Philip Hammond rose to his feet just after 12.30 pm today to deliver his first, and as it turns out, his last, Autumn Statement.
It contained a wide range of measures and, in many ways, marked a significant departure from the direction taken by his predecessor, George Osborne. Not least, due to the announcement that he has decided to abolish the Autumn Statement. In future, following the Spring Budget in 2017, the Budget will be moved to the Autumn, avoiding the uncertainty of significant changes being made twice a year.
Mr Hammond started off his speech in a bullish mood, announcing that the IMF now believe the UK to be the fastest growing developed nation. But, he then turned to more sobering news, with an analysis of the current state of the UK economy.
The Chancellor confirmed, that the Office for Budgetary Responsibility (OBR) has predicted growth over the coming years as follows:
- 2016: 2.1%
- 2017: 1.4% (down from 2.2%)
- 2018: 1.7% (down from 2.1%)
- 2019: 2.1% (unchanged)
He also revealed that Brexit is likely to reduce growth by 2.4%.
As previously trailed, the Chancellor announced that he no longer plans to return the UK economy to surplus by 2019 / 2020. He went on to confirm, that the OBR forecasts a budget deficit of £68.2 billion in 2016 and £59 billion in 2017; both figures significantly above those announced earlier in the year.
Mr Hammond predicted that the budget deficit in future years will be:
- 2018/19: £46.5 billion
- 2019/20: £21.9 billion
- 2020/21: £17.2 billion
He then moved on to outline three new fiscal rules:
- To move the budget to surplus as early as possible in the next parliament, with borrowing down to 2% by the end of this parliament
- To get net debt falling by the end of this parliament in 2020
- To ensure welfare spending is kept below a limit set by the Government
Following this analysis of the UK economy, he then turned to a range of announcements, which will affect your own personal finances.
Here’s our run down of the key changes:
Mr Hammond confirmed that the Personal Allowance, the amount an individual can earn before they start to pay tax, will rise to £11,500 from April 2017.
He went on to say, that it was still his intention to increase the Personal Allowance to £12,500, by the end of this parliament. It will then will rise in line with inflation.
No changes were announced to the rates at which Income Tax is charged.
The Chancellor confirmed that Corporation Tax will fall to 17% as planned by 2020.
Mr Hammond announced that from April 2017 he would align the employee and employer NI thresholds at £157 per week, resulting in a negligible saving for both employers and employees.
It was announced that the taper rate at which universal credit is withdrawn, as earnings rise, will be reduced from 65p to 63p from April 2017; a measure which will cost £1 billion.
Savers have been hit hard over the recent years with on-going low interest rates; the same group will suffer further losses if inflation starts to rise again in 2017.
Mr Hammond announced that a new National Savings & Investment (NS&I) three-year bond will be launched in the Spring Budget, paying an interest rate expected to be 2.2%.
Mr Hammond announced that the Triple Lock, which sees the basic State Pension rising by 2.5%, earnings, or the Retail Prices Index, will remain in place; at least until the next spending review early in the next parliament, when the challenges of an aging population will need to be addressed.
It was announced by the Chancellor that the government will consult on ways to ban cold calling in relation to pensions, which experts believe lead to thousands of people being scammed out of their pension pot or mis-sold inappropriate investments.
Much of the speech was devoted to housing.
The main headline will naturally be a ban on letting agents charging tenants fees to rent a property.
However, there was also an announcement that Right to Buy extended to housing association tenants. Additionally, Mr Hammond went on to say: “We will focus government infrastructure investment to unlock land for housing with a new £2.3bn Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in areas of high demand.”
“And, to provide affordable housing that supports a wide range of need, we will invest a further £1.4 billion to deliver 40,000 additional affordable homes. And I will also relax restrictions on government grant to allow providers to deliver a wider range of housing types.”
The Chancellor also confirmed his on-going support for the Help to Buy: Equity Loan scheme and the Help to Buy ISA.
The National Living Wage
This will increase from £7.20 to £7.50 per hour from April 2017.
Measures will also be taken to ensure workers are paid the National Living Wage to which they are entitled.
The proposed rise in fuel duty will be cancelled.
The process known as ‘salary sacrifice’ which sees workers giving up part of their income to pay for benefits such as gym membership, health care and mobile phones, and therefore reducing their tax and National Insurance bills, will be stopped from April 2017.
Various benefits will be excluded from this clampdown, including pensions, childcare, low emission cars and the Cycle to Work scheme.
Insurance Premium Tax (IPT)
IPT will rise from 10% to 12%.
To stop people over the age of 55 taking money from their pension and recycling it back into another pension, thus being able to claim additional tax relief, Mr Hammond announced that the Money Purchase Annual Allowance will be reduced from £10,000 to £4,000 from April 2017.
Productivity and investment
To target the problem of low productivity Mr Hammond announced that the government will form a new national productivity fund worth £23 billion.
The fund will focus on innovation and infrastructure, whilst investment into R&D will rise by £2 billion per year, by 2020.