24th November 2016
Hammond celebrated an economy that has ‘bounced back from the depths of recession’, promised to ‘prepare our economy to be resilient as we exit the EU’, and detailed important changes to taxation.
- Britain has the fastest growing major economy in 2016, but the Office for Budget Responsibility (OBR) tempered that forecast with a reminder that uncertainty due to Brexit continues to constrain growth. This uncertainty is reflected in the OBR’s updated growth forecasts: GDP will grow 2.1 per cent in 2016, slow to 1.4 per cent in 2017, and recover to 1.7 per cent in 2018, and 2.1 per cent in 2019 and 2020.
- This higher uncertainty lead to weaker OBR business investment forecasts—a 2.2 per cent fall in 2016 and a 0.3 per cent fall in 2017. The forecasts return to the positive with 4.1 per cent growth in 2018, and 5.3 per cent growth in 2019.
- Owing to Brexit uncertainty and slower growth forecasts, the government has abandoned its goal to deliver a surplus (more tax raised than spent) by 2019. It hopes to see public finances ‘return to balance as soon as practicable’.
Highlights for Businesses and Individuals
Insurance Premium Tax (IPT) will increase by 2 per cent: In June 2017, the IPT, a tax on general insurance premiums, will increase from 10 to 12 per cent. The Association of British Insurers called the increase a ‘hammer blow for the hard-pressed’, and the Automobile Association (AA) warned that it will add about £10 per year to the average car insurance premium. The AA cautions that younger drivers and those living in London will bear the biggest burden, potentially making vital cover unaffordable. The IPT has now doubled in less than 18 months and most recently increased on 1st October 2016.
The National Living Wage (NLW) and National Minimum Wage (NMW) will increase from April 2017: The NLW will increase from £7.20 to £7.50 per hour, and the NMW will increase as follows:
- A new Housing Infrastructure Fund (HIF) will provide £2.3 billion by 2020: The HIF will help construct 100,000 new homes in high-demand areas. In addition, the government will allocate an extra £1.4 billion to provide 40,000 new, affordable homes.
- The government will reform whiplash compensation: New rules will lower the high number of whiplash claims, allowing insurers to pass on an estimated £40 in premium savings per year for drivers in England and Wales.
- Rural Rate Relief (RRR) will increase to 100 per cent: In April 2017, RRR will rise from 50 to 100 per cent, saving rural businesses £2,900 a year.
- The government commits to cutting corporation tax to 17 per cent by 2020.
- Letting agents will be banned from charging renters fees, saving tenants £223 per tenancy.
- Fuel duty will remain frozen for a seventh year.