Autumn Budget 2018 – PLMR’s Analysis

Alex Hackett

Overview

We already knew about the freezing of fuel duty, more money for potholes, and more money for mental health services through the usual cycle of rolling the pitch and Budget pre-briefing designed to ensure the various announcements get the airtime wanted.

And today, the Chancellor delivered his final Budget before Brexit and echoing the Prime Minister, the message he wanted people to hear was that the “era of austerity was finally coming to an end” and for people to see that their “hard work is paying off”.

In a sign of how technology impacts so many aspects of our lives, the Chancellor addressed the issue of tax in the digital age, by setting out plans for a U.K. digital services tax. But with this expected to raise £400m, this will be the subject of further scrutiny and debate.

There was also a particular focus on the role and sustainability of the High Street with support on business rates and help to transform. Another issue that matters to local communities and people’s every day lives.

It was interesting to hear the Chancellor speak about how this was a Budget for grafters and people far removed from Westminster. It’s not lost on the Government that in addition to saying austerity was finally coming to an end, people up and down the country will also need to feel the difference, in their pockets and in their everyday lives.

Health & Social Care


The Chancellor delivered an uncontroversial Budget that promised austerity is coming to an end and in keeping with this message he made some pronouncements that on the surface look like good news for health and social care.

He confirmed the £20.5 billion previously promised for the NHS by 2023-24.

He also confirmed that there would be an increase in mental health funding of more than £2 billion a year by 2023-24 which will enable measures such as the introduction of special mental health ambulances, 24/7 specialist mental health support in A&Es, and dedicated mental health crisis teams in schools.

The Chancellor also announced that English local authorities would be given an additional £650 million to help tackle the growing adult social care crisis in 2019-20. This is on top of a previously promised £240 million for adult social care to ease NHS winter pressures.

These are all positive steps in the right direction, but critics have been quick to point out that these promised sums are too small and don’t amount to more than just sticking plaster.

And those hoping for any further news on the elusive social care Green Paper were sorely disappointed with Hammond merely saying it would be announced shortly. He also kicked the can down the road regarding the finer details of the extra NHS funds by saying further details would be revealed in next year’s spending review.

In short Hammond’s Budget was a bland and insubstantial result for those working on the frontline to deliver much needed care services.

Energy & The Environment


The so-called ‘plastics tax’ was a long anticipated feature of today’s Budget, and represented the major announcement across the energy and environment sectors.

The Treasury will consult on “a new tax on the manufacture and import of plastic packaging which contains less than 30 per cent recycled plastic”

The measure is intended to create more of a domestic market for recycled plastics – which is often considered a stifling factor in growing the industry. However, environmentalists will be less impressed that the Chancellor kicked the proverbial coffee cup down the line, avoiding the ‘latte levy’ on single use drinks containers.

In the energy sector, the main headline was that the Carbon Price will be frozen through to 2021 – and the Government will also plan to balance out the Climate Change Levy that business pays on power, which will be raised on gas and lowered on electricity so that they sit at the same level by 2022.

The Budget also continued to offer tax rebates to the oil and gas sectors, and as expected fuel duty was frozen for the ninth year in succession, whilst a further £1.6bn was committed to fund so-called ‘advanced technologies’ such as nuclear fusion.

Overall, business and green campaigners alike may find mixed messages coming from today’s Budget, which made relatively tepid commitments in areas where the Government has previously taken a strong public stance.

However – it is not so much today’s Budget but rather the previously announced Industrial Strategy and Clean Growth Strategy, and the forthcoming Resources and Waste Strategy, which really set the backbone of policy making in these sectors.

Education


Whatever the Chancellor promised for education today, there was only one thing that schools and colleges wanted – more money in their budgets to plug ever-increasing holes.

Teachers say there are huge issues with under-funding – leading to staff cuts, subjects being dropped and larger class sizes. And last month around 2,000 headteachers took part in a march to Downing Street to protest. The Institute for Fiscal Studies (IFS) has said that per-pupil funding has fallen 8% in almost 10 years.

Today, Philip Hammond announced that schools will get £400 million in extra capital funding this year – an average of £10,000 per primary school or £50,000 per secondary school for equipment and facilities.

