Spring Budget 2017

This piece has been prepared by Chloe Smith’s office during her absence on maternity leave.

Philip Hammond, the Chancellor of the Exchequer, today laid his budget before the House of Commons.  It was a particularly important moment in Parliament as this is the last Spring Budget the Chancellor will present, having announced at the end of last year he would make present his budget in the Autumn in the future.

The Chancellor described the budget as one that ‘puts stability first, ensuring we keep our economy strong as leave the European Union’.  He explained he wanted to ensure young people can get the skills they need to do the jobs of the future, while also ensuring more children go to a good or outstanding school.

The Chancellor spoke for just under an hour, presenting first the Office of Budget Responsibility’s forecast for the years ahead and the current financial situation before making new funding announcements.

Amongst the financial indicators, the Chancellor reported:

• Unemployment is at an 11-year low
• Employment is at a record high, with the OBR also forecasting that an extra 2/3 of a million people will be in work by 2020-21
• Real wages have grown every month for the last 27 months
• The UK’s budget deficit continues to fall and is forecast to fall to 0.7% by 2021-22, the lowest level for two decades, but UK public sector debt has risen to £1.7trn, just under £62,000 per household
• The UK has collected £140bn more tax revenue since 2010 through reducing tax avoidance, evasion and closing loopholes

He also announced a commitment to use £1bn, partly funded by the sugar tax, to fund school sports and healthy living programmes, together with £1bn for T-levels.

He also announced additional money for social care services: the extra funding amounts to £2bn over 3 years, together with additional money to ease winter pressures on the NHS following significant coverage of this issue in the press.

The Chancellor made further announcements about investing in cutting-edge technology and research, such as £270m investment for technology looking at robots and electric cars and £290m to support new PhD places that are focused on science, technology, engineering and maths (STEM) subjects.  There was also £16m for UK research institutions as part of the Government’s effort to establish a National 5G Innovation Network.

The Prime Minister had already announced extra funding to combat domestic violence (£20m) and support parents to return to work (£5m), as part of an earlier interview for International Women’s Day.

Local government will receive a £300m discretionary relief fund for business rates and pubs with a rateable value under £100,000 will receive a £1,000 discount, which will leave 90% pubs in England unaffected. 

The Chancellor also re-emphasised the work the Government is doing to support families with the introduction of tax-free childcare from April, whereby parents will be able to save up to £2,000 of tax on the cost of their childcare, together with the introduction of 30hrs/week free childcare from September, which the Chancellor estimated was worth £5,000 a year.

The Chancellor also announced a change in National Insurance Contributions (NICs), for the self-employed from 9% to 10% in April 2018, and by a further 1% in April 2019.  The Chancellor said he will continue with the planned abolition of Class 2 NICs for the self-employed as these are outdated.  The Chancellor outlined the rationale for this proposal:

“An employee earning £32,000 will incur between him and his employer £6,170 of National Insurance Contributions.

“A self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.

“Historically, the differences in NICs between those in employment and the self-employed reflected differences in state pensions and contributory welfare benefits.

“But with the introduction of the new state pension, these differences have been very substantially reduced.

“Since 2016 self-employed workers now build up the same entitlement to the state pension as employees, a big pension boost to the self-employed.

“The most significant remaining area of difference is in relation to parental benefits, and I can announce today that we will consult in the summer on options to address the disparities in this area as the FSB [Federation of Small Businesses] and others have proposed.

“Mr Deputy Speaker, The difference in National Insurance Contributions is no longer justified by the difference in benefits entitlement.

“Such dramatically different treatment of two people earning essentially the same undermines the fairness of the tax system.

“Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way.

“The lower National Insurance paid by the self-employed is forecast to cost our public finances over £5 billion this year alone.

“That is not fair to the 85% of workers who are employees”.

The final Spring Budget has now been published by the Government and can be viewed here.  The EDP has published its own analysis of the main points of the Chancellor’s budget, which you can view here.