Economic Overview
Mr Hammond began his speech on a noticeably bold note, declaring that the “age of austerity is finally coming to end”, as he set out the fiscal and economic assessments from the Office for Budget Responsibility (OBR).
The OBR now forecasts growth next year of 1.6 per cent, 1.4 per cent in 2020, 1.4 per cent in 2021, 1.5 per cent in 2022 and 1.6 per cent in 2023. Mr Hammond added that the OBR expects real wages to grow in each of the next five years.
He went on to report that the deficit is falling to 1.5 per cent this year and next year, before dropping to 0.8 per cent by 2023-24.
He said that these represent a “significant improvement” in the public finances, enabling him to set out a new path for public spending. He added that there will be a full Spending Review next year.
Business and Enterprise
To cheers from his MPs, the Chancellor said Business Rates will be cut by one third for those with rateable values of £50,000 or less following the next revaluation exercise. This is expected to benefit 90 per cent of independent firms.
He also announced a significant increase in Annual Investment Allowance from £200,000 to £1 million for the next two years.
He also said that the qualifying period for entrepreneurs’ relief will increase from 12 months to two years.
Meanwhile, in the only announcement relating to Making Tax Digital (MTD), Mr Hammond said that the VAT threshold will remain at £85,000 for the next two years, meaning additional businesses will only be subject to MTD for VAT if their turnover rises above this level.
Moving to direct support for businesses, he said that a modern industrial strategy, supporting nuclear fusion, quantum computing, artificial intelligence and more will receive £1.6 billion in new investment. He also announced a £695 million initiative to help small businesses hire apprentices.
Small businesses will see their contributions to the apprenticeship levy reduced from 10 per cent to five per cent.
Less welcome for large online firms was the announcement of a UK Digital Services tax of two per cent on money made from users in the UK from April 2020. However, this will only apply to firms with revenues of £500 million or more and only if a good global alternative is not approved. Start-ups and SMEs in the sector will be unaffected.
Mr Hammond also announced that the National Living Wage is to rise by 4.9 per cent from £7.83 to £8.21 in April 2019.
Contractors working through personal service companies for medium-sized and large businesses will be subject to the IR35 rules, but not until April 2020, instead of April 2019 as planned. This means that these businesses will need to determine whether any contractors should be treated as employees for tax purposes.
Mr Hammond also announced a consultation on a plastic tax where packaging contains less than 30 per cent recycled plastic, but ruled out a tax on cups, unless the industry fails to make sufficient progress.
Meanwhile, the Chancellor confirmed that HM Revenue & Customs (HMRC) will become a preferred creditor following insolvency.
Public Spending
Saying that some “bunnies” have already escaped the hat, Mr Hammond said that there will be £20 billion for the NHS in England, £240 million to assist with winter pressures on Social Care and £2 billion more each year for mental health by 2023-24.
As part of this, there will be mental health crisis centres providing support in every accident and emergency unit in the country.
For education, he announced what he described as a £400 million “bonus” to spend on what he described as the little extra.
Turning to transport, Mr Hammond said that there will be a £30 billion package for roads in England, including for motorways and pothole repairs.
Turning to defence, he announced £1 billion additional funding for the Ministry of Defence this year and next year. This was followed by the announcement that an additional £160 million will be provided for counter-terrorism policing.
Meanwhile, £10 million will be provided to support mental health care for military veterans, marking the centenary of the end of World War One.
There will also be £1.7 million for education programmes to mark the liberation of the Bergen-Belsen concentration camp 75 years ago.
Brexit
Mr Hammond said that an additional £500 million will be provided to Government departments to fund Brexit preparations. This follows £2.2 billion that was announced previously and £1.5 billion that he announced at the Spring Statement.
Meanwhile, one of his more eye-catching announcements was the minting of a commemorative 50 pence piece to mark the UK’s withdrawal from the EU next year.
Personal Tax, Housing and Welfare
Mr Hammond provided welcome news for individuals by bringing forward the increase in the Personal Allowance for Income Tax to £12,500 by a year to April 2019, increasing the Higher Rate threshold to £50,000 at the same time.
Motorists will benefit from fuel duty being frozen for the ninth consecutive year. Duties on beers and spirits will also be frozen for a year, but duty on wine rises.
First-time buyers purchasing shared ownership homes will no longer have to pay Stamp Duty Land Tax (SDLT) on properties valued at up to £500,000. £5.5 billion will also be provided for a Housing Infrastructure Fund.
Turning to Universal Credit, which has provoked significant political controversy in recent years, he committed to spending an additional £1.7 billion over the next five years.
