The chancellor has spoken and we now know where we stand, at least for the next 6 months (until the full budget). Possibly the most surprising news from this Autumn statement is that it was the last of its kind and next year’s Spring statement will likewise be the last ever. From now on the UK will have annual Autumn budgets and make Spring statements. The least surprising announcement was that the proposed rise to fuel duty has been scrapped. Given that this is the 7th consecutive year the government has frozen fuel duty, this was probably widely expected, but will still probably be welcome news to many people, particularly those who travel frequently. The rest of the budget was arguably a mixed bag. Here is a summary of the three most important areas.
It’s understandable that debate on the economy was overshadowed by Brexit, particularly since, at this point in time, there now seems to be a question mark over whether it will actually happen at all, let alone when and how and what effect it will have. Philip Hammond, however, is essentially obliged to work on the basis that it will and is therefore proceeding with caution. The government has ended its commitment to return to a budget surplus by the 2019-2020 financial year. Instead debt will rise and is forecast to peak in 2017-2018.
Pensioners may have raised their eyebrows at the chancellor’s commitment to maintain the triple lock system for this parliament. The triple lock system refers to the practice of increasing the state pension in line with average earnings, the consumer price index or 2.5%, whichever is highest. While it is undoubtedly reassuring to pensioners, it is also expensive and was recently criticised by the Work and Pensions Committee as being both unsustainable and unfair. The fact that Philip Hammond set a deadline on this commitment may be a hint that the government will look to drop it in the next parliament. Interestingly Philip Hammond also suggested a new bond for savers of all ages, paying 2.2% interest. No further details of this were given, but at first glance it sounds like a similar idea to the “pensioner bonds” of 2015 and may be intended to cushion the blow of removing the triple-lock guarantee.
For working adults, the chancellor raised the National Living Wage (formerly known as the minimum wage) to £7.50 (from April 2017). He raised the income tax threshold to £11,500 (also effective next April) and committed to raise the higher rate threshold to £50,000 by the end of this parliament. At the same time, he removed the tax benefits on salary sacrifice/benefits in kind schemes, but notably exempted schemes relating to childcare and pension saving along with schemes linked to ultra-low emission cars and the cycle-to-work scheme.
The headline-grabbing announcement that the taxpayer would fund repairs to Buckingham Palace was made before the budget and Philip Hammond was also notably silent on the matter of repairing the Palace of Westminster (otherwise known as the Houses of Parliament). He did, however, manage to find a relatively modest £7.6 million to fund repairs to Wentworth Woodhouse, known to Jane Austen fans as the probable inspiration for Mr Darcy’s home of Pemberley. He also committed £2.3B to provide 100,000 new homes in areas of high demand as well as £1.4B for 40,000 affordable homes. The chancellor also promised almost £1.5B to fund various transport projects. The vast majority of this went to improving local transport networks in England with £220M to combat traffic pinch points and £110M for East West Rail. The digital economy was not forgotten with a commitment of £1B to improve broadband access. This is in addition to 100% business rate relief for spending on new fibre infrastructure.