An overview from our Senior Account Director, Simon Darby
The Chancellor emphasised the government’s ambition to deliver a Global Britain – ‘a prosperous and inclusive economy’ and an ‘outward-looking nation’.
Aside from an extra £3bn being put aside to support the UK’s transition out of the EU, Brexit – understandably – didn’t feature heavily.
Placing technology at the forefront, the Chancellor used his speech to present a government that was preparing the UK for the future.
From investment in 5G and full-fibre broadband to a new National Retraining Scheme, the Chancellor sought a balancing act – between maximising the opportunities technological change brings and providing reassurance against the upheaval and uncertainty it can cause.
Devolution continues to be a priority – reflecting the influence of Greg Clark (BEIS Secretary). Hammond announced a second devolution deal with the West Midlands Combined Authority, will seek to progress a North of Tyne devolution deal and, more widely, announced a £1.7bn Transforming Cities Fund to ‘improve connectivity and support jobs across England’s great city regions’.
Additional funding for the NHS, changes to the implementation of Universal Credit and – the Chancellor’s rabbit – scrapping Stamp Duty for first time buyers on homes up to £300,000, were all intended to demonstrate that the Chancellor hasn’t forgotten about the here and now. Hammond also sought to woo the millennials, with the introduction of a new railcard for 26-30 year olds.
Despite being laden with jokes, the Budget contained stark figures regarding growth forecasts.
Growth this year is revised down to 1.5% from 2% in March, and is also revised down in subsequent years, highlighting the difficulties the Chancellor will continue to face in finding voter-pleasing spending commitments.
The headline economic figures were as follows:
- 3 million new jobs created since 2010, with another 600,000 people set to be in work by 2022
- Annual rate of CPI inflation forecast to fall from peak of 3% to 2% later this year
- Growth forecasts (GDP) downgraded since Spring: 1.5% in 2017 (down from 2%); 1.4% in 2018; 1.3% in 2019; 1.3% in 2020; 1.5% in 2021 and 1.6% in 2022
- The UK’s productivity performance continues to ‘disappoint’ with productivity growth remaining flat and revised downwards
- Debt is ‘still too high’ but expected to peak this year; debt to peak at 86.5% of GDP then falling in the subsequent years, reaching 79.1% in 2022-23
- Annual borrowing forecast to be £49.9 billion this year – £8.4 billion lower than forecast in the Spring Budget. Borrowing then forecast to fall in every subsequent year from £39.5 billion in 2018-19 to £25.6 billion in 2022-23.
Health and Social Care
Overall this was a disappointing Budget for those of us in the health and social care sector – whilst the NHS received some money, it was far short of the amount requested by Simon Stevens, whilst social care wasn’t mentioned at all.
In a nod to a certain symbolic bus, the NHS will immediately receive £350m of funding to support the health service through this coming winter. This will be followed by £2.5bn over the next two years – which is in addition to the increase in spending announced in 2015. Altogether this means the Conservatives can meet their manifesto pledge of increasing spending on a per person basis in each year.
For care providers, of most concern will be the confirmation of the increase in the National Living Wage, which is rising by 4.4% to £7.83/hour for April 2018.
This will add yet more cost pressures to already struggling care providers, and follows last week’s disappointing announcement that the social care green paper is delayed until summer 2018. This means long term funding reform is still several years away.
The best we can do now is hope politicians make it their new year’s resolution to fix social care.
With Brexit looming, the Chancellor had a bold message in today’s Budget: more maths for everyone.
It was announced that £600 would be given to schools for every additional student taking a level or core maths qualification and the Teaching for Mastery of Maths programme is to be expanded to a further 3000 schools.
A commitment was made to triple the number of trained computer science teachers to increase digital skills, with a pledge to work with industry to create a centre for computing to help achieve this and the government’s aim to address gender disparity in STEM subjects was also touched upon briefly.
In other measures to address teacher development, Teachers in underperforming schools are to be offered training grants worth up to £1,000 each to improve their skills as part of a £42 million fund for professional development.
Moving to wider skills, the chancellor emphasised the importance of preparing people for a rapidly changing workforce with the announcement that the government, the CBI and the TUC would work together to set a strategic direction for a national retraining scheme to help prepare the nation’s workforce.
