Top takeaways from the 2018 Spring Statement
The Chancellor today delivered his first Spring Statement after scrapping the Autumn Statement in favour of an Autumn Budget.
While he promised it would be short and snappy, providing an update of the overall health of the economy, some announcements will impact consumers’ pockets.
Below is a summary of the key announcements:
Inflation and real wages: Inflation is hovering at 3% – well above the Bank of England’s 2% target. The Office for Budget Responsibility (OBR) expects inflation to fall over the next 12 months, with wages rising faster than prices over the next five years. Hammond said: “Real wage growth is expected to be positive from the first quarter of 2018/19, and to increase steadily thereafter.”
Housing: At the Autumn Budget in November, Hammond announced a stamp duty cut would apply to first-time buyers of properties under £300,000. So far, an estimated 60,000 first-time buyers have benefitted.
On the housing shortage, the Chancellor said London would receive £1.7bn to start building a further 26,000 affordable homes by the end of 2021/22 (though government documents state this figure is 27,000). Nationwide, the Housing Minister is working with 44 local authorities to help them bid for funding to unlock homes in areas of high demand. A deal has been agreed with the West Midlands to deliver 215,000 homes to be built by 2030/31.
Personal allowance: Hammond confirmed the tax-free personal allowance – the amount you can earn before you start paying income tax – will rise to £11,850 in April. We knew this already, but Hammond said a typical taxpayer will pay £1,075 less income tax in 2018/19 compared to 2010/11. He added that four million more people have been taken out of tax altogether since 2010.
5G internet: In November 2017, the Chancellor launched a £190m fund to help roll out full-fibre to local areas. The first wave of funding (£25m) has been earmarked for the “first 5G testbeds”.
Plastic tax: A call for evidence has been launched on how best to use the tax system to encourage responsible use of plastic, such as coffee cups, cutlery and foam trays which damage the environment and end up in the seas. Hammond said that £20m from existing budgets will be given to businesses and universities to research ways to reduce the impact of plastics on the environment.
VAT: VAT has already been frozen at £85,000. A consultation has been launched seeking views on how a split payment mechanism could work. The expansion of e-commerce has “posed a significant challenge to the UK VAT system”, it states. Certain businesses fail to charge VAT when they’re meant to on the sale of goods to UK consumers, meaning the Exchequer is deprived of c.£1bn-£1.5bn.
The government wants to combat online VAT fraud and with the VAT split payment, it will seek to use payments industry technology to collect VAT on online sales and transfer it directly to HMRC. “This would significantly reduce the challenge of enforcing online seller compliance and offer a simplification for businesses,” the consultation stated.
Road tax: Hammond said: “This government is determined that our generation should leave the natural environment in a better state than we found it. And improve the quality of the air we breathe. So we will publish a call for evidence on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas.
“And following our successful intervention to incentivise green taxis, we’ll help the Great British White Van driver go green with a consultation on reduced VED rates for the cleanest vans.”
Brexit: £1.5bn has been allocated to departments and devolved administrations to prepare for Brexit in 2018/19. It’s part of the £3bn committed to be spent over two years as announced in the November Budget.
Update 14 March 2018: Accompanying Spring Statement documents also revealed the Treasury is seeking views on the future of 1p and 2p coins, as well as £50 notes.