In what was a largely unexciting Autumn Statement, the new Chancellor’s main announcement came at the end, that this was his first, and last Autumn Statement. Cue stunned silence in the House, until he stated that he was changing the Budget timings, such that next year’s Spring Budget will be the last. Thereafter, we will have an annual Autumn Budget, giving advance warning of legislative changes to be introduced in the following April, whilst the spring will be reserved for a response to the Office of Budget Responsibility (OBR), which he is statutorily required to do twice a year.
This is a welcome change given that, with two major Statements each year, often what is said is a regurgitation of previous Statements. In addition, for those of us who enjoy attending the Cheltenham Festival, the removal of the March Budget is good news indeed!
Turning to the remainder of Mr Hammond’s Statement, the OBR’s forecast for growth for 2017 is 1.4%. Whilst lower than had previously been predicted prior to the EU referendum, such growth is at the same rate as predicted for Germany and higher than other major EU nations, such as France and Italy.
The Chancellor also had to announce that the previous target of a budget surplus by 2020 will no longer be achieved. The new fiscal rule is to balance the books as soon as possible in the new Parliament.
Add to this bad news the fact that debt peaks at 90.2% of GDP in 2017/18 (the highest for 50 years) and you would start to think that this was all doom and gloom, but the Chancellor suggested there was plenty to cheer about as well.
The International Monetary Fund (IMF) have forecasted that we will be the fastest growing major advanced economy in the world this year, employment is at a record high of 74.5%, unemployment at an 11-year low and the deficit has reduced by two thirds between 2010 and 2016.
Hammond’s main target area in this Autumn Statement was to try and tackle the issue with the country’s productivity, which lags some 30% behind the US and Germany and 20% behind France. As a result, £23 billion is being ring-fenced for a new National Productivity Fund, using these monies in areas considered critical for productivity; housing, research and development and economic infrastructure.
Specific areas being targeted include £7.2 billion for the construction of new homes and £2.6 billion to tackle congestion (which I guess means more roadworks, therefore increasing congestion, at least in the short term)!
On the tax side, little new was announced. One significant announcement was the abolition of the Employee Shareholder Status, with effect from 1 December 2016. Given employment advice needs to be given seven days before implementation, it has been subsequently confirmed that such advice had to be given by 1.30pm on 23 November. The reason cited by the Chancellor being that this was being used to avoid tax by high earners (quite frankly, it’s surprising it’s taken this long to work that out)!
Other announcements include the alignment of employee and employer national insurance thresholds; confirmation that the personal allowance will rise to £12,500 and higher rate threshold to £50,000 by 2020, and that corporation tax will be lowered to 19% from April 2017 and 17% from April 2020.
There was a comment that a consultation will take place to consider the increasing number of incorporations taking place, ensuring a similar tax cost for those operating as a company compared to those operating as sole traders or partnerships. It will be interesting to see what their proposal is for attacking a legitimate trading structure.
Avoidance was, once again, mentioned with advisers facing significant penalties if they implement or introduce avoidance schemes defeated by HMRC in the courts. Salary sacrifice has also been attacked with the tax and national insurance benefits being removed, other than in respect of pensions, childcare, cycle to work and low emission cars.
Overall, little to be excited, or angry, about. With this being standard with the bi-annual major Statements, it’s no wonder that the Chancellor has decided to change things around, it will give him more opportunity to bring the ‘rabbit out of the hat’ and surprise us all. Let’s hope that the future surprises are all positive.