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Against the context of a slowing UK economy, the independent Office for Budget Responsibility (OBR) has lowered forecast 2017 GDP growth to 1.5% (0.5% lower than the UK government’s 2% March forecast). The Chancellor has opted for a fire-fighting approach that puts out fires in certain areas but lacks much of a grand plan.
The OBR is still forecasting a smooth adjustment post “Brexit” (i.e. from March 2019) with no cliff edge effects. This looks optimistic as the odds of a “no deal” have risen in recent months. Furthermore if as recently suggested by Brussels, the UK/EU trade deal resembles the EU/ Canada deal and covers only goods, then this would have a major impact on the UK post “Brexit” due to the UK’s surplus in services.
On welfare spending, Chancellor Philip Hammond has pledged £1.5bn to address the backlog in Universal Credit Scheme and an extra £2.8bn for the NHS, equating to a total £7bn rise in NHS funding. The “NHS is under pressure right now” said the Chancellor.
New Budget items include:
£3bn for Brexit planning, higher staffing requirements and issues relating to the EU exit
A rise in the National Minimum Wage to £7.83 per hour from next April, an increase of 4.4% from the £7.50 currently.
£400m for charging infrastructure for electric vehicles
£300m for HS2 connections to the North of England
£2.3bn for investment in R&D principally those grants that will be lost from the EU
An offshore crackdown aiming to raise £200m from royalties relating to UK sales.
More funding for mathematics students post GSCE
Stamp duty abolished for first time buyers up to a property value of £300,000. To help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty.
A new railcard with discounts for those aged 26-30
Local authorities will have the authority to charge a 100% council tax premium on empty properties. This is an important change aimed at addressing the recent trend that has seen many homes being left empty for long periods of time by non-resident owners. It could increase the supply of properties available to let and reduce housing shortages.
Tobacco duties have been kept at 2% above inflation equating to a total increase of over 5%.
Overall this is a neutral budget with limited net impact ahead of key Brexit negotiations over 2018.
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