Here’s our lowdown on what you need to know from Philip Hammond’s Budget, which he billed as a Budget to “seize opportunities for Britain”.
Arguably the most significant announcement as far as Cumbria’s economy is concerned, although it was widely trailed beforehand.
He promised £44bn of capital funding over five years in the form of loans and guarantees to boost the supply of skills, resources and building land to ensure that 300,000 new homes are built each year by the mid 2020s.
The £44bn figure includes £34m to develop construction skills, and planning reforms to protect green belt but boost the number of high quality, high density, homes in city centres and around transport hubs.
He also promised changes to force builders to develop sites they hold planning consents for, but haven’t started.
We think housebuilding is a sure-fire way to stimulate the economy and could have a big impact in areas such as Carlisle, which have ambitions to grow, and we expect it to boost spending in the wider economy as people buy furnishings, carpets and so on when they move.
There is a specific pledge to help SME housebuilders, through a £630m small sites fund, who can deliver the smaller-scale schemes appropriate in smaller towns and villages.
But we don’t expect the Chancellor’s stamp duty reforms – first-time buyers won’t have to pay stamp duty on purchases up to £300,000 – to have any significant effect on the Cumbrian housing market.
The British Chambers of Commerce had called for a two-year freeze in business rates. He listened, but didn’t go as far we wanted.
From next April, business rates will rise in line with the CPI rather than RPI, which will mean an increase of 3% rather than 3.9%.
He is, however, dealing with the unfair so-called ‘staircase tax’ that hits businesses with offices in communal blocks.
Future revaluations will be every three years, rather than every five, which should avoid the large increases that some businesses saw this April.
We also called for a Brexit special annual investment allowance of up to £1m, which would have encouraged investment to boost productivity – he didn’t do that, and we think that’s a missed opportunity.
But we’re delighted that the R&D tax credit is rising to 12%. This is a valuable tool that businesses can make more of.
In terms of personal taxes, the Income Tax personal allowance rises to £11,850 in April, and the higher-rate threshold to £46,350.
Tobacco duties rise by inflation plus 2% but there’s better news for drinkers, and for pubs and Cumbria’s vibrant brewing and distilling industries, as duties on beers, ciders, wines and spirits are frozen.
The business rate discount for pubs with a rateable value below £100,000 is extended for another year.
He froze short-haul air passenger duty.
But the big one for business is fuel duty, which has been frozen again – especially good news in a rural county such as Cumbria.
As expected, taxes on the most polluting diesel cars will rise. Vehicle excise duty for diesels that don’t meet the latest standards rises by one band in April and the existing diesel supplement in company car tax rises by 1%. But it’s good news that vans and lorries aren’t affected.
We are concerned that farmers with diesel cars may be hit, which is unfair as diesel pollution is an urban problem.
We’re relieved he resisted the temptation to cut the VAT threshold or tinker with National Insurance for the self-employed, that could have been damaging.
But landlords need to be wary of proposals to allow local authorities to impose a 100% council tax premium on empty properties.
National Living Wage
This is set to rise by 4.4% to £7.83 an hour from April, while the National Minimum Wage that applies to under-25s rises too.
This is an above-inflation increase – which we were expecting – and while it’s yet another added cost for business, we are relieved it wasn’t higher.
Infrastructure and productivity
We were hoping for some big ticket announcements of investment in road, rail, and mobile and broadband connectivity.
That didn’t happen as far as Cumbria is concerned but there were positive steps.
The National Productivity Investment Fund was expanded to £31bn, and that includes a £500m initiative in artificial intelligence, 5G and full-fibre broadband – Cumbria could bid for some of this money – and £2.5bn for the British Business Bank to invest in high-tech emerging businesses.
There’s also £400m to roll out of more charging points for electric cars.
What money there is for infrastructure seems to be targeted at areas that have agreed devolution deals with government – Cumbria hasn’t, unfortunately.
This includes a £1.7bn Transforming Cities Fund for transport projects, half of which is earmarked for areas with elected mayors.
The Chancellor did mention that progress has been made on a ‘Borderlands Deal’ – this should benefit Cumbria, Dumfries and Galloway, Northumberland and The Borders and could, for example, see the re-opened Edinburgh to Tweedbank rail line extended to Carlisle. We will watch this one closely.
When we consulted Cumbrian businesses on the Government’s Industrial Strategy Green Paper, one of the things they flagged up was that too many young people are struggling with basic skills.
So we’re pleased to see £40m to train maths teachers, and cash to triple the number of computer science teachers to 12,000.
He promised £20m to help further education colleges gear up for the new T-levels, the Government’s new streamlined model for technical qualifications, which we hope will give vocational qualifications real credibility.
And he announced a partnership with the CBI and TUC to retrain and upskill existing workers, focusing initially on digital skills and construction.
Sluggish productivity growth has led the Office for Budget Responsibility to downgrade its growth forecast for the UK economy – but it does predict growth, there is no expectation of a Brexit-induced recession.
GDP is forecast to grow by 1.5% this year (the previous forecast was 2%), 1.4% next year, 1.3% in 2019, 1.3% in 2020, rising to 1.5% in 2021 and 1.6% in 2022. This should mean there are 600,000 more people in employment by 2022.
Inflation is expected to peak around 3% this quarter, falling back towards the Government’s target of 2% next year.
Government borrowing is forecast to be £49.9bn this year – that’s £8.4bn lower than predicted at the time of the spring Budget – and should fall to £25.6bn by 2022-23.© Cumbria Chamber of Commerce