Ten top takeaways from the Autumn Statement
Chancellor Philip Hammond delivered his first – and last – Autumn Statement speech today in front of a packed House of Commons.
Hammond announced he would be scrapping the Autumn Statement in favour of a Spring Statement…and replacing the Spring Budget with an Autumn Budget.
Here are ten other takeaways from today’s speech.
1) UK economy
Hammond opened his speech by saying the UK economy will be “the fastest growing major advanced economy in the world this year”. However, the growth forecast for next year was disappointing. It was revised down significantly to 1.4%, from the 2.2% quoted in the March Budget. Inflation is also expected to rise to 2.3% in 2017 and 2.5% in 2018 and then fall to 2.1% in 2019.
2) Tax-free personal allowance
The Chancellor has committed to raising the tax-free personal allowance to £11,500 in April and to £12,500 by 2020.
“Our research indicates this could remove a further 1.3 million workers out of income tax,” said Frank Nash, partner at accounting practice Blick Rothenberg. However, from 2020, any rises to the allowance will be linked to consumer price inflation rather than the National Minimum Wage as currently planned. Nash called this the “sting in the tail”.
“A better fit would have been to link the rise in tax-free earnings to the annual average growth in wages, so that those who are lower paid have a better chance of remaining outside the UK income tax net indefinitely,” he said.
3) Minimum wage
The National Living Wage for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour from April 2017. The Treasury claims this will be a pay rise of over £1,400 a year for a full-time worker previously on the National Minimum Wage.
The National Minimum Wage will also increase:
- for 21 to 24 year olds – from £6.95 per hour to £7.05
- for 18 to 20 year olds – from £5.55 per hour to £5.60
- for 16 to 17 year olds – from £4 per hour to £4.05
- for apprentices – from £3.40 per hour to £3.50.
4) Letting agent fees
Letting agents will no longer be able to charge renters’ fees, for example when they sign a new tenancy agreement. This will stop tenants being hit with fees averaging £223 per tenancy, the Treasury said.
“Tenants have been paying extortionate fees to some letting agents for some time, so any measures introduced to save them this cost is fair and welcome. But shifting this cost to landlords will only put more pressure on the private rental sector and potentially increase rents for tenants in the long-term,” said Steve Bolton, founder of Platinum Property Partners.
5) Housing measures
The government announced a package of measures to increase housing supply and halt the decline in housing affordability. Among the initiatives was £2.3bn for a new Housing Infrastructure Fund, which will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes.
On top of that, £1.4bn will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent.
6) Digital infrastructure
The government will invest over £1bn in the UK’s digital infrastructure. The investment will help the private sector roll out more full-fibre broadband by 2020-21. It will also support trials of 5G mobile communications.
“Our future transport, business and lifestyle needs will require world class digital infrastructure to underpin them. So my ambition is for the UK to be a world leader in 5G,” said Hammond.
7) Corporation tax
The Chancellor committed to cutting corporation tax to from 20% to 17% by 2020, the lowest rate in the G20. The move will benefit over one million businesses, the Treasury said.
“An opportunity has been missed in not reducing corporation tax any further in today’s Autumn Statement. Keeping the current rate to 17% by 2020 is an admirable target but it should have been lowered further to ensure a significant boost for companies and a reminder that Britain is open for business following the Brexit result,” said Robert Gordon, CEO at Hitachi Capital.
Motorists were dealt a mixed bag. While fuel duty was frozen for the seventh consecutive year – saving the average driver £130 a year – insurance premium tax will go up again, from 10% to 12%, in June 2017. This will add around £15 a year to the average motor insurance premium, according to market research firm Consumer Intelligence.
9) Savings bond
NS&I is to launch a ‘market leading’ savings bond paying around 2.2% for a three year fixed term. Savers will be able to deposit up to £3,000. The bond will be available for 12 months from spring 2017.
Danny Cox, chartered financial planner at Hargreaves Lansdown, called the new bond a “decent gesture”.
But Charles Calkin, head of financial planning at James Hambro & Co, said it sounds more attractive than it is: “The details won’t be announced until the Budget next spring, by which point a 2.2% interest rate may not look quite so appealing as it does today.
“The investment limit of £3,000 is not exactly going to make a huge difference to people who can already easily get 1.2% on a three-year savings product with some shopping around. It’s the equivalent of £30 a year extra.”
10) Pension triple lock
Despite calls to scrap it, the pension triple lock, the mechanism by which the state pension is increased each April by the higher of inflation, average earnings or 2.5%, will be retained until 2020.
“We will meet our pledge to our country’s pensioners through the triple lock,” Hammond said.
“But as we look ahead to the next Parliament, we will need to ensure we tackle the challenges of rising longevity and fiscal sustainability.”
Jon Greer, pension expert at Old Mutual Wealth, said: “While the removal of the triple lock is politically toxic, it is fiscally unsustainable and logical that it be removed eventually. However, it needs to be undone with careful thought.”
The Chancellor also committed to tackling pension cold callers who scam people out of thousands of pounds.