Philip Hammond has done just that, and it is unlikely that this – the final spring budget – will live long in the memory of the masses. Although, given the Chancellor’s Autumn address will now be the set piece event outlining policy directions for the following fiscal year it comes as no real surprise that the Spring Budget was a tad thin on content.
Prior to the Chancellors speech, headlines had been dominated by speculation around the state of the economy and the impact that Brexit would have on the government’s ability to seriously tackle issues around social care, education, and the rather contentious policies around businesses rates and respective revaluations.
The Chancellor needn’t have worried however, as the Office for Budget Responsibility (OBR) equipped him with some rather useful statistics to paint a picture of an economy and associated plan that is doing better than previously predicted. The OBR’s latest analysis revised up its GDP growth forecast for 2017 from 1.4% to 2.%, whilst public sector borrowing is forecast to fall to 0.7% of GDP by 2021/22.
Then came the headlines that so many had been waiting for. It wasn’t long into the speech before the Chancellor tackled the issues around business rates reform. These were issues that had drawn numerous industry bodies into campaigning. These organisations had called for more thought to be given to the very tangible effect that the government’s revaluation plans would have on small and medium sized businesses across the country. Over the past few months it had become apparent that the Prime Minister, Chancellor, and Secretary of State at DCLG had all, at the very least, heard the cries for change.
Those calling for change would not have necessarily been placated by Mr. Hammond’s opener; that although the government are to press ahead with revaluation, there will be a consultation undertaken before changes are made. Rather fittingly the statement came with cries of ‘not another consultation’ from the shadow bench.
...organisations had called for more thought to be given to the very tangible effect that the government’s revaluation plans would have on small and medium sized businesses across the country.
The Chancellor then attempted to prove that 3 is indeed the magic number by announcing the following measures to address growing concerns around business rates:
- Any business coming out of business rate relief because of the revaluation, will have the respective increase in their bills capped at £50 per month
- £435m will be available to support businesses facing significant rate increases, of which £300m will be allocated to local authorities to provide ‘discretionary relief’ for the hardest hit businesses in their areas. We wait to see how this package will work in practice
- There will be a £100 discount on business rate bills for all pubs with a ratable value of less than £100,000 – this is 90% of all pubs in the country
These announcements would have been a welcome relief for many, whilst others will not think they have gone far enough. What is for certain is that the Chancellor’s desire to balance the books in anticipation of a Brexit fallout, saw self-employed workers take the brunt of the reforms to taxation.
As of April 2018, the main rate for Class 4 National Insurance Contributions (NICs) will increase by 1% with a further 1% increase due the following year. This will raise £145m a year to fund public services, but will likely effect 5 million self-employed workers, some of whom will be in the throes of setting up a business.
In addition, the tax-free dividend allowance will be reduced from £5,000 to £2,000 as of April 2018, a policy that has already prompted commentary from industry bodies, with the Federation for Small Businesses (FSB) pointing out that businesses will be concerned about the impact this might have on staffing and growth.
Events and announcements such as this are often notable for what is omitted rather than the content itself, and given that the country is in the midst of a housing crisis, whilst infrastructure provision struggles to keep pace, there was very little offered by way of respective policy.
In the end, the Spring Budget 2017 will not be remembered for the shockwaves it sent running through the economy, but rather the light heartedness that Philip Hammond had finally managed to work into his routine.
Oliver Deed is an Account Director at Snapdragon Consulting