Everything you need to know about the UK budget

The Autumn Budget has been revealed with key announcements on Universal Credit, VAT and investment in technology

THE UK GOVERNMENT’S tax and spending plans for the year were announced in Chancellor Philip Hammond’s budget speech on Wednesday, which will have far-reaching consequences – one way or another – for people across the UK.

Hammond sought in his statement to present an image of “kind conservatism”, making multiple references to the need to support families with a balanced approach to investing in the future and helping those who need extra help in the short term.

The Chancellor also used the budget to take aim at the Labour opposition for just about everything, pointing out the comparative successes of the Tories in their seven years in government.  

But we know that hour-long finance speeches aren’t always thrilling to listen to, so we’ve broken down the key points so you don’t have to.

Brexit

Hammond began his announcement with Brexit, but was quick to move on swiftly, saying that the budget was about “much more than Brexit”.

Acknowledging the need to protect businesses by preparing for Brexit, Hammond announced that in the coming weeks the government would be working on an implementation agreement to allow businesses to plan ahead.

Having invested £700m in Brexit preparations already, the Chancellor announced that the government will now set aside £3bn over the next two years and “stands ready to allocate further sums”, if and when these are needed.

Universal Credit

While defending the principle of the controversial Universal Credit as delivering a “modern welfare system where work always pays”, Hammond made some key concessions on the implementation of the benefit.

  • Firstly, the seven day waiting period at the start of the claim has been removed, so that entitlement begins on the day.
     
  • Next, the advances system will be changes so that “any household that needs it” can access a full month’s payment within five days of applying, and it will now be possible to apply for an advance online.
     
  • The repayment period for advances will be extended from 6 months to 12 months.
     
  • And new claimants who are in receipt of housing benefit at the time will continue to receive housing benefit for a further 2 weeks, which the chancellor said would make it easier for them to pay their rent.
     
  • Overall, this comes to a 1.5 billion package to address the issues with the system.
     
  • Jeremy Corbyn responded to the announcement by arguing that these measures didn’t go far enough to address the problems with the roll-out, highlighting the six week waiting period which will only be reduced by one week.
     
  • Corbyn called for the roll-out to be paused and said of the changes in advance payments: “The Chancellor’s solution to a failing system causing more debt is to offer a loan.”

Take-home pay

In another effort to illustrate the government’s willingness to help those in lower incomes, Hammond announced that personal allowance –  tax free income – would increase to £11, 850, and that the higher rate would be lowered to £46, 350.

The Living Wage is also to increase from £7.50 to £7.83, which amounts to a £600 pay increase per year.

Scottish budget

The Chancellor made some specific announcements regarding each of the devolved administrations, including, of course, the big one: the devolved budgets.

In his speech, Hammond said the Scottish Government would receive £2bn more, the Welsh Government would receive 1.2bn more, and the Northern Irish executive would receive 650m more. The detail behind this is that the figure is spread over the next four years.

Responding on Twitter, First Minister Nicola Sturgeon said: “More than half of the headline £2bn (£1.1bn) is in the form of Financial Transactions - money that can be used for limited purposes only and has to be repaid by @scotgov.”

Scottish emergency services VAT charges

The Chancellor also revealed, as anticipated, that the UK Government will legislate to allow VAT refunds for Police Scotland and Scottish Fire and Rescue from April 2018 – meaning that tax owed from the point onwards can be reclaimed. This falls short of calls by the Scottish Government to allow a tax rebate for the years since 2013 when the services were centralised.

Hammond made sure to give full credit for the decision to the Scottish Tories, saying that, despite the fact that the Scottish Government knew they would lose out on the refunds when the single forces were created:  “My Scottish conservative colleagues have persuaded me that the Scottish people should not lose out just because of the obstinacy of the SNP Government.”

Oil and gas tax break

Hammond made one further Scotland-focussed announcement – for which he also thanked his Scottish Tory colleagues – which was the introduction of transferable tax history for oil and gas fields in the North Sea.

The aim is to encourage new investment and thereby provide an economic boost.

A number of environmental groups have already criticised the move, however, with Friends of the Earth Scotland arguing that it will “increase our climate emissions at a time when we need to rapidly moving away from fossil fuels”. 

Transportation tax freezes

Also unlikely to please environmentalists was an announcement to freeze short haul air passenger duties and long haul economy rates – to be paid for by an increase in tax on premium class tickets and private jets.

