IFA Magazine’s Mike Wilson reports on the Spring Budget

by Heat Recruitment

Mike Wilson, Editor-in-Chief, IFA Magazine reports on this year’s Spring Budget.

For more industry reactions from Hargreaves Lansdown, Tilney, LEBC, City Of London Corporation, Fidelity, Investec, Aegon and a host more, please read here: IFA Magazine

It might be significant that this year’s spring Budget was always destined to be the last, before the new system of expressing new policy through the Autumn Statement instead. Because, on the face of it, there wasn’t that much to be said this time round.

Chancellor Philip Hammond is a nice chap, with quite a good line in dry humour, some of which he aimed squarely at himself. By remarking that the last chancellor to deliver what he said would be the last person to deliver a spring budget – only to be sacked a few weeks afterwards – Mr Hammond displayed a subtlety and a quiet confidence that would have eluded the loud-braying George Osborne every time.

But that was Hammond’s other endearing quality too. He seemed to spend such a lot of his time chatting away about other people’s ministerial portfolio areas –  education, hospitals, women’s rights – that those of us standing beside our radios were heard to ask when he was going to get on with it and start talking about money?

But we’d have misjudged him if we did that. The plain fact, as you might have supposed, was that Mr Hammond had very little cash to splash on this occasion – especially since he’d taken the very courageous decision to chop back the budget deficit a great deal faster than expected. And all credit to him for that.

The Economy

On growth, the Chancellor was entitled to be proud that projected UK GDP growth will hit 2% for 2017, according to the OBR – but he derives even more so for conceding that 2018 it will be down to 1.6%. A signal, perhaps, that he doesn’t think the Brexit battle is won just yet? Then 1.7% in 2019-20, 1.9% in 2020/21 and back to 2% in 2021-22.

Nor did he beat about the bush when it came to inflation. The CPI will rise to 2.4% in 2017-18, he admitted, before falling back to 2.3% and then 2.0% in subsequent years. Anyone who’s bought petrol or imported food recently will understand that one.

But for all that, the determination on the deficit suggested that some of Theresa May’s bull-headed attitude has either rubbed off on him or, maybe, been thumped into him. The Chancellor said he would reduce the total debt burden from 86.6% of GDP this year to just 79.8% of GDP in 2021-22. Net annual borrowing in 2016-17 will have come in at  £51.7 billion in 2016-17 – a full £16.4 billion lower than forecast. Rising a bit to £58.3 billion in 2017-18, then sharply down to £40.6 billion in 2018-19, £21.4 billion in 2019-20 and £20.6 billion in 2020-21. Just in time for the general election. Nice one.

New public sector net borrowing, he says, is set to drop dramatically from 3.8% of GDP in 2015/16 to 2.6% in 2016/17, then 2.9%, 1.9%, 1%, 0.9%, and (gasp) 0.7% in 2021-22. Applause, please.

More for Education

Oddly, though, that was about as far as the hard figures went. Mr Hammond’s engaging ability to leave his spreadsheets behind and waffle genially about brighter hopes for trainees and better child care came to the fore as he devoted quite long tracts of his speech to “soft stuff”.

Although we learned that the government was providing funding for 110 extra free schools, making a total of 500, we listeners were somehow never quite clear about how years Mr Hammond was talking about. (And nor, it appeared from the snorting, were his parliamentary colleagues.) Eventually we got to the point, though – the additional spending on schools is to be £260 million over a period of three years, which is a little over £10 a head per annum when divided among 8.2 million schoolkids. Hmmm, did somebody say style over substance?

Children who get free school meals are to receive free school transport if they attend a selective school. And the government is to push for 3 million apprenticeships. A topic which seemed to contain oddly more policy than expenditure. (Good news, though: The government plans to introduce a different system of college qualifications, with only 15 basic types of qualification, compared to what he perhaps loosely described as 3,150-odd.

Funding the NHS

There was better news for the health sector, where “the party of the NHS” was to prepare for the arrival of 2 million more old people between now and 2017 with the award of a £2 billion scheme for stopping bed-blocking. Or, to be precise, £2 billion worth of grant funding designed to help local authorities get the hospitalised elderly into other forms of care more quickly. Starting with £1 billion in 2017/18. Meanwhile, £100 million is to spent on new triage projects in A&E, so as to reduce time-wasting from people who don’t need to be there.

Nothing about pensions that hadn’t been said last November, nothing about ISAs, nothing about property or help to buy, and only the usual warnings about tax-dodging. A green paper on consumer support to be drafted, and new mayors to be rolled out in various metropolitan districts, and an extra couple of hundred million for eliminating transport pinch points in the provinces, and…

Self-Employed – The Axe Strikes

Are we lulling you into a false sense of waffle yet? The Chancellor, axe was about to fall on the self-employed. Directors’ tax-free dividends to be chopped from £5,000 to £2,000 per annum, Class 4 NICs to be increased by 1% immediate (and another 1% in 2019, so as to counter the effect of scrapping Class 2 NICs), and a full-on offensive against those small firms who fudge the relationship between capital and income.

New financial penalties for any professionals who enable a tax avoidance arrangement that later turns out to be defeated by HMRC. New measures against “abusing” foreign pension schemes. All in all, an additional £830 million of revenue for HMRC over the forecast period. In addition to what he rather grandly claimed to be the £140 billion that the Treasury has already recouped from its crackdowns. (Since which year? Sorry, that was another detail that somehow slipped away. But the point was well made anyway.)

The self-employed could, however, count on getting better parental benefits than the (broadly nil) entitlements they enjoy at present, and those who turn over less than the VAT registration threshold (£83,000) will get an extra year to prepare for the costly palaver of quarterly digital accounting.

And So To the Regions

The budget was remarkable, compared with the Osborne days, for the lack of emphasis on regional development. Oh, there were minor mentions, but the Northern Powerhouse didn’t get a mention even once as far as I could. Which is not to say that the Chancellor went easy on the technology challenge.

There are to be further cuts in business rate liabilities, particularly to smaller enterprises, and a £300 million fund is to be established for local authorities to spend on case-by-case rate relief.

£300 million of funding for special talents, £270 million for disruptive technologies, and £500 million worth of support for AI, electric cars and robotics, and some special incentives for the oil and gas industry. An additional £350 million for Scotland (loud jeers), £200 million for Wales, £120 million for Northern Ireland, and an injunction to remember that we are “stronger together”. At which point, having made the Prime Minister’s point as well as everyone else’s, the Chancellor sat down.

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