ruling now means there is scope for double tax relief both during the saving phase and at the point of purchase.
There was also good news for the NHS, which was promised additional funding of £2.8bn over the next three years, with £350m being made available immediately during the strained winter period.
Pensions, investments and technology
One thing that was noticeably missing from this Budget was any significant meddling with pension or insurance legislation, which is a relief for an industry which has historically been susceptible to change. This makes it the second budget in succession without interference. Let’s hope these things come in threes!
The increase to £1,030,000 in the Lifetime Allowance from 2018, in line with the Consumer Price Index (CPI), is still due to go ahead, as are the plans put forward in the Finance Bill to afford more powers to HMRC to register (and de-register) Master Trust pension schemes to provide greater regulation over a growing part of the pensions market.
There were some small changes to Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT) limits, allowing greater investment for “knowledge-intensive companies”, and there is a clear drive by the Chancellor to make the UK one of the leading tech economies in the world. Bold words and he seemed adamant to back up this rhetoric with some actual substance.
The Government already invests some £500m in tech services and the Chancellor announced he would be increasing the National Productivity Investment Fund to £31bn to help fund the tech revolution.
There was also the announcement that electricity provided by employers for electric cars would be made exempt from being taxed as a benefit in kind.
The Chancellor announced that the personal allowance for income tax would rise to £11,850 a year and that the higher rate threshold would rise to £46,350 from April 2018, measures that push us closer towards a £12,500 personal allowance by 2020.
There were increases too, to the National Living Wage and National Minimum Wage, continuing an upward trend to these limits, resulting in a proposed pay rise of £600 a year for over 2 million people.
Lastly, the Chancellor saved Christmas by promising a freeze on the duty of beers, wines and spirits, although high-strength cider is set to be singled out for a new band of duty.
The Budget was something of a win for an under-pressure Chancellor, with very few proposals that could be argued are anything other than positive for our economy. Lower projected growth rates are a problem for the Government, but investment in infrastructure is a step in the right direction.
How this plays out in the coming weeks and months is not yet clear, and given Mr. Hammond’s last Budget, some of these may need to be taken with a pinch of salt, but he has done both his own career and his party more good then the last six months combined.