Today (March 8, 2017), Philip Hammond delivered his first Budget as Chancellor. Here, Melanie Powell and Eugene Michaels, both Lecturers in Economics at the University of Derby, explain exactly what it means.
There are no surprises in this Budget – and that is not a surprise either. There are two reasons for this. The first is this is the last time the current Chancellor, Philip Hammond, will use a March Budget. The Budget has traditionally been used to announce tax changes, while the Autumn Statement has been used to announce economic forecasts and changes in government spending and departmental plans.
From November 23rd 2017, the two will be packaged together in one Budget Statement. So, if you know your ‘big stage show’ will be in November, why reveal the story in March?
The second reason is that the Article 50 trigger – Britain’s complex negotiations to exit the EU – will have been pulled before November, so if there is any fall out or reaction in the economy, the Chancellor will want to save his reaction for the November statement.
The Budget announcement was a managed show with virtually the whole content revealed before the Chancellor’s speech. The focus on technical training, investment, new Free Schools, help for small businesses struggling with the business rate changes, extra money for local authorities to handle social care, extra money for emergency NHS provision and changes to NICs were all released to the media before the budget.
What does it mean for social care and the NHS?
Short run political pressure from the current crisis in social care and NHS emergency care prompted the extra £2bn over three years for local authorities to meet social care payments, and the new £100m for GPs to provide triage within A&E departments. But this is just a sticking plaster.
The real job of finding a way to fund the rising demand for social care inside and its impact on NHS services has been left to a promised Green Paper.
Budget allowance and small businesses
The Chancellor has also offered a short term concession to the voters in the devolved regional governments by raising their budget allowance and reacted swiftly to complaints from small businesses hit by the recent business rate update. Small businesses who lose their rate relief will have the rate rise capped at £50 a month and £450m will be available to help support businesses facing rate rises.
Technical training and ‘T-levels’
The medium term focus on investing in infrastructure and technical training is welcome with new money for the NHS Scientist Training Programmes, the introduction of new T-levels or technical A-levels, with maintenance grants available for students studying these T-levels in new technical colleges and STEM subject PhDs.
In addition, there is extra funding for 110 new Free Schools and £216m additional funding for existing schools. There is additional funding for technology projects including 5G mobile and broadband, and new money for road improvements, £23m of which is in the Midlands.
Taxpayers and self-employed
The winners are taxpayers benefitting from a higher personal allowance, savers who apply for the new NS&I bonds from April this year paying 2.2%, and families with children.
The losers in this budget are the self-employed. Their Class 4 National Insurance contributions rise from 9-10% in April this year, and the tax free dividend allowance for shareholders in small firms will be reduced from £5,000 to £2,000 per annum from April 2018.
Smokers and sugar tax
Other losers include smokers, who will see the price of cigarettes rise by about 35p on average, as cigarettes rise by 2% plus the RPI (retail prices index). The new minimum excise level will mean that cigarettes cannot be sold for less than the excise tax, which was £5.37 on a pack priced at £7.35. Those of you with a sweet tooth could also see the price of your fizzy drink fix rise with the announcement of a minimum 18p tax per litre on drinks with 5g of added sugar and 48p per litre on drinks with 8g of added sugar or more.
So, overall, is the Budget good news?
The mood is upbeat on the back of improved growth forecasts for 2017. But a year is a very long time in politics. Chancellor Philip Hammond is keeping his big guns under cover until the uncertainty over rising inflation, falling retail sales, elections in Europe and the Article 50 trigger are passed.