Hello, Goodbye, Autumn Statement
Thursday, December 1, 2016
No sooner did he deliver his first Autumn Statement, did Philip Hammond announce it would be his last, with the main Budget moving from Spring to Autumn going forward...
And what a ‘final’ Autumn Statement it was. Delivered in less dramatic style than the previous Chancellor favoured and lacking in sweeping reforms, it still provided some surprises.
This was our first big-picture inkling of Brexit’s impact on our financial bottom line. The Office for Budget Responsibility said the effect of the UK leaving the European Union will knock 2.4 percentage points off UK growth. The increase in the deficit will be a staggering £122bn higher than forecast in March. It was a sobering moment in the opening act of the Autumn Statement.
Up first, the good news: against the odds, Britain will be the fastest growing major economy this year – the Chancellor was at pains to reassure that Britain is ‘open for business’. The bad news: there will be no “fixing the roof while the sun is shining”, to quote Mr Hammond’s predecessor; the UK's deficit will not be clear by 2020, but rather “as early as possible.”
The big reveals largely centred around investment in the nation’s infrastructure. We forecast here that Government investment in big infrastructure projects would give the construction sector, housing developers and other businesses the boost they need, while wooing international firms to the UK. A National Productivity Investment Fund of £23bn has been introduced, to be spent over the next five years on new homes, science and innovation, transport networks, full-fibre connections and 5G communications, and more.
To benefit businesses on home soil, the Chancellor doubled export tax and pumped £400m into venture capital firms, with a view to fuelling inward investment and reducing foreign takeovers. Also designed to aid businesses, corporation tax will fall to 17% by 2020, and small businesses in rural areas will be given a welcome tax break.
Alas it was never going to be entirely good news for the business community. Those losing out in the Autumn Statement will include beneficiaries of salary sacrifice schemes, the VAT Flat Rate Scheme and the self-employed will be penalised over 'disguised earnings'. The crackdown on tax avoidance went a step further, with Mr Hammond announcing that he will “introduce a new penalty for those who enable the use of a tax avoidance scheme that HMRC later challenges and defeats.”
In case you’re worried that you blinked and missed it, Making Tax Digital didn’t get a mention in the Chancellor’s speech. It did get a quick reference in the Autumn Statement document, stating that in January the Government will publish a response to the MTD consultations. One to watch out for in the New Year.
All in all, a practical set of measures aimed at short-term stability, delivered by someone who gives the impression that he wants to be left alone to knuckle-down to the job in hand. With Brexit looming, this was not a radical Autumn Statement designed to make the Government’s life substantially trickier in the coming months. Read it in full here.