November Budget 2017 | NatWest Premier

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November Budget Summary

November 2017

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Richard Ramsey, Chief Economist, NatWest
Add your signposting title here… Summary from Richard Ramsey

“This may not have been a game-changing Budget from the chancellor: but the fact is, given the state of the UK’s finances, Philip Hammond was in a fiscal straitjacket – and this straitjacket was only tightened by the downgraded growth forecasts provided to him by the Office of Budget Responsibility (OBR).

“It was clear that Hammond was making a strong attempt to appeal to millennials in the way that his predecessor George Osborne aimed many policies at the older generation. He talked a lot about the future and the need to modernise the UK economy and invest in sectors, such as artificial intelligence, 5G and driverless vehicles.

“Housing was always expected to play a big role in this Budget: there was £44bn announced to support property development over the next few years in the form of loans and guarantees as well as direct funding, while the abolition of stamp duty for first-time buyers will be welcomed by many.

“But as the OBR pointed out, perhaps the biggest challenge facing our economy is lack of productivity growth seen over the past decade. The UK has had a strong recovery in jobs but unfortunately not in productivity.”

Richard Ramsey
Chief Economist, NatWest

November Budget 2017

What you need to know

If any of the topics below prompt questions you may have on financial planning or taxation,
please contact your Premier Banking Manager.

Economy

The independent Office for Budget Responsibility (OBR) has downgraded growth forecast for the UK economy for the next three years.

 

In March, it had expected GDP to rise by 2% in 2017 and 1.6% in 2018. However, chancellor Philip Hammond revealed these forecasts are now 1.5% and 1.4% respectively. Also, the OBR expects the economy to expand by just 1.3% in both 2019 and 2020 before picking up again.

 

The chancellor said a key problem facing the UK was the lack of productivity growth; it had been expected to return to its long-term trend of 2% following the financial crisis but has remained static.

 

He revealed that inflation was expected to peak at 3% this quarter before falling back towards the target rate of 2% next year. And Treasury figures showed that the lack of productivity growth would lead to a £90bn increase in borrowing from 2017/18 – 2021/22.
 

Housing

The chancellor sought to help people get on to the property ladder by abolishing stamp duty for first-time buyers on homes worth up to £300,000.

 

This also applies to the first £300,000 of properties up to £500,000, intending to help first-time buyers in areas where prices are particularly high. 

 

Estimated to help 80% of buyers to save up to £5,000.

 

The chancellor announced he was giving local authorities power to impose 100% council tax premiums on empty homes.

 

He introduced new funding measures to support property developers and the construction industry, to increase the number of new homes built in the UK to 300,000 a year by the middle of the next decade.
 

Fuel duty, air pollution and electric vehicles

Fuel duty has been frozen again. The freeze, which has been in place since 2010, has saved car drivers a total of £850 over the past seven years, at a cost of £46bn to the Treasury.

                            

Buyers of new diesel cars that don’t meet the most up-to-date emissions standards will pay a higher rate of first-year vehicle excise duty from next year. The proceeds from this will be put into a new £220m Clean-Air Fund.

 

Meanwhile, the government has committed £400m to improve the charging infrastructure for electric vehicles, while drivers who use their employers’ charging stations will no longer face a benefit-in-kind charge on this from next year.
 

Small businesses

The current £85,000 VAT-registration threshold for small firms will remain in place for at least the next two years.

 

Small companies are also likely to benefit from the fact that annual business rates increases are to be linked to Consumer Prices Index inflation from next April rather than as now, the Retail Prices Index (which tends to be higher).
 

Alcohol duty

Duty on wine, beer and spirits is to be frozen, but tax on high-strength so-called white cider will be increased. 
 

NHS

Philip Hammond announced £10bn of extra capital investment in frontline NHS services and added he would consider lifting the public-sector pay cap for some healthcare professionals when the results of an independent pay review are submitted “in due course”. 
 

Innovation and infrastructure

To meet the challenges of the future, policies were aimed at promoting innovation, research and development.

There will be £2.3bn of extra funding for R&D, including an increase in R&D tax credits to 12.5%, while the National Productivity Investment Fund will be extended for a further year.
 

Meanwhile, the government is to invest more than £500m in a range of initiatives from artificial intelligence to 5G and full-fibre broadband.

Limits on the Enterprise Investment Scheme (EIS) will be doubled for backers of knowledge-intensive companies, while the British Business Bank will create a new £2.5bn fund aimed at new and high-growth businesses.
 

Hammond said he was setting aside a further £3bn over the next two years to meet the cost of leaving the European Union.
 

Brexit

The chancellor is setting aside a further £3bn over the next two years to meet the cost of leaving the European Union.
 

The tax system

From next April, the personal income tax allowance will increase from £11,500 to £11,850.

 

The 40% higher rate band will start at £46,350, up from the current £45,000.

 

Also in April, the National Living Wage will rise by 4.4% to £7.83 an hour.

 

The seven-day wait for Universal Credit claimants is scrapped with a further £1.5bn to be invested in addressing delays in the new system.
 

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