Philip Hammond’s first Autumn Statement as Chancellor was the first big economic announcement since the vote to leave the EU. Mr Hammond announced that the Statement is in fact being scrapped and replaced with an Autumn budget and a Spring Statement responding to forecasts. This will allow for “greater Parliamentary scrutiny of budget measures”.
Despite uncertainty around Brexit, the Chancellor commended the economy’s “strength and resilience”, noting that Britain is the fastest growing major advanced economy this year, according to the IMF. Mr Hammond promised to tackle the UK’s long-term weaknesses – the productivity gap, the housing challenge and the ‘imbalance in economic growth’ across the country.
Significant investment has been announced in both house building and broadband capability, giving two of our key markets – construction and telecoms – a welcome boost.
Key takeaways from the speech are summarised below:
- The Office for Budget Responsibility (OBR) growth forecast upgraded to 2.1% in 2016, but slowed to 1.4% in 2017, due to lower investment and weaker consumer demand, driven by uncertainty and inflation caused by the Sterling depreciation.
- OBR forecasts growth of 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021.
- Growth is forecast to be 2.4% lower in 2020 due to uncertainty around Brexit. Because of this, the government will no longer be looking to balance the books by 2020.
- The UK labour market is forecast to remain robust. 2.7m new jobs have been delivered since 2010, with 500,000 more jobs predicted over the OBR forecast.
- Debt will increase from 84.2% of GDP in 2015 to 87.3% this year, rising to 90.2% in 2017-18.
- A new national productivity investment fund will spend £23 billion on infrastructure and innovation, over the next 5 years.
- £2bn per year by 2020 for research and development funding.
- The income tax threshold will be raised from £11,000 to £11,500 in April.
- Higher rate income tax threshold will rise to £50,000 by the end of the Parliament.
- The National Living Wage will rise from £7.20 an hour to £7.50 from April 2017.
- Insurance premium tax to rise from 10% to 12% next June.
- Rural Rate Relief to be increased to 100%, giving small businesses a tax break worth up to £2,900.
- Over course of Parliament, the government will double annual capital spending on housing.
- A new £2.3 billion housing infrastructure fund, to deliver infrastructure for 100,000 new homes in high demand areas.
- £1.4 billion to deliver 40,000 extra affordable homes in England.
- Infrastructure investment to rise to between 1% and 1.2% of GDP from 2020.
- £1.1 billion of investment in English local transport networks.
- £222 million to address traffic pinch points.
- £390 million to build on the UK’s competitive advantage in low emission vehicles and autonomous vehicles.
- £110m for East West Rail and commitment to deliver Oxford to Cambridge Expressway.
- More than £1bn for digital infrastructure, including 5G.
- 100% business rates relief on new fibre infrastructure.
- £1.8bn from Local Growth Fund to English regions.
- Fuel duty rise cancelled for seventh year running- at a cost of £850m, saving the average car driver £130 and van driver £350 a year.
- For the oil and gas sector, the Carbon Price Support will be capped until 2020 and business rates reductions worth £6.7bn will be implemented.
- Business-led recovery is at the heart of the plan. The Chancellor will stick to the business tax roadmap set out in March and corporation tax will fall to 17%, the lowest rate in the G20.
- UK export funding capacity will double.
- 400m to be injected into venture capital funds through the British Business Bank, unlocking over £1 billion of new finance for growing firms. There will also be a Treasury led review into the barriers to accessing patient capital.
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