Philip Hammond has this afternoon delivered his annual Budget. As well as an update on the Government’s accounts, the Chancellor announced a range of spending commitments designed to reinvigorate the economy and revive his party’s – and his own – political fortunes.
This was always going to be a testing afternoon for Fiscal Phil. Play it too safe, and Brexiteers decry his cautious, spreadsheet-oriented style. Take a risk too far, and the subsequent political backlash could lead to his demise, as demonstrated by previous attempted reforms to National Insurance Contributions for the self-employed earlier in the year.
All in all, the Budget was a safe performance, delivering some eye catching policies for aspirational and younger voters. Hammond appears to have succeeded in avoiding the furore that accompanied his previous Budget, and the Conservative rank-and-file are already lining up to support the Chancellor. Hammond’s reputation was previously balanced on a knife edge; he may just have bought himself some time.
Technology and Industry
The Chancellor opened the Budget by painting the image of a brave new world, full of new technologies and exciting innovation. “For the first time in decades”, Hammond said, “Britain is genuinely at the forefront of a technological revolution”.
Policies to this end included extending grants for electric vehicles and associated charging infrastructure, £500m for Artificial Intelligence and an uplift in R&D funding, towards a target of 2.4%. Further reforms to stimulate the sector are expected next week, when the Government publishes its response to the Industrial Strategy White Paper. The Government sees such policies as easy wins. Positioning Britain at the forefront of these new industries creates attractive headlines, and generates jobs in desirable cutting-edge sectors.
The Government will provide £20m to support the rollout of T-Levels, expand support to maths teachers for 3,000 more schools, and introduce a £600 pupil premium for every student undertaking A-Level maths.
In conjunction with the CBI and TUC, the Government will convene a National Retraining Scheme, to rehouse workers who lose their jobs as industry evolves. The Government will change immigration rules to attract talented researchers, by broadening the Tier 1 visa pathway, make it quicker for international graduates to apply for UK jobs, reduce red-tape in hiring international workers and allow research bodies to sponsor visas.
Hammond’s announcement on Stamp Duty was the highlight of the Budget. Hammond echoed the Prime Minister’s words, in dedicating this Government’s time in office to solving the housing crisis.
The Chancellor announced that Stamp Duty would be abolished on first-time purchases under £300,000 on the first £300,000 on purchases of up to £500,000. Tory MPs roared with delight at this announcement, which intends to rescue the Conservative Party’s deteriorating popularity with young voters.
Hammond reaffirmed his vision for more housebuilding, with a £44bn plan to deliver 300,000 homes per year. A £1.5bn homebuilding fund will support SME builders, while £8bn will go towards guarantees for construction including the purpose-built rental sector.
The Chancellor has also brought forward action against empty properties, introducing a new 100% Council Tax surcharge, and against land banking by developers, commissioning a review by former Cabinet Minister Oliver Letwin against this practice.
However, despite the political excitement of the Stamp Duty exemption, commentators may see this Budget as yet another missed opportunity to take forward fundamental reforms to the broken housing market. Several think tanks, such as the Taxpayers’ Alliance, have already critiqued the Stamp Duty change as a gimmick, rather than the radical changes needed to improve affordability.
The cost of living
Conscious of public opinion and Labour’s rising electoral fortunes, the Chancellor announced measures to ease the financial burden on middle class and working families, as well as those on lower incomes.
The National Living Wage will increase to £7.83 from April 2018, and the personal tax allowance will also rise to £11,850. These measures are designed to benefit the low paid, in light of the fact the inflation will peak at 3.0% this month.
Owing to political pressure, the Chancellor also announced a number of reforms to the Universal Credit process, to ease the transition from conventional benefits. This announcement did not quell Labour unrest, with Jeremy Corbyn repeating demands for the process to be frozen.
The Chancellor has passed his initial objective, of avoiding another Budget which threatens the integrity of the Government. There are important funding streams announced for high-tech industries, while cuts to Stamp Duty and railcard extensions will be warmly received by younger voters. However, any credit amassed will quickly evaporate if swift and decisive progress is not delivered on Brexit negotiations, which were conspicuous in their absence from the Budget, except for a new £3bn fund for contingencies relating to withdrawal.
Brexit will continue to define British politics, and in comparison, many of today’s announcements amount to tinkering around the edges. If the Government can combine positive fiscal reforms with the negotiation of a successful divorce agreement and trade deal with the EU, it will be rewarded by the public come next election.