Budget Report: Autumn Budget 2017

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This week we’ll summarise some of the main points of the Autumn Budget 2017, and try to understand what the headline announcements really mean.

Chancellor Philip Hammond started his speech on an optimistic note, announcing that the UK economy continues to grow and continues to create more jobs … apparently in the face of all the odds. He spoke of the great opportunities that exist for the UK outside Europe  – and in the upcoming global technological revolution. And he committed £3bn to make Brexit work, plus measures to support UK research and development, and new technologies such as electric and driverless cars and artificial intelligence.

But the Chancellor’s glowing opening headlines couldn’t disguise the fact that the latest forecasts for the UK economy are decidedly gloomy – figures which journalists later pointed out were the worst since the early 1980s. He said that the Office for Budget Responsibility have revised the UK growth forecast for 2017 down from 2% to 1.5%. And that they expect growth to remain flat for another three years, not picking up – and then only to 1.6% – until 2022. And he said – in a claim reminiscent of the 1970s – the UK’s low productivity is partly responsible for making everyone feel poorer.

Hammond announced that while the UK’s national debt is forecast to start falling and Government borrowing will be less this year, future borrowing will be higher and the period over which it will be repaid will be longer. (Which as most of us will spot means the overall cost will be more.)

Although confirmation that the books are at least partly on the way to being balanced appeared to be good news, it didn’t lead to any indication that public spending might be increased as some commentators were expecting. There were a few announcements of increased spending or investment. However many of these were of mere millions rather than the billions that are probably needed to make a real impact. And there was little indication of how this spending and investment would be funded.

There was a (fairly small in the scheme of things) extra £2.8bn over three years for NHS England, plus increased budgets for the devolved administrations in Scotland, Wales and Northern Ireland. And there was £44bn of support for the housing market, plus £1.7bn of funding for the devolved cities and support for infrastructure projects in northern England.

This budget saw no major announcements on personal finance – perhaps for fear of upsetting a fragile electorate. Personal allowances, together with the minimum wage, were increased in line with expectations, while indirect taxes were merely tinkered with. A Stamp Duty Land Tax exemption for first time buyers buying property for £300,000 or under, perhaps designed to address the concerns of young voters and their parents, was the main headline grabber. It seems clear that the Chancellor has very little room for manoeuvre to increase tax revenues in order to reduce Government borrowing or fund investment.

Six of the most important points to take from the 2017 Budget:

* The UK is ‘doing as well as can be expected in the circumstances’.

* But …. the economy isn’t growing as forecast. And we should expect this to be the new normal.

* The UK needs to be more efficient to take advantage of the opportunities in the global economy, and outside the EU.

* Austerity isn’t over. Its grip may be loosening slightly …. but that probably means it will last longer.

* The Government won’t be ‘splashing the cash’ anytime soon. But it will put the necessary resources into making Brexit work (and it will be expensive).

* Household budgets and consumer spending are going to continue to be stretched. It could be some time before everybody feels better off.

You can read the full speech on the official UK Government website here:

https://www.gov.uk/government/speeches/autumn-budget-2017-philip-hammonds-speech