14 March 2018
Philip Hammond gives an upbeat view of the economy as he presented his Spring Statement yesterday. It was not expected to make any fundamental fiscal changes – these are reserved for the annual autumn budget – but it was an opportunity for him to highlight issues on which he intends to take action in the future and to instigate consultations on various matters.
Some cause for cautious optimism
It was also a platform from which to present the forecasts of the Office for Budget Responsibility. He celebrated the good news that the OBR had revised its forecast for growth for the current year from 1.4% to 1.5%. Commentators have pointed out however that the forecasts for 2021 and 2022 have been reduced, and we are in any case talking about growth figures that are considerably less than the world average, and less than that of the Euro-zone. He also emphasised the prediction that next year the National Debt was predicted to fall as a percentage of GDP. This is indeed welcome news, but we must not lose sight of the fact that the debt is currently 85.6% of GDP, amounting to £65,000 per household, and costs £50 billion a year in interest. There were hints, however that the slight improvement in GDP might enable the Government to put more funds into public services in 2020, following a spending review in 2019.
Skills and productivity
The issue of the UK’s poor productivity by comparison with other advanced economies has been a recurrent theme of late. So, the announcement of £500m for the new T-levels was no surprise. (T-levels were announced about a year ago and are to provide 16-19 year-olds with technical training in 15 practical subjects to prepare them for work.) He also announced spending of £50m to help employers roll out placements for T-level students and £80m to support small businesses engaging apprentices.
There is also to be a review of how to help the least productive businesses catch up with the most productive businesses and a call for views on the possibility of extending the current tax regime to allow self-employed people and employees who pay for their own training to get tax relief on the costs.
Other announcements affecting small businesses
A review on how to introduce measures to eliminate late payments to small businesses was announced, and the next business rates revaluation review is to be brought forward by one year to 2021. Reviews will be every three years thereafter, instead of five.
The house-building industry
£4.1 billion is promised for the Housing Infrastructure Fund. This will be distributed to 44 local authorities to help them to build affordable housing. Funding for the Housing Growth Partnership, which helps smaller housebuilders to fund their projects, is doubled to £220m.
To try to counter the loss of VAT on online sales there is to be a consultation on designing a new mechanism for the collection of tax on such sales.
Showing that he is in touch with the most topical public concerns, the Chancellor launched a call for evidence and made available £20m for research into ways of reducing plastic waste.
The digital infrastructure
Another area in which it is alleged that the UK is falling behind its competitors is high-speed broadband, so £95m is to be allocated to help roll out high-speed broadband to 13 areas, as part of the £190m challenge fund.
The role of cash
The government is going to consult on how to make sure those who need to pay with cash are able to do so, and how to prevent the use of cash for tax evasion and money laundering.
Incidentally, the Treasury is starting a consultation on the abolition of the 1p and 2p coins.
In a nutshell
Some would say that this is a statement characterised by politically inspired optimism and consultations that actually serve to defer action on a number of key issues. Put another way, Mr. Hammond, known for his coolness and analytical skills, is accentuating the positive and taking time to gathering facts and information before tackling difficult issues. Either way, if you are involved in the housing industry or have the misfortune of being located in a broadband blackspot you might see some benefit in the short to medium term.
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