In the Chancellor’s first Autumn Budget, the gloomy downgrading of the UK’s growth forecasts was offset, during his speech, by some positive announcements about increased spending for education, housing, the NHS and to improve productivity. However, with a distinct lack of tax raising measures, you have to question where the money is going to come from.
The Red Book suggests that the tax and spending decisions will cost the UK Government £24.755 billion over the next five years and yet the Chancellor is predicting a reduction in debt over the same period, although when you look at the numbers in more detail, it is at a much slower rate than was predicted in the March Budget.
On top of the £3.5 billion previously scheduled increase in funding for the NHS, Mr Hammond announced an additional, exceptional £2.8 billion, with £350 million available immediately to help improve A&E waiting times.
In an attempt to assist the next generation with the new digital economy, investment is to be made into education or, more specifically, maths. This aims to provide £27 million to put the Teaching for Mastery maths programme into a further 3,000 schools. Schools and colleges who support their students to study Maths will be rewarded by giving them £600 for every extra pupil who decides to take Maths or Further Maths A Levels, or Core Maths, with £80 million available initially.
It was widely predicted that housing would be at the heart of this Budget and the Chancellor didn’t disappoint with wide ranging plans aimed at achieving 300,000 new homes per year, but only by the mid 2020’s. He plans to achieve this through such measures as a 100% premium on council tax for empty homes, compulsory purchases of land with planning permission that is not being built on for commercial, but not technical, reasons. Furthermore, he proposed five new garden towns and funding for training and for small and medium builders struggling to access the financing they need.
One of his major tax announcements also related to the housing market, where first time buyers of houses worth up to £300,000 will be exempt from Stamp Duty Land Tax. Those acquiring higher valued properties of up to £500,000 will receive a nil rate band on the first £300,000, the aim being to assist 95% of first time buyers and help turn the dream of home ownership into a reality.
The Chancellor announced that there is to be an increase in the tax free personal allowance in 2018/19 to £11,850 and for the higher rate band to £46,350.
Those investing in Enterprise Investment Schemes had positive and negative news, with Mr Hammond announcing that the relief will not apply on 'safe, capital preservation' companies, but that the £1 million investment limit will be doubled for those investing in knowledge intensive companies.
Companies took a hit with the announcement that ‘indexation allowance’ will be frozen from 1 January 2018, meaning companies will no longer benefit from relief for inflationary rises when selling chargeable assets, which individuals lost back in 2008. On the more positive side, there was an increase in the main rate for R&D tax relief to 12%, for those carrying out qualifying research and development.
There was relief that the VAT threshold was not reduced, as had been talked about in advance of the Budget, although the registration threshold of £85,000 is to be frozen for the next two years.
Tobacco duty continues to rise at 2% above inflation, but alcohol (with the exception of white cider) and fuel duties were both frozen.
Anti-avoidance, as always, was mentioned, with a new income tax charge being brought in for royalties paid to a tax haven. This is similar to the rules already in existence for non-resident companies owning UK land and property.
It is perhaps of no surprise that there were no controversial measures announced from the Chancellor of a minority Government. The last thing they need at the moment is a Finance Bill that is not passed by the House.
It remains to be seen as to whether the measures announced appeal to the youth that appear to have deserted the Conservatives in droves. Regardless, the Government appears to be committed to giving them every opportunity of watching the next election from their own home.