Philip Hammond used his first and last Spring Budget to set out how the Government will build the foundations of a “stronger, fairer, more global Britain”.
He said even before taking to the floor that the Treasury’s priority would be to make sure “our economy is resilient, that we’ve got reserves in the tank” as the Government prepares to enter Brexit negotiations with EU.
Addressing a packed House of Commons, Hammond announced tax rises to meet some of the his spending commitments, instead of increase borrowing, in what was a fiscally neutral Budget.
Below are some of the key points raised in todays budget:
The main rate of Class 4 National Insurance contributions for the self-employed to increase from 9% to 10% in April 2018 and 11% in April 2019
The new rate, applying to earnings below £43,000, will raise £145m a year by 2021-22 at an average cost of 60p a week to those affected
All earnings above £43,000 will be taxed at 2%
Class 2 National Insurance contributions, also paid by the self-employed, to be scrapped
No changes to National Insurance paid by the employed and employers or to income tax or VAT
Personal tax-free allowance to rise as planned to £11,500 this year and to £12,500 by 2020
£435m for firms affected by increases in business rates, including £300m hardship fund for worst hit
Pubs with rateable value of less than £100,000 to get a £1,000 discount on rates they would have paid
Rate rises for businesses losing existing relief will be capped at £50 a month
A tax avoidance clampdown totalling £820m to include action to stop businesses converting capital losses into trading losses and introduction of UK VAT on roaming telecoms services outside the EU
Annual borrowing £51.7bn in 2016-17, £16.4bn lower than forecast
Borrowing forecast to total £58.3bn in 2017-18, £40.6bn in 2018-19, £21.4bn in 2019-20 and £20.6bn in 2020-21
Public sector net borrowing forecast to fall from 3.8% of GDP last year to 2.6%, 1.9%, 1% and 0.9% in subsequent years, reaching 0.7% in 2021-22. But borrowing still predicted to be £100bn higher by 2020 than forecast in March 2016
Debt rose to 86.6% this year, but will fall to 79.8% in 2021-22
Alcohol, tobacco, gambling and fuel
No increases in alcohol or tobacco duties on top of those previously announced
A new minimum excise duty on cigarettes based on a packet price of £7.35
Tobacco will rise by 2% above Retail Price Index (RPI) inflation, with a packet of 20 cigarettes costing 35p more
Duty on beer, cider, wine and spirits will increase in line with RPI inflation
This will equate to 2p on a pint of beer, 1p on a pint of cider, 36p on a bottle of whisky and 32p on a bottle of gin
Vehicle excise duty rates for hauliers and the HGV Road User Levy frozen for another year
Pensions and savings
Reduction in tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000
The measure will come into force in April 2018, raising £2.63bn by 2021-2022
Measures to tackle abuse of overseas pension schemes
£300m to support 1,000 new PhD places and fellowships in STEM (science, technology, engineering and maths) subjects
Free school transport extended to all children on free school meals who attend a selective school
Upgrade fund of £216m for existing schools
Funding for 110 new free schools and grammar schools
New T-Levels to be introduced to give parity of esteem for technical education
Number of hours of training for technical students aged 16 to 19 increased by more than 50%, including a high-quality, three-month work placement
Transport spending of £90m for the north of England and £23m for the Midlands to address pinch points on roads
£690 million competition fund for English councils to tackle urban congestion
£270m for new technologies such as robots and driverless vehicles
£16m for 5G mobile technology and £200m for local broadband networks
£250m in funding for Scottish Government, £200m for Welsh Government and £120m for Northern Ireland Executive
Health and social care
£100m to place more GPs in accident and emergency departments for next winter
Additional £325m to allow the first NHS Sustainability and Transformation Plans to proceed
An extra £2bn for social care over next three years, with £1bn available in the next year
Long-term funding options to be considered but so-called “death tax” on estates ruled out
Most sugary soft drinks to be taxed at 24p per litre as part of plans to reduce childhood obesity
New funding totalling £20m to support the campaign against violence against women and girls
A further £5m committed to project to celebrate the centenary of women first getting the vote, and to educate young people about its significance
Funding of £5m to support people returning to work after a career break
The main topic of discussion over Philip Hammonds budget was in relation to the broken promise surrounding the conservatives 2015 manifesto pledge on NI contributions, whereby they explicitly ruled out rises in National Insurance, VAT and income tax during the lifetime of the current Parliament.
Based on yesterdays announcement it has resulted in 1.6 million people paying £240 on average more every year, with the chancellor stating that lower earning self-employed people would be better off, and the new system fairer.
Wednesday’s changes would see the 9% rate of Class 4 National Insurance contributions currently paid by those self-employed people earning between £8,060 and £43,000 go up to 10% in April 2018 and to 11% in April 2019
Justifying the move – which is set to raise £145m – the chancellor said there had been a “dramatic increase” in the number of self-employed workers and the current difference in NI rates paid by the self-employed and employees “undermines” the fairness of the tax system.
Last night saw ministers defended the chancellors actions by stating that legislation enshrining the manifesto commitment in law – approved by Parliament in 2015 – only referred to national insurance contributions paid directly by employers and their employees.
A much debated topic of discussion which will no doubt continue for the coming days ahead
The next Budget will take place in the autumn to provide more time ahead of the new tax year in April.
A Spring Statement will be used to respond to the twice-yearly OBR report but Hammond has promised “no major fiscal changes” next spring.