Wednesday, 23 November 2016

Autumn statement, 2016

Philip Hammond, Chancellor of the Exchequer, has just delivered his first, and last, Autumn Statement to Parliament. Last, because as he announced to a laughing House, future Autumn Statements will actually be Budgets and the Spring Budget will be a Statement.

This is actually a sensible measure. The Budget will be delivered in November and the new rules will then start April next year. So businesses will have a few months to prepare for the changes. The current scheme was invented by Gordon Brown so he could get his face on TV twice a year. It was never a good idea.

Hammond: "Borrow, borrow, borrow."

He spoke for a mere 51 minutes during which he cut taxes (well, froze fuel duty for the seventh year running) and sprayed £23bn of investment money all over the country. The other nations all got raises - Scotland will get £800m more a year (the SNP responded with a stony silence.) Roads, bridges, railways will all get funded. Affordable houses will get built all over the shop; and they will all have ultra-fast internet connections. (Hammond said they will have "5G" connections, but that is a mobile phone standard so he may be slightly confused about the technology.)

The cash unfortunately is going to be borrowed. The government will be borrowing £68bn this year and will continue borrowing at least until the year 2022. The government can no longer forecast when it will stop borrowing. Likely the national debt will be over two trillion by the next election in 2020.

There were some tax rises: insurance premium tax will rise from 10% to 12% and the "salary sacrifice" tax dodge is to be abolished. The triple lock on pensions is good for now but may be lost in the next parliament.

By 2020 the tax free threshold will be £12,500 and the higher rate won't cut in until you're earning £50,000 (currently it's £45,000.)

There will be a new NS&I 3-year bond paying 2.2% with a maximum subscription of £3,000. (Big deal, not!)

Shadow Chancellor replied pointing out that growth was down, investment was down and only borrowing was up. Real wages, he said, have not increased since 2008. He then spent the rest of his time moaning about Brexit.

 McDonnell: "Borrow even more."

To summarise: borrowing continues, austerity continues, but Philip Hammond seems to have a lower-key style about him than previous Chancellors and is less prone to showboating; which must be a good thing.

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