Some have described Philip Hammond, the man who replaced George Osborne as Chancellor of the Exchequer back in July, as a quiet, safe pair of hands. Less charitable observers have called him ‘boring’. His first autumn statement certainly lacked much of the showmanship of his predecessor.
He delivered on his promise no ‘rabbits out of the hat’ – the only big surprise being his announcement that the autumn statement will be scrapped and the budget moved to the autumn, a mind-numbingly dull point of process that is unlikely to make it onto tomorrow’s front pages.
Hammond had to deliver bad news for the economy. Greater uncertainty and the low value of the pound post-Brexit mean that growth will be lower next year than expected, according to the Office of Budget Responsibility, and consequently the government’s finances are in even more of a mess.
But he’s not doubling down on Osborne’s obsession with fiscal discipline. Instead of cutting further Hammond is relaxing the government’s attitude to spending, abandoning his predecessor's aim of reaching a budget surplus by the end of the decade and freeing up a load more cash for capital spending on infrastructure. He announced there would be a new £23bn ‘National Productivity Investment Fund’ to be spent on transport, housing and R&D. As with all chancellors he’s giving with one hand and taking away with another - in the form of tax hikes. Here are the key changes bosses and entrepreneurs need to be aware of:
No more salary sacrifice tax breaks
With the exception of pensions, childcare vouchers, bicycles and low-emission company cars, salary sacrifice schemes (such as for healthcare, gym membership and computers) will now be taxed on the same basis as any other income, effectively rendering them redundant. ‘The majority of employees pay tax on a cash salary, but some are able to sacrifice salary and pay much lower tax on benefits in kind,’ said Hammond. ‘This is unfair, and so from April 2017 employers and employees who use these schemes will pay the same taxes as everyone else.’
A mixed bag on other taxes
Corporation tax will fall to 17% by 2020 as previously announced; the lowest rate in the OECD (though Donald Trump has suggested he might be going after that crown in the future). And the freeze on fuel duty rises will be carried over again. But the insurance premium tax will be increased from to 12% (from 5% when the Tories came to power) and Hammond said he would be closing more ‘loopholes’ in the tax system, including the use of employee shareholder status and the ‘inappropriate’ use of the flat-rate VAT scheme.
Another increase in the minimum wage
The national living wage for over-25s will rise by another 30p to £7.50 in April. The national insurance thresholds for employer contributions will be realigned with that for employees, a move Hammond says will cost a maximum of £7.18 per employee per year.
Crackdown on letting agents and a warning for energy firms
Letting agents will no longer be allowed to charge tenants administration fees for things like printing out contracts, credit checking and changing the names on a tenancy agreement. ‘We have seen these fees spiral, often to hundreds of pounds,’ Hammond said. ‘This is wrong. Landlords appoint letting agents and landlords should meet their fees.’ There’s been much controversy over whether that’s a good thing or will just drive up rents.
He also had ominous words for the equally unpopular energy industry. ‘We will always support a market led approach; but we will not be afraid to intervene where there is evidence of market failure,’ he said. ‘We will look carefully over the coming months at the functioning of key markets, including the retail energy market, to make sure they are functioning fairly for all consumers.’
Funding for exports, start-ups and training
Hammond pledged to double the funding for UK Export Finance, which provides loan guarantees and some direct funding to support companies plying their trade overseas. And he will put another £400m into venture capital funds to support ‘innovative small businesses.’ There was a further £1.8bn for local enterprise partnerships and £13m to be invested in John Lewis chairman Charlie Mayfield’s new management skills initiative.
Image source: FCO