Newgate Budget 2018 Summary

Budget summary: Key takeaways

A very political budget

Philip Hammond has delivered his third Budget as Chancellor of the Exchequer and the last one before Britain leaves the EU. His statement was made against the backdrop of political uncertainty, as Brexit negotiations enter a critical phase and the government is under pressure to agree a deal with Parliament and its EU counterparts.

Hammond sought to deliver a Budget that largely avoided political controversy, kept restless Conservative backbenchers and the DUP onside and delivered on the Prime Minister’s own promise that austerity is coming to an end. On top of that, however, Hammond delivered a highly political statement, which sought to counter the Labour Party’s current message of spending pledges and radical business reforms with his own message of ‘reinvigorated capitalism’. This was a mix of investment and enterprise, combined with discipline on public spending and, notably, tax cuts for individuals.

“Era of austerity finally coming to an end”

Central to the Budget, was Hammond’s statement that the “era of austerity was finally coming to an end”, echoing the Prime Minister’s promise made earlier this month. The Chancellor was helped in this with the OBR figures revealing that public borrowing was significantly below previously forecast (by £11.6 billion). Together with a small upgrade in growth forecasts, this allowed him to commit to new spending pledges. Most of this money went towards the Prime Minister’s pledge in June this year of increasing NHS funding – albeit with a special announcement on mental health measures.

Although Hammond announced that departmental spending would be determined by a new spending review next year he slightly pre-empted this with announcements of increased spending for defence and policing. Defence secretary Gavin Williamson will enjoy an extra £1 billion for the armed forces and Home Secretary Sajid Javid has an extra £160m for counter-terrorism police.

Helping Business: taxing the tech giants and saving the high street

One of the headline measures was the announcement of a new “digital services tax” on UK revenues of big technology companies. This was specifically aimed at the major digital platforms (the so-called ‘FAANGs’ – Facebook, Apple, Amazon, Netflix and Google) with global sales of more than £500 million.

It ran parallel to measures designed to assist struggling retailers on the high street, with new business rates relief of one third for small retailers. Also of interest to retailers was a new tax on non-recycled plastic packaging, although the Chancellor stopped short of introducing a levy on disposable plastic cups. Alongside this were a range of announcements to help UK innovation, with £1.6 billion investment in science. This will go towards Artificial Intelligence, quantum computing, future manufacturing and nuclear fusion.

Housing and Infrastructure spending

Given the priority of housing to the government, the Chancellor was always going to make sure the sector was looked after. He didn’t disappoint, with a £500m funding boost for the National Productivity Investment Fund (taking its total funding to £5.5bn) and £1bn for the British Business bank to lend to SME housebuilders. He also announced the publication of Sir Oliver Letwin’s review into the planning system. In another piece of good news for housebuilders, Hammond said that Letwin had found “no evidence of systematic land banking”.

Tax cuts and toilet humour

In terms of ‘rabbits’ and headline grabbers, Hammond’s big measure in the Budget was the increase in personal allowance and higher rate income tax thresholds – in effect a tax cut. From April next year, the personal allowance threshold is set to rise from £11,800 to £12,500 and the higher rate income tax threshold will rise from £46,350 to £50,000. While this was an existing Conservative manifesto commitment, it is due to be implemented a year earlier than planned.

This was a popular measure, but according to social media analytics not the most talked about announcement of his speech. This was, in fact, his announcement of mandatory business rates relief for all public lavatories – which was accompanied by Hammond’s now trademark ‘dad jokes’ about toilets. These had a mixed reception in the Commons chamber.

 

Most talked about moments during Hammond’s Budget 2018

3rd – Freeze on Beer Duty

2nd – Personal Income Allowance and Higher Rate Threshold to be raised from April 2019

1st – Hammond’s Toilet jokes

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