Budget Highlights - 2018

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Budget 2017

Budget Highlights

This is the second November budget to be delivered by a UK Chancellor, and the last before Brexit in March 2019. There has been much recent talk of ‘an end to austerity’, and for many this is how the 2018 budget will be assessed.  The Chancellor, Phillip Hammond, also spoke of the ‘productivity challenge’ facing the UK and the need to deal with the productivity gap.

Forecasts for the economy

Growth

Forecasts for growth are:

2018 - forecast upgraded from 1.3% to 1.6%

2019 - 1.4%

2020 - 1.4%

2021 - 1.5%

2022 - 1.6%

  1. These relatively low growth figures – certainly lower than the UK’s long-term trend – are mainly down to the productivity constraint.
  2. Also, real wage growth is at its highest in nearly a decade, with it forecasted to continue to grow over the next 5 years.
  3. Employment is predicted to rise by 800,000 by 2022, through increased labour market participation.

Public finances

  1. Public borrowing in 2018 is expected to be some £11.6bn lower than forecast and represents 1.2% of GDP, and is forecast to be £31.8bn, and £26.7bn, £23.8bn, £20.8bn and £19.8bn in the subsequent 4 years.
  2. GDP debt ratio is predicted to fall (from 85.2% in 2016-17) to 83.7% this year and 74.1% by 2023-24.

Measures introduced

In what is clearly a ‘stimulative’ (‘give-away’) budget, the Chancellor plans to inject an extra £30bn into the UK economy through a combination of additional spending and continued borrowing, with the lion’s chares of the extra spending going on the NHS.

Measures – many of the details were already in the public domain - include:

Personal taxation and wages

The personal allowance is to rise from £11,800 to £12,500 in April 2019 (a year earlier than planned), and the higher rate tax threshold will rise from £46,350 to £50,000.

Alcohol, tobacco and fuel

Beer, cider and spirits duties to be frozen and wine duty to rise in line with inflation.

Tobacco duty will continue to rise by inflation, plus 2%.

Fuel duty to be frozen again.

Stamp duty and housing

Shared equity purchases of property up to £500,000 are now to become exempt from stamp duty.

£500m for the Housing Infrastructure Fund, with the aim of enabling a further 650,000 homes to be built.

Defence and security

An extra £1bn for the Ministry of Defence (MOD), specifically to improve cyber defence and the UK's nuclear submarine programme.

An extra £160m for counter-terrorism initiatives, and £10m for mental health care for veterans.

Business and the digital economy

The Chancellor also announced a new digital services tax on UK revenues of the big technology companies, from April 2020, covering companies with global sales of more than £500m, although measures introduced by the OECD may eliminate the need for this. It should be noted that this tax is a tax on digital services and not a digital sales tax.

The Private finance initiative (PFI) is to be scrapped.

Business rates companies with a rateable value of £51,000 or less to be cut by a third over two years.

£900m in business rates relief for small businesses.

£650m to help rejuvenate the High Streets.

Health (England only)

The Chancellor confirmed the announcement of an extra £20bn for the NHS – phased in over the next five years, with an extra £2bn a year for mental health services.

There will also be new mental health crisis centres in all A&E units, and an additional £700m for councils, to provide care for the elderly and disabled.

Education

A one-off £400m cash payment to help schools with new purchases.

Transport and infrastructure

A £420m package for England's roads, to repair to motorways and mend potholes.

The opening of e-passport gates to non-EU citizens, including those from the USA, Canada, New Zealand and Australia.


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