Fresh from Theresa May’s speech at the CBI Annual Conference, chancellor of the exchequer Philip Hammond delivered his autumn statement on Wednesday 23 November. To the surprise of many, Hammond concluded his speech by saying it would be his first and last autumn statement as chancellor, before clarifying that he was abolishing the autumn statement and replacing it with an autumn budget from next year. This, he explained, would allow the government to announce tax changes “well in advance of the start of the tax year”, while a new ‘spring statement’ would respond to financial forecasts from the Office of Budget Responsibility (OBR), but not act as a “major fiscal event”.
Prior to this announcement, the chancellor told MPs that the OBR’s economic growth forecast for the next five years had fallen by more than two percentage points since March’s budget. "While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case," said the chancellor.
The OBR also forecast government borrowing over the next five years to be £122 billion higher than forecast in March, with debt set to rise to 90.2% of GDP by 2017/18, before falling for the first time since 2002. And while the deficit is expected to fall to 0.7% in 2021-22 – “the lowest deficit as a share of GDP in two decades” – Hammond confirmed the government is no longer seeking to reach a budget surplus by 2019/20, saying it would look to balance public finances “as soon as practicable”.
My priority as chancellor is to ensure that Britain remains the number one destination for business – creating the investment, the jobs and the prosperity to protect our long-term future.
Despite these gloomy economic forecasts, there were still some positive announcements for Britain’s business owners. To prevent promising UK startups being acquired too early, the chancellor revealed that the government would be ploughing £400 million into venture capital funds through the British Business Bank, unlocking £1 billion in finance for fast-growing firms. Businesses looking to trade overseas were also given a boost, with the chancellor announcing that the UK’s export funding capacity will be doubled, while rural rate relief will be increased to 100%, "giving small businesses a tax break worth up to £2,900.”
As well as reaffirming that corporation tax would drop to 17% in 2020, the chancellor said the national living wage will increase from £7.20 to £7.50 in April 2017. He also pledged to invest more than £1 billion in broadband and 5G, with the government to offer full business rates relief on new fibre infrastructure from next April. Last but not least, Hammond said the government would be addressing the UK’s “shocking” productivity gap with a £23 billion National Productivity Investment Fund.
Hopefully this snapshot has given you all you need, but the government’s website provides full details of the autumn statement if you’d like to see what else was announced by the chancellor.
Photo Credit: Foreign and Commonwealth Office