The Share Centre examines the Spring Budget.
Spring statement 2018 review
Light at the end of the tunnel
Chancellor Phillip Hammond claimed there’s a “light at the end of the tunnel” for the UK economy during yesterday’s Spring Statement In his speech to MPs, Mr Hammond said the economy is finally at a “turning point” as he announced a £4.7 billion reduction in borrowing forecasts for 2017‐18 and upped the revised growth forecast for the UK economy from 1.4 to 1.5% for 2018.
He told MPs: "We have made solid progress towards building an economy that works for everyone." Inflation is also forecast to drop from 3% to 2% by the end of the year with wages rising faster than prices over the next five years.
The national living wage will increase to £7.83 an hour in April, as previously planned. Mr Hammond added public finances would see “the first sustained fall in debt for 17 years, a turning point in the nation's recovery from the financial crisis of a decade ago". He said: "There is light at the end of the tunnel because what we are about to see is debt starting to
fall after it has been growing for 17 continuous years. "That is a very important moment for us but we are still in the tunnel at the moment."
Debt as a share of GDP is expected to fall from 85.6% from 2017‐18 to 85.5% over 2018‐2019 while borrowing is forecast to continue falling every financial year until it hits £21.4 billion over 2021‐22.
Debt interest payments will remain at around £50 billion a year. Mr Hammond suggested that austerity will be eased when the Autumn Budget comes around, if “public finances continue to reflect” the improvements we are currently seeing.
He told the House of Commons: "If, in the autumn, the public finances continue to reflect the improvements that today's report hints at, then... I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers' money is wasted."
Tax changes ahead
The Spring Statement also outlined a number of consultations over tax changes which could take place – including lowering vehicle excise duty rates on low emissions vans, a new VAT collection mechanism for online sales and extending current training tax relief to self‐employed people and employees.
A consultation into using taxes to discourage the use of single‐use plastic, including takeaway boxes and disposable cups – as well as a £20m fund for research into ways to reduce plastic's environmental impact by businesses and universities – was also announced.
Mr Hammond said: "Single‐use plastics that have been used for only a few seconds can last centuries in the natural environment.” Adding that taxes are "a way of changing behaviour".
With Brexit set to take place in March 2019, the Chancellor said £1.5bn has been allocated to government departments to help them prepare for exiting the EU.
Elsewhere, the budget for Housing Growth Partnership will be more than doubled to £220m and £1.67bn will go towards building a further 27,000 affordable homes by the end of 2021‐22 in London. Cities across England were invited to bid for a share of the remaining £840m fund for regional transport.
The war on cash
Mr Hammond also announced that consultation will take place into the use of cash in society which will question the role of 1p and 2p pieces and £50 notes in circulation. The revaluation of business rates has also been brought forward by a year to 2021.