In a move slightly contradictory in aim to another car related announcement (see below), the Chancellor also revealed that an increase in fuel duty for petrol and diesel will again be cancelled and celebrated the long freeze which the Conservative government has maintained.

Green investment and taxation

All of that being said, Hammond did attempt to highlight areas of the budget with a greener focus.

  • As he had already revealed pre-budget, the government will aim to have driverless vehicles on roads by 2020. Cue jokes about Jeremey Clarkson, Hammond and May from the Chancellor.
     
  • Before then though, he said there will be greater investment in all electric cars, with the aim of reducing air pollution. Specifically, £400m will be invested in a charging infrastructure fund, an extra £100m will be put into a plug-in car grant, and £40m will be invested in research and development.
     
  • To encourage the use of electric cars, the government will clarify the law so that people who charge vehicles at work will not be charged a benefit in kind.
     
  • The government will also increase taxes on new diesel cars which don’t meet the latest standards around emissions, with the first year VED rate increasing to band 1 for new cars. However, Hammond was clear this would only relate to cars – not vans or buses – and there was no mention of petrol vehicles.
     
  • Hammond also revealed his intention to “investigate” the possibility of using the tax system to put charges on single use plastic to reduce waste.

Investments in technology

Hammond was eager to present Britain and the Conservative government as leading a “technological revolution” – of which those futuristic driverless cars would only be a part.

  • He announced a new investment of over £500m in initiatives including artificial intelligence, 5G and full fibre broadband, a regulators pioneer fund, and a new geospatial data commission to develop a strategy for using government location data to support economic growth.
     
  • The government will also publish a plan to unlock £20bn of new investment in knowledge intensive scale-up businesses and a new fund in the British Business Bank, seeded with £25bn of public money.
     
  • The Chancellor also stated that the government would be prepared to replace European Investment Funding if required.

Tobacco and alcohol taxes

It was announced that the tobacco duty escalator will continue to rise at inflation plus 2 per cent, with additional one per cent on hand rolling tobacco this year.

In an attempt, Hammond explained, to address alcohol misuse among vulnerable people, Hammond announced the UK Government will now legislate to increase duty on high strength alcohol such as white ciders.

In contrast, duties on other ciders, wine, sprits and beer will be frozen. “Merry Christmas,” Hammond said. 

Tax evasion

Hammond was clear that he would “take no lectures” from Labour on tax evasion, claiming that the Tory Government had already done more on the issue than its predeccessors.

That being said, the government will seek to raise £4.8bn more in taxes by 2022-23 with further measures to prevent evasion.

VAT

The Chancellor revealed that the VAT rate would not be reduced over the next two years, but that he would consult on whether there are ways it can better incentivise growth given concerns around the tax.

Also announced was a plan to address online VAT fraud by making all online marketplaces jointly liable with services based on their provider – likely to impact on large companies such as Amazon and Apple.

Housing policies

One of the major focuses of the budget was housing, and although these policies don’t impact on Scotland, considering that housing policy has been a key area in which campaigners have been pushing for reform, it is likely that many in Scotland will be keeping a close eye on the developments.

  • In an effort to support young people to buy houses, stamp duty for first time buyers spending under £300,000 will be scrapped, and on properties up to £500, 000 the duty won’t be charged on the first £300, 000. However, the Office for Budget Responsibility has already warned that increasing stamp duty will likely drive up house prices.
     
  • The government will also legislate to give local authorities the right to charge 100 per cent council tax premium in empty properties, consultation on barriers to long term tenancies.
     
  • In order to help those on low incomes in areas of rising rents, Hammond said the government will increase targeted affordability funding by £125m over the next 2 years.
     
  • At  least £44bn in capital funding will be committed to support housing the housing market, delivering 300, 000 net additional homes per year on average by thr mid 2020s.
     
  • The Homes and Communities Agency will expand to become Homes England with a remit to facilitate the delivery of sufficient homes where they are most needed and improve housing affordability.
     
  • And in order to address rough sleeping, the government will invest 28m in three new Housing First pilots in England and establish homelessness taskforce.

Announcements not affecting Scotland

Other key announcements in areas which are devolved included the introduction of a new railcard for those 26-30, providing a third off rail fares; £10bn in capital investment to frontline NHS services and an additional £2.8bn in resource funding; investing in maths and IT teacher training; and making over £1bn of discounted lending available to local authorities to support high value infrastructure projects.

Picture courtesy of Foreign and Commonwealth Office

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