This was a budget all about housing, with the Chancellor placing ‘the dream of home ownership’ at the heart of his speech. Overall, £44bn was committed to housebuilding and post-Brexit construction skills, although only £15.3bn represents new money.
Stamp Duty has been abolished for first time buyers on homes up to £300,000. This announcement provided Hammond with his main headline-grabbing giveaway and demonstrates the concerns at the top of government regarding housing affordability.
Major changes to CIL charging were announced, to capture the uplift in land value. And yet another review into land banking will be undertaken.
Not forgetting renters, the government is looking at support for Build to Rent, longer term tenancies and criteria around affordability.
The Chancellor also highlighted a preference for garden towns and strategic sites, and building at higher densities in city centres. Yet again, the thorny issue of the Green Belt was ducked, permitting the ongoing confusion between greenbelt, greenfield and brownfield.
Overall, this budget was an effort to appeal to a broader and younger audience.
The key takeaway is that this is a move in the right direction for home building. This was a budget with quite a lot of sticks when it comes to housebuilding and slightly fewer carrots. But perhaps that’s no bad thing.
This budget has been fairly disappointing for transport projects, especially following the cancellations of wires on the Midlands Main Line, Didcot-Oxford, Cardiff-Swansea and Windermere branches in the summer. It is clear the Chancellor is prudent with new spending.
On aviation, Heathrow Airport’s campaign to scrap air passenger duty on domestic flights has been unsuccessful. There was however mention of revising APD for Northern Ireland and it was announced that from April 2019 there will be a freeze in short-haul APD rates and long-haul economy APD rates, paid for by an increase in APD on Premium class tickets and private jets.
For rail, the Chancellor announced the replacement of the 40-year-old rolling stock on the Tyne and Wear Metro, and gave shout outs to HS2 and Crossrail.
The announcement of the ‘millennial rail card’ for 26 to 30 year olds demonstrates the government’s nudge to Train Operating Companies (TOCs) that they need to focus more on the consumer, without receiving any new government funding.
On roads, there has been nothing knew since last year’s Autumn Statement which announced £90m for motorway ‘pinch points’ in the North of England (and £23m in the Midlands).
The Chancellor did however announce a £1.7 billion ‘Transforming Cities Fund’, much of which will be transport focused.
Finally, automotive, the Chancellor announced he will establish a new £400m charging infrastructure fund, invest an extra £100m in Plug-In-Car Grant, and £40m in charging R&D”, but announced no further investment into driverless cars since the previous budget.
Despite the extended support for electric cars, this wasn’t a particularly futuristic budget for the energy sector.
The messages of support for cleaner transport came at the same time as a freeze on the fuel duty, and extended tax breaks for oil and gas exploration in the North Sea will frustrate those who wish for a greener energy mix.
Hidden in the small print was one of the most significant points – that there will be no new low carbon electricity levies until 2025. This is a setback for emerging technologies like tidal and wave power, which need support to be able to compete on the open energy market.
Offshore wind has enjoyed remarkable success in recent months, but other technologies face an uphill battle to dislodge traditional, more carbon intensive fuel sources from our energy mix.
Although the Chancellor made only limited reference to the challenge of Brexit in his budget, it was nonetheless telling that he chose to open by listing the economic challenges and opportunities posed by Britain’s exit from the European Union.
Allusions were made to a “deep and special partnership” and to a “Global Britain”. Hammond announced that thrashing out an implementation agreement, to provide confidence and certainty to UK businesses, would be a “top priority” for the Government in the coming weeks.
Although he quickly moved on from the subject, other key themes of the Chancellor’s speech reflected the central importance of Brexit to the UK’s economic future. The strong focus on Britain’s position as a global leader in tech, for example, was a clear attempt to pitch a positive and dynamic vision of Britain outside the EU, both to domestic businesses and to foreign investors.
Hammond also struck a cautionary tone as he set aside 3 billion pounds to prepare Britain for Brexit. The size of this sum may well cause alarm amongst those who fear that Brexit could disrupt UK-EU trade and prompt an economic slow-down.
FULL sector analysis from PLMR consultants can be found here