Newington's Naomi Harris gives an overview of the Chancellor's crucial Budget.
This Budget had been trailed as ‘make or break’ for the Chancellor. And as Philip Hammond took to the dispatch box there was a definite air of trepidation, if not from him personally then certainly from the backbenchers around him who were all too aware of what another National Insurance-style debacle could mean for the Government.
The economy may have grown more than expected in the third quarter and factory orders may be up, but recent reports of public sector borrowing having unexpectedly widened combined with the latest OBR forecast downgrades meant this was always going to be a difficult balancing act.
The Chancellor sought to sound sufficiently upbeat about the country’s prospects post-Brexit and offer tangible support to those who feel they have been ignored by the Conservatives for too long – not least millennials and those outside the South East. At the same time, he attempted to manage expectations about what was possible amid continued uncertainty and given constrained finances. And so Hammond walked a tight rope; aware that if he went too far in either direction the result could be his political demise – something many commentators have been predicting for months.
Many of the announcements had been trailed in advance, though there were a few surprises - including the pledge to abolish stamp duty for first time buyers for up to £300,000 on properties worth up to £500,000. He also committed £44 billion of capital funding and loans over the next five years to increase the number of homes built in the UK to 300,000 per year by the mid-2020s, though this is less than it is understood Sajid Javid wanted. Hammond insisted the Government would maintain its ‘strong protection’ of the green belt, but there would be planning reform for urban land.
In response to continued concern about the UK’s poor productivity, Hammond pledged to extend the National Productivity Investment Fund to £31 billion with an extra £500 million going to the roll-out of artificial intelligence, fibre broadband and 5G. Alongside this, he pledged to unlock £20 billion of patient capital, through a range of measures, including doubling Enterprise Investment Scheme limits for knowledge-intensive businesses.
Reaffirming the Government’s commitment to the Northern Power House and the Midlands Engine, the Chancellor committed £1.7 billion to the Transforming Cities Fund with half going to the exisiting metro mayors and the remainder open to competition. Meanwhile £400 million will go towards rolling out electric vehicle charging infrastructure across the UK.
No changes were announced for VAT thresholds or corporation tax but the Chancellor brought forward the switch for calculating business rates from RPI to CPI by two years, and said that income tax on royalties relating to UK sales would come into force from April 2019 in line with international standards.
As the Chancellor sat down the question everybody is asking is whether he has pulled off that balancing act. The immediate reaction has been that the Chancellor avoided any quickly identifiable blunders, but with all these things the devil will be in the detail. And it will be only after the Red Book has been pored over and interrogated that we will know whether this will be Hammond’s first and last Autumn Budget. All eyes will now turn to next Tuesday and the conclusion of the Budget Debate– the time between now and then will be a deciding factor in the Chancellor’s prospects for the New Year.
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