Spring Statement 2019: what Chancellor Philip Hammond announced and what it means for your money
Chancellor Philip Hammond has delivered his Spring Statement 2019 under Brexit storm clouds.
Today the Chancellor Philip Hammond delivered his Spring Statement on the state of the economy. In previous years, Chancellors have used the statement to announce changes to taxes or new policies.
This year the focus was almost solely on the current state of the economy, backed up by a complete overview published today by the independent Office for Budget Responsibility (OBR), as well as outlining the potential impact should Britain not agree a deal with the EU ahead of Brexit.
Mr Hammond gave the highlights of this review, but caveated heavily that many of the projections (detailed below) were predicated on Britain leaving the EU with a deal in place, rather than a ‘no-deal’ exit.
The Statement as usual was much shorter than a full Budget. The Budget used to take place in the the spring, but Philip Hammond changed this so now he delivers government budgets in the Autumn. Read our full breakdown of the last Autumn Budget, in 2018, here.
“The economy itself is remarkably robust”
The Chancellor says the economy is “remarkably robust” despite Brexit uncertainty.
Despite the slowing world economy the OBR expects Britain’s economy to grow at 1.2% in 2019, 1.4% in 2020, and 1.6% in 2021, 2022 and 2023.
The growth figure of 1.2% is down from the OBR estimate at the Autumn Budget of 1.6%. The growth forecast for 2020 is unchanged. He adds that the economy has grown in the last nine consecutive years and is forecast to continue growing in each of the next five.
The Chancellor says he now has an extra £26.6 billion extra (up from £15.4 billion) from tax receipts thanks to better-than-expected economic performance. But this is predicated on a ‘Brexit deal dividend’ i.e. it will only be available on the basis that the UK leave the EU with a withdrawal agreement.
Some commentators have taken this as a thinly-veiled threat to those in his own party who helped vote down Theresa May’s deal for a second time.
The OBR also expects inflation to stay near the target set for the Bank of England of 2% for the next five years.
Read a round-up the key economic takeaways and highlights here.
“Britain’s remarkable job story is set to continue”
The OBR estimates wages will grow over 3% for the next five years. Wage growth is above inflation, which means money goes further.
However the Chancellor caveats that these figures are reliant on the UK reaching a deal with the EU on how it exits the economic bloc.
The Chancellor says 30 million people will receive cuts to their income tax in three weeks time. The personal allowance is set to rise from £11,850 to £12,500 from the start of the new tax year, 6 April 2019.
The unemployment rate of 4% is the lowest rate since 1975. The OBR forecast it will remain near historic lows over the next five years. It belives employment will increase by a further 600,000 new jobs by 2023.
State of the public finances
The Chancellor says govenrment borrowing is experiencing the “first sustained fall in a generation.” Borrowing has been reduced by four-fifths since 2009/10.
Debt levels peaked at 85.1% of GDP in 2016/17 but will fall to 73% of GDP by 2023/24 says the OBR forecast.
A full three-year spending review will be concluded alongside the Autumn Budget – assuming a Brexit deal is agreed in the next few weeks
He has announced plans to launch a full three-year spending review this summer, assuming the UK leaves the EU with a deal. This is where the government conducts a detailed check on all the income and spending of its departments.
Three-year budgets for resource spending will be confirmed, focusing on supporting a “high-growth economy with public services that work for everyone”.
The Chancellor says the government has put plans in place to mitigate no deal shocks to the economy, including a temporary no deal tariff schedule. Read more on that here.
The Chancellor adds the government needs to adapt regulations to help consumers in the “digital marketplace.” He has asked the Competition and Markets Authority (CMA) to conduct a review of digital advertising.
Future-proof energy for homes and low-carbon transport
The government wants to “help ensure consumer energy bills are low” and so intends to implement a ‘Future Homes Standard’ by 2025.
This will ensure new-build homes are ‘future proofed’ with low carbon heating and have highest-standard energy efficiency.
This includes the banning of gas boilers in new homes by 2025. Read more on that here.
The Chancellor also wants to give consumers the option of ‘zero carbon’ travel. The government intends to launch a call for evidence to look at ways it can help consumers understand the emissions caused by their journeys and the options available to offset this impact (such as hybrid or fully-electric cars, human-powered transport such as bicycles and other forms of low emission transport).
£3 billion for affordable housing
Of housing, Mr Hammond says changes to the property market such as Help to Buy equity loans, and Stamp Duty abolition have helped first time buyers onto the property ladder.
He has announced extra funding for new home building projects including a £3 billion fund for an ‘affordable homes guarantee scheme’ to build 30,000 new affordable homes.
The OBR forecast noted a big dip – to negative figures – in 2019, before a considerable rebound. Read our full story on that here.
Free sanitary products girls in secondary schools
The government will now fund the provision of sanitary products for girls in secondary schools from the next school year. Read our full story here.
Open to business
Landing cards at UK airports will be abolished from June to reduce bureaucracy and speed up processing of passengers on arrival in the UK.
Citizens of the US, Canada, New Zealand, Australia, Japan, Singapore and South Korea will also be permitted to use the e-gates at UK airports and at Eurostar terminals.
Knife crime funding
The Chancellor announced an extra £100 million of funding to tackle knife crime in England and Wales, an issue growing in recent times. £80 million comes from new Treasury funding while £20 million is Home Office ‘reprioritisation’ of spending.
Extra funding for innovation and scientific projects was announced by Mr Hammond. This includes £81 million for extreme photonics, state-of-the-art laser technology. A £45 million boost for bioinformatics research in Cambrdige was also announced.
Minimum wage review
A review of minimum wages will be undertaken by professor Arindajit Dube, to consider the latest international evidence and inform future National Living Wage policy after 2020.
PhD level jobs boost
PhD-level occupations will be exempt from the high-skilled visas cap from the autumn. Researchers will also no longer be unfairly penalised for time spent overseas conducting vital fieldwork, as overseas research activity will count as residence in the UK for the purpose of applying for settlement.
Biodiversity to be considered in infrastructure planning
The Chancellor says he wants to ensure wildlife isn’t compromised when infrastructure and housing projects are delivered. Therefore the government will mandate that net gains for biodiversity will have to be made on new developments in England so that overall biodiversity is increased.
Furthermore, 443,000 square kilometres of the waters around the Ascension Islands will be designated a Marine Protected Area to help protect critical habitats.
More green gas
The government will aim to increase the proportion of green gas in the grid, to reduce our dependence on burning natural gas in homes and businesses. This is to help meet our climate targets.
Original article from https://www.moneywise.co.uk/news/2019-03-13/spring-statement-2019-your-money-roundup