The most interesting part of the budget was the stark reduction in growth expectations for the next few years, that looks very much like an exercise in setting low expectations to allow positive headlines if there is a surprise on the upside. The reduction in growth is because of concerns around Brexit impacts and £3bn was committed to fund Brexit changes in the next two years. Outside of this there were a couple of other long promises that might be hard to measure in the future. The NHS is promised £6.3bn over the course of the parliament with £350m being pledged immediately and NHS England promised £2.8bn in the next year.
Housing seems to be major target in the Chancellor’s sights. There was a promise to invest £44bn over the next five years to promote housebuilding that it is hoped will see house building rising to 300,000 per annum in the early 2020s, this was combined with a number of other measures including infrastructure funds and land purchase funds local authorities can access. Recent initiatives have shown precious little evidence of success in promoting the development of affordable starter housing, so these pledges will be monitored closely in the coming years. Maybe it will deliver a boost to the construction sector.
In the short term the big headline is genuine first time buyers will see stamp duty erased on properties under £300,000 outside London and under £500,000 in the capital. This will reduce the cost of housing for genuine first time buyers entering the market, although many first time buyers outside London may have been buying houses where stamp duty was 0% anyway if the property was under £125,000 in value. It sounds like a substantial measure, but it has already been suggested this might only impact around 3,500 house sales in the first year. For some of those younger house buyers they may also benefit from the off peak rail concession being extended to 26-30 year olds. If they are nurses they may also benefit from a pay review, but probably shouldn’t bank on this delivering results too quickly.
The personal allowance is to increase to £11,850 in April 2017 and the higher rate income tax threshold will move up to £46,350. Other than this few other tax changes of merit were mentioned. Small businesses were threatened by a decrease in the VAT threshold, but it has been held at the current level of £85,000 and English pubs with a rateable value of less than £100,000 will keep a £1,000 rate discount. Northern Ireland is getting an extra £660m in 2020/21, although many might be questioning this figure as there was a promise of £2bn somewhere not too long ago albeit contingent on other things (like many of the giveaways in this budget).
We had been concerned that there would be substantial changes, read reductions in, the pensions annual allowance or the tax relief on pension contributions, but once again the complexity involved and focus on other areas has resulted in pensions being left alone, with the result that the only change is an increase in the Lifetime Allowance to £1,030,000 in line with expectations.
There has been much speculation in the tax incentivised sector that EIS or VCT regulations would change. They have, to the extent that the government is going to double the allowance for investment in new innovative and technology companies. This will hopefully re-direct investment away from safe asset backed schemes, but little detail has been provided yet on the restrictions on investments made in safer asset types. This seems another area where a large change in an allowance is trumpeted, but few in reality were utilising the maximum allowances before this change was announced.
After two-years of seeing Insurance Premium Tax (IPT) go from 6% to 12%, at least they have seen sense in not needing another rise in what many see as a 'stealth-tax' propping up the coffers. It stays at 12% as various industry bodies petition the Government for a reduction.
At least as we drive home from the office tonight to consider the content of yesterday's budget, fuel duty has been frozen for another year and when we call into the off licence our wines and spirits will not have changed in price much (unless you have a low quality cider habit). For the smokers amongst us, you remain the target of duty increases with 2% on cigarettes and 3% on rolling tobacco. When we return the office the next day it is broadly; business as usual and try and increase productivity.