By Ben Barlow
Chancellor Philip Hammond has delivered his first Budget for 2017, saying his aim is to provide a stable platform for future Brexit negotiations, help young people gain the skills they need and improve education in the UK. Economic forecasts are for higher growth but Hammond told MPs that the Budget deficit was still too high and productivity lower than he wanted.
In his opening statement, Hammond began with some positive news that the UK economy was continuing to thrive, despite dismal forecasts last year. The Office for Budget Responsibility has predicted a 2% growth in 2017, which is 0.6% higher than its original forecast. The OBR also predicts borrowing will be £16.8 billion lower.
The Chancellor has made an extra £500 million available for technical and vocational education, which should go some way to closing the skills gap in the construction sector. Funding has been confirmed for 1,000 new PhD places and more free schools will be created, despite heavy criticism from the education sector on the benefits of investing in free schools. However, an announcement that the government will be committing money to the technical education sector has been welcomed.
Social Care Funding
The biggest announcement was the news that the Chancellor has earmarked an extra £2 billion to help alleviate the growing social care crisis in the UK. £2 billion will be made available over the next three years, with a further £1 billion in the kitty for the coming year.
Bad News for the Self-Employed
Self-employed people have a small tax increase to look forward to. Despite the Tory manifesto forbidding any Class 1 National Insurance increases, the Chancellor has managed to find a workaround by increasing Class 4 National Insurance rates instead. In a move that will upset self-employed voters, the Chancellor is increasing Class 4 NI from 9% to 10%, to close the gap between contributions made by employees and the self-employed. There will be an additional 1% rise in April 2019.
Business Rates Relief
Business rates have been in the news of late, so the Chancellor has included three measures in his Budget to cut business rates by £435 million, but only in certain sectors.
A £300 million discretionary fund will be given to councils to distribute to local businesses that are suffering from increase in business rates. Small businesses losing their small business rate relief will have their rates capped and pay no more than £50 extra per month. There is also extra help for pubs – 90% of pubs will receive a £1,000 business rates discount. However, this discount may not apply to companies that own several pubs.
Companies are also being targeted by the Chancellor, with tax-free dividends slashed from £5,000 to £2,000 from April next year.
Personal Tax Allowances
On a good note, the personal tax allowance will rise to £11,500 per year. Higher rate taxpayers will also enjoy a small increase in their personal allowances. The National Living Wage is also rising to £7.50/hour.
Reactions to Hammond's Budget have been mixed, ranging from "cautious" to "callous", depending on which media outlet you look at. How the electorate react remains to be seen, but no doubt they will make their feelings crystal clear when polling day comes back around.