Chancellor Philip Hammond presented his first Autumn Statement to the House of Commons today, outlining the Conservative government’s plans for spending, borrowing and taxes as the UK prepares for an exit from the EU.
Welcoming Phillip Hammond’s “prudent” approach to the running of Britain’s economy, Theresa May told the cabinet that the Autumn Statement “will deliver on the government’s commitment to
“This is a balanced and prudent Autumn Statement which will make clear Britain is open for business and the government is on the side of ordinary working people struggling to make ends meet.”
Hammond opened his speech by stating that it was "a privilege to report today on an economy which the IMF predicts will be the fastest growing major advanced economy in the world this year.”
Further stating that ‘through the hard work of the British people [the economy] has bounced back from the depths of recession’ and has shown resilience since the EU referendum vote 5 months ago.
Affirming that the Brexit decision has increased the urgency at which the government need to tackle the economy’s weaknesses, he resolved that the government will confront the challenges head on and work towards an “economy that works for everyone”.
“My priority as Chancellor is to ensure that Britain remains the number one destination for business – creating investment, the jobs and the prosperity to protect our long-term future”
Stating that he knows how much the business world values certainty, so the government will stick to the business tax roadmap set out in the March budget.
Here are just some of the key findings from today’s Autumn Statement:
New fiscal rules
Hammond stated that the government does not expect to balance the budget by 2020 and announced three new fiscal rules:
To get the budget in surplus in the next parliament and reduce borrowing to 2% by the end of this parliament.
To get net debt by the end of this parliament.
To keep welfare spending below a limit
The pound dropped ahead of the Autumn Statement as the city awaited the new growth and deficit forecasts.
The pound lost half a cent against the dollar to $1.237 (its lowest level this week) and dipped against the euro to €1.165.
Hammond stated that employment is currently at a record high and unemployment is at an 11 year low.
Hammond says growth is expected to be 2.4% lower than forecast after Brexit, due to lower investment and weaker demand caused by greater uncertainty and higher inflation.
Since 2010 the Office for Budget Responsibility (OBR) has done forecasts, and this year growth is forecast to be 2.1%, followed by a prediction of 1.4% in 2017. Subsequent growth forecasts are:
2018 - 1.7%
2019 - 2.1%
2020 - 2.1%
2021 - 2%
Hammond announced a new charter for budget responsibility alongside forecasts for borrowing. Stating that it will be £68.2bn this year and £59bn next year and that there will no longer be a surplus by the end of the decade.
The following updated borrowing figures for the UK economy
2018-19 - £46bn
2019-20 - £21bn
2020-21 - £20.7bn
2021-22 - £17.2bn
Exports and start-ups
Hammond says that he will double UK Export’s financial capacity and will take the “first step to
Stating that he will inject an additional £400m into venture capital funds, with a view to unlocking £1bn of new finance for growing firms.
Hammond said that current figures show that the government is spending 0.8% on economic infrastructure and that they will commit to spending between 1% and 1.2% of GDP on economic infrastructure from 2020.
Hammond said that he will prioritise high-value investment in infrastructure, stating that the government’s hard-won credibility on spending means that they can fund it from extra borrowing while funding everything else in the statement from taxation and spending cuts.
Further stating that the UK lags behind the US and Germany by 30 points in terms of productivity:
“This means it takes a German worker four days to make what a British worker makes in five”, he says, explaining that it means longer hours and lower pay for British workers.
Hammond says the government will create a new national productivity investment fund worth £23bn and that its main focus will be on innovation and infrastructure.
Investment in Research and Development (R&D) will also rise by £2bn a year by 2020.
Hammond stated that the UK needs a world-class digital infrastructure and that he wants the UK to be a
Corporation tax will fall to 17%, the lowest overall rate of corporate tax in the G20, as previously planned by 2020
Hammond stated that the government is “committed to tackling tax evasion, avoidance and aggressive tax planning” and that as a result of this “the UK tax gap is now one of the lowest in the world”.
They will shut down
These measures are set to raise £2bn over the forecast period, says Hammond.
From April 2017, the employee and employer NI thresholds will be aligned to £157 a week.
Salary sacrifice schemes will be scaled back, with the exceptions of ultra-low emissions cars, pensions savings, childcare and the cycle to work scheme.
National living wage
Hammond stated that the government gave a pay rise to over a million low-paid workers through the “national living wage”.
Announcing that the National Living Wage will increase from £7.20 per hour to £7.50 in April next year, equating to a “pay rise worth over £500 a year to a full-time worker”.