Key Takeaway: Make Britain ‘fit for the future’ once it leaves the EU in 2019
In his Commons speech today, Chancellor Philip Hammond has set out proposed tax and spending changes. He has also updated MPs on the current state of the economy, future growth projections and the health of the public finances.
Hammond started his speech today by saying the UK economy “continues to grow, continues to create more jobs than ever before, and continues to confound those who seek to talk it down”.
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These are the key economic take-aways for the UK businesses.
Hammond has promised investment to make Britain “fit for the future” as an “outward looking, free-trading nation” once it leaves the EU in 2019. To ensure this, Hammond is setting aside another £3bn for Brexit preparations over the next two years.
The Office for Budget Responsibility (OBR) has cut its forecasts for UK economic growth. The UK economy is now expected to grow by 1.5 per cent in 2017, a downgrade from the 2 per cent forecast.
Debt still too high and “need to get it down”, OBR predicts the borrowing forecast to be £49.9bn this year; £8.4bn lower than forecast at the Spring Budget.
OBR also forecasts another 600,000 people in work by 2022.
Deficit to decline:
The chancellor has previously committed to cutting the deficit to below 2 per cent by 2020-21. Hammond says the latest forecasts suggest he will get there. The OBR forecasts the deficit to be 1.3% of GDP in 2020-21, giving £14.8bn of headroom against the 2% target, he says.
Industrial Strategy at heart of Britain:
Hammond spoke about the National Productivity Investment Fund, which provides an additional £23bn of investment over five years to upgrade the UK’s economic infrastructure for this century. The fund will be extended for another year and expanded to be worth more than £31bn.
North Sea oil boost:
Hammond has confirmed there will be a tax break for transfers of North Sea oil and gas fields.He calls it “an innovative tax policy that will encourage new entrants to bring fresh investment to a basin that still holds up to 20 billion barrels of oil”.
Nations get funding boost:
Decisions within this budget mean, he says, £2bn more for the Scottish Government; £1.2bn more for the Welsh Government and over £650m more for the Northern Ireland Executive.
VAT threshold put under review:
The point at which small businesses pay VAT will be kept at £85,000, the chancellor said.
Digital Retail sales:
From April 2019, UK will apply income tax to royalties relating to digital retail sales in UK.
Business rates change brought forward:
In business rates, the switch from the retail prices index (RPI) to the consumer prices index (CPI) is brought forward by two years, to April 2018. The move is worth £2.3bn to businesses over the next five years, the chancellor says.
Big relief to pubs:
Duty on alcohol is being shaped by health consequences. The chancellor says duty will rise on “cheap, high strength, low quality products – especially so-called white ciders”. But duties on other ciders, wines, spirits and on beer will be frozen.