It's that time of the quarter again and Chancellor Philip Hammond's first (and last) Autumn Statement. It's also the first Statement 'post-Brexit'. The focus of the Statement has, as predicted, been on austerity versus growth. The Chancellor had previously indicated that he would use the Autumn Statement to scale back on austerity measures following June's Brexit vote. However, with Brexit predicted by some to cost the UK as much as £100 billion, the Chancellor has had to take a cautious approach when considering growth and debt forecasts.
Whilst the Chancellor has abandoned George Osborne's plans to 'balance the books' by the end of this Parliament, he still has ambitions to achieve this in the course of the next Parliament. Notwithstanding that, the Chancellor has announced an extra £100bn of public borrowing for the next five years. From the Statement it looks like a large portion of this fund is going to be spent on infrastructure building – housing, transport networks and digital infrastructure.
The Chancellor has stressed that the growth of the labour market is forecast to remain robust, with 2.7 million new jobs having been created in the government's current term. He also noted that such growth is not just a South West phenomenon and he has committed to a "labour market recovery working for everybody".
However, he emphasised the 'Productivity Gap' that we face in the UK, noting that our gap is higher than a number of our European neighbours, including Germany, France and Italy. He suggested that what that essentially means is that there are too many British workers working long hours to achieve the same levels of productivity and, as such, being paid less when calculated on an hourly basis. Accordingly, he has committed £23 billion to investment in innovation and infrastructure, which will be held in a new national 'Productivity Investment Fund'.
Taxes are always at the heart of any Statement. It looks like the Chancellor is sticking to his guns on corporation tax. Some had suggested that corporation tax would be slashed dramatically in light of comments from Mr Trump across the pond that he would cut US corporate tax to 15 per cent, but at this stage the Chancellor has simply reaffirmed the government's previous business road tax map, to cut the rate to 17 per cent by April 2020. The Chancellor emphasised that "Britain is open for business".
The Chancellor has plans to align employee and employer National Insurance Contributions. He has confirmed that this will be at no extra cost to employees, but will constitute an additional overhead cost of £17.80 per employee per year for employers.
It's clear that the Chancellor has incorporated a number of measures aimed at boosting workers' income but, in reality, it's a mixed bag for employees. The Chancellor has stuck to the Government's manifesto pledge to increase the tax-free personal allowance to £12,500 from £11,000, and to raise the higher rate threshold to £50,000, from £43,000, both by 2020. The tax-free personal allowance will increase to £11,500 from April 2017. The National Living Wage will also increase to £7.50 an hour from April 2017, and the Government will reduce the Universal Credit taper rate to encourage and incentivise people to re-enter the workforce.
But it's bad news for those who are on salary sacrifice schemes or who enjoy certain work-related benefits, such as subsidised gym membership. The Chancellor is looking to tighten up the rules governing those benefits and employees could lose some of the tax advantages that those schemes currently attract. However, the Chancellor has confirmed that certain salary sacrifice schemes will be excluded, including pensions savings, childcare and cycle to work schemes. Further, certain long-term arrangements will be protected until April 2021. It's also good news for working parents, with the Chancellor committing 30 hours' free childcare from September 2017, up from 15 hours currently.
There were some concerns that the Chancellor may scrap the State Pensions triple lock. However, he has confirmed his commitment to this, at least in the short term. The triple lock means that the state pension rises every year by the highest of price inflation, earnings growth or 2.5 per cent. Instead he has chosen to focus on closing tax loopholes. Employee shareholder status was introduced in September 2013 and there are certain tax reliefs and exemptions that apply to those shares. However, the government is concerned that the scheme has been misused as a way of avoiding tax. As such, the Chancellor has committed to abolishing the tax benefits related to employee shareholder status. There was already limited take up of employee shareholder status but it will be interesting to see how the Chancellor's announcement affects further uptake of the scheme.
As ever, what's left out of the Statement is sometimes more interesting than what's in it. Prime Minister Theresa May has already back-tracked on her 'workers on boards' pledge. She told the CBI's annual conference that there were 'other routes' within existing board structures to ensure workers' voices were heard at the top of organisations. It's not clear from her comments what 'other routes' she is suggesting but stated that plans would be set out at the end of the year.
Her original pledge mirrors the European model of mandating works councils, or directly appointing workers or trade union representatives to boards. However, it was met with an outcry from the business world. The Chancellor has avoided the issue completely in his Autumn Statement. Similarly the Chancellor has failed to provide any comment on the issues surrounding the UK's 'gig economy', which are being heavily debated in the court system and in the press.
Finally, some unexpected news from the Chancellor – this is his last Autumn Statement. No resignation from the Chancellor, just a commitment to abolish the Autumn Statement and the Spring Budget. Next year's Spring Budget will be the last and from 2018 we will have an Autumn Budget only.
It's been a fairly conservative budget but with some good news for employees, particularly for the 'Jams' – those 'just about managing' on their current levels of income.
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