A MORE ‘BALANCED’ plan of investment and cuts, plus a surprise change to the Budget process, were the key messages from chancellor Philip Hammond in his first Autumn Statement.
With continued economic and social uncertainty to follow in the next few years as Britain plans for Brexit, Hammond ditched – to an extent – the previous direction of travel laid out by former chancellor George Osborne.
The aim to eradicate government borrowing was pushed back several more years. Borrowing will fall to £21.9bn in 2019/20, compared with a surplus as predicted by Osborne.
There is a more ambitious programme of spending on the cards. A new National Productivity Investment Fund will see £23bn of spending allocated over the next five years. As part of this, and revealed by prime minister Theresa May earlier this week, an additional £2bn will be invested in R&D.
Other planned investments include transport networks (with £1.1bn going towards local transport links); £390m towards low emission vehicles and capital allowances; and a pledge from Hammond for the UK to be a “world leader” in 5g. This pledge towards telecoms includes £1bn for new infrastructure.
‘Tech corridor’
A “transformational tech corridor” between Oxford and Cambridge will be further developed. Road schemes in the north of England would be given the go-ahead, while funding would be made available to evaluate the Midlands Rail Hub.
More funding capacity; a doubling of export finance capacity; management skills training; and other measures were aimed at helping small, high-tech high-growth companies.
Employment tax changes loom
But, despite pledges to invest and keep the business climate free of tweaks and changes, Hammond outlined a series of changes to the tax system.
Employer and employee National Insurance thresholds would be aligned; the insurance premium tax would rise to 12% from 10%; while the taxation of people working in different structures would be equalised. Many salary sacrifice benefits would be ended although, crucially for many, the pensions offering would remain.
Abuse of the flat rate VAT scheme would also be stamped out, said Hammond, while penalties for tax avoidance schemes defeated by HMRC would increase.
A rise in fuel duty would be cancelled for the seventh year in a row, he added.
Budget shifted to Autumn
Many tax advisers and business commentators have called for a change in the way in which the Budget and Autumn Statement process work – and they got their wish, to a degree.
Hammond said the Autumn Statement would be abolished, while the Budget would move and take its place. This would be, mainly, to allow for greater scrutiny of the Budget prior to it being enshrined in law.
However, as parliament had set out that the chancellor would answer to the Office of Budget Responsibility twice a year, a Spring Statement would be introduced to answer its findings. However, this would not be used to introduce a welter of new policies.