- Hammond delivers his first budget, and the final Spring Budget.
- Office for Budget Responsibility increases UK growth forecast from 1.4% to 2% in 2017, reflecting unexpected resilience from British economy since Brexit vote.
- Forecasts for 2018, 2019, 2020 all lower than previous estimates.
- Corporation tax set to fall to 17% by 2020.
- Self-employed workers to see tax increases.
- National debt forecast to rise to 86.6% of GDP, but planned borrowing cut by £23.5 billion over coming five years.
- NHS: An extra £2 billion in additional grant funding for social care announced over three years.
- And £425 million more for NHS development and A&E departments.
- A new “T-Level” qualification for skill- and trade-focused students, with loan funding akin to university grants.
- You can see the key ways the budget could impact British households here, and the full text of Hammond’s speech here.
LONDON — Chancellor Philip Hammond used his first budget to drive home the message that the British economy remains resilient despite the vote to leave the European Union last June, and reaffirm the government’s commitment to lowering taxes for corporations operating in the UK.
“From April this year, it [Corporation Tax] will fall to 19%, the lowest rate in the G20. In 2020 it will fall again to 17%,” Hammond said.
Beginning his speech, Hammond told the House of Commons: “I report today on an economy that has continued to confound the commentators with robust growth. A labour market delivering record employment. And a deficit down by over two-thirds.”
“As we start our negotiations to exit the European Union, this Budget takes forward our plan to prepare Britain for a brighter future.”
Hammond, who became chancellor last July, stepped up to the dispatch box in Parliament just after 12.30 p.m. GMT (7.30 a.m. ET) on Wednesday to give his first formal budget speech. It was not his first fiscal policy statement, however — he delivered one Autumn Statement in late November 2016.
“We are building the foundations of a stronger, fairer, and more global Britain,” Hammond told the Commons. “Our task today is to prepare Britain to take the next steps for a global future.”
2017 GDP growth: 2%
Hammond confirmed that the independent Office for Budget Responsibility has increased the UK’s predicted GDP growth in 2017 from 1.4% in November to 2% today. In 2018, the OBR’s forecast stands at 1.6%. GDP growth will increase to 2% by 2021.
The OBR’s forecast for inflation in 2017 is 2.4%, lower than the 2.8% figure forecast by the Bank of England. Inflation will remain broadly unchanged at 2.3% in 2018, before hitting the bank’s official target of 2% in 2019.
The budget confirmed that corporation tax rates in the UK will continue to fall in coming years. “From April this year, it [Corporation Tax] will fall to 19%, the lowest rate in the G20. In 2020 it will fall again to 17%,” Hammond said.
Alongside changes to the structure of corporation tax, Hammond announced a planned crackdown on those avoiding tax, saying that the government aims to raise an extra £820 million by doing so.
A further review of the way business tax rates are levied will be carried out, Hammond said, following strong opposition to earlier reforms. Three new measures will be introduced, including making it so any small business outgrowing the small business rate relief currently offered by the government will not pay more than £50 extra tax per month next year.
New taxes on the self-employed
Hammond also announced a new tax on Britain’s self-employed, which aims to raise an extra £145 million for the Treasury by 2021-2022. He also appeared to break a key pledge from the Conservative party’s 2015 general election manifesto by doing so. Self-employed people will, in fact be hit by a new national insurance hike.
He said the current situation, which sees self-employed workers pay lower national insurance rates, “undermines the fairness of our tax system.”
“The employed and the self-employed use public services in the same way but the lower National Insurance contributions from the self-employed will cost the public £5bn this year alone,”
There was a further rise in the UK’s tax-free personal earnings rate, a seventh consecutive year of increases. “The personal allowance will rise to £11,500 next month, over 75% higher than in 2010. This will take 1.3 million people out of income tax altogether, compared to the beginning of this Parliament,” the budget said.
Hammond did not engage in one of the budget’s great traditions and said that there will be “no changes to previously planned upratings of duties on alcohol and tobacco.”
Turning to schools, the chancellor announced funding for 110 new free schools, aimed to help academically gifted students from poorer families to gain a top-class education. The government had already announced 500 new free schools to be built.
“Perhaps the single most important thing government can do to support ordinary working families is to invest in the future, so that their children and grandchildren can make the most of the opportunities ahead,” Hammond said.
“That means addressing the skills gap and ensuring that every child — regardless of background — has the opportunity to go to a good or outstanding school.”
He also promised free transport to any pupil on free school meals at a selective school. “Pupils typically travel three times as far to attend selective schools, so we will extend free school transport to include all children on free school meals who attend a selective school. Because we are resolved that talent alone should determine the opportunities a child enjoys,” he said.
The chancellor introduced a new system of “T-Levels,” a qualification akin to A levels but for skill- and trade focused technical education. “There is still a lingering doubt about the parity of esteem attaching to technical education pursued through the Further Education route. Today we end that doubt for good, with the introduction of T-Levels,” he said.
T-Levels will replace “the 13,000 or so different qualifications with just 15 clear, career-focused routes.” The government will spend an extra £500 million a year on 16 to 19-year-olds studying T-Levels. “To encourage and support the best of them to go on to advanced technical study, we will offer maintenance loans for those undertaking higher level technical qualifications at the new Institutes of Technology and National Colleges. Just as we do for those attending University.”
For social care, an additional £2 billion of grant funding over the coming three years was also announced by Hammond, with £1 billion in the first year.
“Building on the short-term actions taken in December 2016, the government will provide £2 billion additional funding for social care to councils in England between 2017-18 and 2019-20, to help ensure people receive the social care support they need and to reduce pressure on the NHS,” official government documents said.
£425 million more for the NHS
Hammond added £100 million to the NHS budget for emergency services and £325 million for capital development.
“It will also invest a further £425 million to improve local NHS services and support Accident and Emergency improvement. The government will also set out proposals in a green paper to put the social care system on a more secure and sustainable long-term footing.”
Early in his speech, Hammond hit back at the fiscal policies proposed by the opposition Labour party, saying that the Conservative government will persist with its economic plan. “By the way, they don’t call it the last Labour government for nothing,” he joked.
Hammond, Britain’s most senior fiscal policymaker, focused on portraying Prime Minister Theresa May’s government as a steady hand at the wheel as Britain steers through the rough seas of Brexit. With growth expected to slow markedly in the face of economic uncertainties around leaving the EU, Hammond needs to reassure the public that he is prepared for a rough few years for the UK economy.
Earlier on Wednesday, the chancellor told cabinet colleagues that today’s budget “lays the foundations of a Britain that works for everyone. It maintains stability, increases our economic resilience and prepares Britain for a highly skilled global future outside of the European Union,” a Downing Street source told Business Insider.
“He set out the main themes which he said were helping people get the skills they need to do high-paid, high-skilled jobs in the future, give more children the chance to go to a good or outstanding school and continues to bring down the deficit so we can get back to living within our means,” the source added.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.