There was also news of a new £10 million trial to retain maths and physics teachers and the Government’s plan to roll out high-speed broadband will include rural primary schools.

So although this a step in the right direction, heads and teachers will be certainly be clear that more still needs to be done.

Planning


This was a budget with plenty of planning news. The Government wants to boost housing supply by providing a further £500 million for the Housing Infrastructure Fund, to unlock 650,000 new homes, meaning that the fund now stands at £5.5 billion. The other big spending announcement was that there will be £1 billion worth of business bank guarantees to support SMEs, providing funding for up to 500 neighbourhoods to sell housing at a discount to local people.

And of course there was the announcement from the Chancellor that the Letwin review has now been published. It’s main conclusion is that “landbanking” is not systemic within the planning system, but it does recommend reform to speed up building. While there was no commitment made at the Budget to act on the report, the Chancellor noted a clear commitment to review its recommendations with a statement expected in the New Year.

On the planning system, the Chancellor announced a consultation on new permitted development rights, to allow greater flexibility for change of use, which people expect will encourage more housing in town centres in former commercial premises.

The news for buyers was mixed. First time buyers will welcome the extension of the abolition of stamp duty for the purchase of shared-ownership properties up to £500,000, backdated to the last budget. At the same time, it was confirmed that the consultation for a proposed 1% increase in Stamp Duty for overseas buyers will be put to consultation  in January, and that Help to Buy will no longer be in effect from April 2023.

Meanwhile, for the rental market, it’s been announced that from April 2020, lettings relief will be permitted only for owners sharing with tenants.

Overall, this was a budget with more detail on housing than many were expecting, including the property industry. If last year was a budget to promote housebuilding, this year can be remembered as one which is more holistic in nature with a variety of measures aimed at bolstering supply, providing discounted housing and encouraging planning reform. There are a lot hurdles to get through before some of these measures see the light of day, so the next few months are likely to see plenty of change.

Brexit


In the final Budget before Brexit, the Chancellor linked progress in the Brexit negotiation to the wider fiscal picture, talking of a deal dividend that would allow more money to be spent on public services in the upcoming Spending Review.

Highlighting the Government’s Global Britain agenda, the was also reiteration of Britain being open for business, more support for exports, measures to attract inward investment and opening up e-passport gates to citizens of countries beyond the European Economic Area, like the US, Canada and Japan.

At the same time, the Chancellor also said on Brexit that the stakes could not be higher, and that the Government was working for the best outcome but preparing for every eventuality. the Chancellor also allocated half a billion pounds more to Government Departments for “no deal Brexit” preparations and suggested that the Spring Statement may be upgraded to a “full fiscal event”

Some will see this as the Chancellor promising more spending if Parliament votes for the Government’s Brexit deal – if and when one is secured, which creates a further dynamic for MPs to consider.

Downing Street have said all spending commitments in this Budget will go ahead irrespective of a Brexit deal. Whatever happens in the next few months regarding Brexit, it will have an impact on the country’s finances.

Scotland

Today’s Budget was billed as the “End to Austerity” and on the surface it hit the mark, with the Chancellor announcing that Scotland’s block grant would increase by £950 million as a result of Barnett Consequentials.

However, when we dig a little deeper we see that despite the substantial increase, Scotland’s block grant will actually be £1.9billion lower in real terms in 2019/20, compared to 2010/11. This will make the Scottish Government’s own Budget, scheduled for March 2019, all the more difficult to deliver as they try to pay for the policies they announced in this year’s Programme for Government.

Elsewhere, the Chancellor’s announcement that he will cut business rates by a third for almost half a million small high street shops will be of interest to many across Scotland – not least the Cabinet Secretary for Finance who is likely to hear calls from opposition parties that he should replicate these measures in his own Budget. This does seem unlikely however, given that last year’s Scottish Budget already contained a controversial Business Rate review.

Finally, the increase in funding for Universal Credit will be a welcome relief for some but will be met with more than a few raised eyebrows in the Scottish Government. Ministers were hoping for a pause in the rollout of Universal Credit and are likely to argue that the £1.7 billion increase to working allowance will do little to help those already in debt due to the delays in payments

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