Streets Chartered Accountants’ verdict on Phillip Hammond’s Budget announcements on October 29
The Chancellor’s Budget was deemed by him and perhaps many in the Cabinet as marking the end of the era of austerity. This was characterised by severe, even extreme cuts, in public and personal spending, with the focus on re-balancing the books, paying off debt and looking at ways to create new and additional wealth.
Well, it seems at least in term of public finances, given the announcements in the Chancellor’s Budget, that there might be more than a glimmer, even hard evidence that we are approaching the end of austerity. This being down to our public finances being in better shape than for a long time, the result of increased tax revenues, reduction in overall borrowing and with the economy being in better shape.
With only 5 months to go, literally to the day for Brexit, with or without a deal, the Budget 2018 with all good intention might be scuppered in the event no deal is reached. The outcome of which is likely to lead to an emergency Budget next Spring, despite the significant financial provision announced in the case of a no deal outcome.
This aside Hammond’s Budget, one of the longest for some time at well over an hour, certainly seemed to give something for everyone. For most the key announcement was probably the plan to bring forward by one year to next April, the increase in personal allowance to £12,500 and the raising of the higher rate tax threshold to £50,000.
To support and help address the demise of the High Street, he outlined support in terms of business rates relief for retailers, pubs, cafes and restaurants and for those looking to spend a penny rates relief for our local authorities which provide public toilets. Bizarrely enough it seems our High Streets have seen a decline in and/or have not kept pace with the need for such facilities.
Our many road users, especially in rural areas, will no doubt welcome the provision of £420 million to fix the pot holes in our roads, as well the continued freeze on fuel duty. Funding was also earmarked for infrastructure projects, including new roads.
Education, Health and Defence all benefited from funding pledges. First time house buyers and new house builders all received news on initiatives, which included the extension to the Help to Buy Scheme till 2023, to further the provision of affordable and additional new homes.
In terms of announcements affecting businesses, the headline grabbing one was the proposed introduction of a UK Digital Service Tax, primarily aimed at the large search engine, web developers and online retailers with over £500m in global revenue. A move which it is felt will not jeopardise an investment in the UK by such enterprises, perhaps because of the UK’s and its consumers’ demand and appetite for the services they provide.
As part of encouraging investment in enterprise and business the Chancellor announced a major increase in the Annual Investment Allowance from £200,000 to £1m. To support and promote enterprise he confirmed the continuation of start-up loans and the New Enterprise Allowance. Whilst under pressure to abolish entrepreneur’s relief, the relief made to entrepreneurs on selling all or part of their business he chose to tweak it by extending the qualifying period of the tax break from 12 months to two years, with the aim of encouraging longer-term investment in British business.
With business and consumer confidence falling and with the possibility of a no deal Brexit, this Budget perhaps sought to boost confidence and optimism. With no real tax takes, certainly those announcements around the provision of funding have seemingly been covered by the ability to meet the cost from the public purse.
Whether though the Budget 2018 becomes one of good intention as opposed actual delivery ultimately depends on the outcome of Brexit negotiations. We will have to wait until March 29th 2019 to find out.