The UK is the 5th largest economy in the world but four million...
This Monday (29th October) Philip Hammond delivered his 2018 Budget, the first ever Autumn Budget and the first to be delivered on a Monday since 1962.
It was an upbeat Statement reflecting the improving state of the British economy. The Chancellor’s task had been made easier by the creation of 3.3 million jobs and lower unemployment in every part of the UK, with wages growing faster than for a decade, and the budget deficit falling. The possibility of a bad Brexit deal was the only dark cloud on his horizon and he increased to £2billion the sum set aside for departments preparing for that.
The fruit of this positive state of affairs was expressed in increased spending on public services. The biggest beneficiary will be the NHS that will receive an additional £20.5billion over the next five years. This reflects the priority public opinion accords the NHS. Whether or not it makes it easier to recruit doctors and nurses remains to be seen. A second tactful measure was additional £1 billion to ease the introduction of Universal Credit, which has been attracting negative publicity.
There was good news for local authorities which have been severely squeezed by the last eight years of austerity. Social Care which has been facing a real crisis and creating bed blocking in NHS hospitals is allocated £285million for this winter and £775million in 2019/20. Local Authorities have also been allocated an immediate £420 million to tackle potholes and road maintenance. £200million has been allocated for a youth endowment fund to help young people avoid violence and £84million set aside for improvements to children’s social care.
Other beneficiaries from the Chancellor’s handouts include the Ministry of Defence that will have an additional £1billion to boost its cyber and anti-submarine capabilities, currently under pressure from Russian aggression. Drivers will welcome a continued freezing of fuel duty and several railway developments receive additional funding. £1.6billion has been set aside for new investments to support strategic industrial developments, including nuclear fusion and quantum computing. Smaller firms taking on apprenticeships will benefit from a £695million package.
A surprising item in the Chancellor’s speech was the abolition of PF1 and PF2 for future projects. Private Finance Initiatives were invented by Gordon Brown to finance public infrastructure projects such as building hospitals. Mr Hammond says he is committed to public-private partnerships where they deliver for the taxpayer and transfers risk to the private sector but doesn’t think PFIs have done that so he will not create anymore.
Notwithstanding the importance of all these announcements, the one that matters to most people concerned the tax we will have to pay. The income tax personal allowance was increased to £12,500 and the higher -rate threshold was increased to £50,000 as from April 2019, a year earlier than previously intended. Welcome though that will be to those affected, it will not help the poorest citizens who don’t earn enough to pay tax anyway.
The national living wage is supposed to be an obligatory minimum wage rate for anyone over 25 in work but a survey by KPMG in 2017 found that a fifth of the workforce were paid less than the £7.50 rate then in force. That rate was increased to £7.83 for 2018 and will be increased to £8.21in April 2019. The Government says that work is the way out of poverty so they need to do much more to ensure that employers pay at least the living wage.
The Chancellor spoke for 80 minutes and addressed many more issues than this brief summary can address but it is worth noting that it was the most upbeat he has delivered. Whether that tone can be sustained will depend on the outcome of the Brexit negotiations. A ‘no-deal’ outcome could necessitate another budget after next March. Whatever our views of Brexit, we can all pray for an outcome that is good for both the UK and the EU.