The Autumn Statement – an end to tightening of the purse-strings?
This week will see Philip Hammond give his first Autumn Statement to Parliament since taking over the reins at the Treasury from George Osborne, when Theresa May became Prime Minister. The Autumn Statement is widely recognised as a lighter version of the Budget, fewer announcements and certainly ones that tend to be less newsworthy, but it remains nevertheless a significant fixture in the parliamentary calendar (the Chancellor has a duty to provide Parliament with two annual updates on the economy) and so businesses and individuals alike will be keen to understand the priorities of our new Chancellor.
The Autumn Statement is not only an update on the Treasury’s plans for the UK economy but also features forward looking projections. So what can we expect to hear from the Chancellor this week?
Government borrowing: Phillip Hammond has already abandoned the Conservative’s manifesto pledge to balance the books by the end of this parliament (as a result of the Brexit referendum) so there is a distinct possibility that the Treasury will borrow more money, a significant shift from the Osborne era. Further spending areas could include infrastructure (our roads and railways), new homes and potentially giving companies incentives to overcome their Brexit nerves and invest.
Brexit: Whilst the Chancellor won’t be revealing the Government’s negotiation strategy for Britain’s exit of the EU, we expect to hear much about the support the economy will be provided with, to give significant encouragement that Britain is “open for business”.
Corporation tax: There have been no indications that the Government is ready to cut corporation tax further to boost the economy, something George Osborne had previously suggested. The previous Government was planning to cut the rate of corporation tax to 17%, from its current level of 20%, by the time of the next General Election in 2020.
Personal tax: The Government appears committed to increase the amount workers can earn before paying the 40p income tax rate, despite revised growth forecasts since the referendum and the current Budget deficit. This will mean honouring the manifesto pledge so that the level at which the 40p higher rate kicks in increases from its current level of £42,000 to £50,000 (by 2020).
The 2015 manifesto also stated the Government’s ambition to increase the personal tax allowance to £12,500 (currently £11,000).
The March Budget announced that the 40p rate would climb to £45,000 and that the personal allowance would rise to £11,500 from April 2017. Further increases are expected over the next three years to meet the Government targets before the 2020 election.
Property market: It is widely reported that the Autumn Statement will include measures to help home builders, including new funds to “Get Britain Building”. Given the recent data suggesting that buy-to-let investors have not been deterred by the second home stamp duty surcharge, the additional 3% on purchases introduced in April this year is likely to resist the calls for it to be scrapped.
The uncertainty caused by Brexit will clearly present the Treasury and our new Chancellor challenges for the period ahead. We look forward to working with our clients to understand the impact that Government measures will have on them and their businesses.Talk to Barnes Roffe today