Autumn Statement 2016: what it means for you

Tax, spending, pay, property; all the key announcements


Autumn Statement 2016

Philip Hammond's first Autumn Statement was his chance to make his mark as a different kind of Chancellor. After an era dominated by talk of balancing the budget and pulling rabbits out of hats - "Spreadsheet Phil" promised no rabbits, and ended by axing the Autumn Statement itself.

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The speech focused on targeted measures designed to do just two things - boost growth and productivity through government and business investment, and offer help to what are becoming known as JAMs - those who are just-about managing,

Of course, this being a political statement, there were also a few popular cheap wins too.

The need to both keep a lid on spending, and be more flexible about balancing the budget was evident from Hammond's report on the post-Brexit economy. The black hole on the economy was valued at £122 billion - which is even worse than previously thought. The Office of Budget Responsibility also revealed slower growth in future years - 2.4% lower than it would have been without Brexit.

Policies for the 'just-about managing'
When Theresa May entered Number 10, her over-riding message was that her government would be one where more was done to help those in the squeezed middle, who are getting by - but only just. The Autumn Statement included a number of measures for JAMs.

Welfare spending
Hammond committed to no more welfare cuts within this parliament - beyond those that have already been pledged.

Minimum wage
Even before the statement we knew there would be a rise in the minimum wage for people over the age of 25 to £7.50 an hour - as part of its longer term plan to raise the wage to £9 by 2020. This, Hammond said, equated to a pay rise of £500.

Universal Credit
There will be changes to the proposed cuts to Universal Credit - although they have been criticised for not going far enough. The change refers to the speed at which people lose benefits when their income increases. The taper rate was due to be 65%, and will now be 63%. The move is expected to cost the Treasury around £1 billion over five years - although it's worth pointing out that most of this cost will come after more people move onto Universal Credit - which isn't expected until the next parliament.

Hammond announced a large scale pilot on giving people the right to buy housing association property, and confirmed he would continue to support help-to-buy schemes.

He recommitted the government to plans to increase the personal tax allowance to £12,500 by the end of the parliament - and the higher rate tax threshold to £50,000.

He pledged to look at the energy market to ensure people weren't being taken advantage of.

He announced money for the NHS and grammar schools.

Fuel duty
He said fuel duty would be frozen for the seventh year in a row - amounting to a total saving of £130 a year for a car driver.

In order to invest in the economy despite this difficult backdrop, Hammond allowed himself the right to borrow for investment - although he said other spending measures would have to be funded by higher taxes and cuts elsewhere.

He therefore replaced George Osborne's rules with a set of his own, which promised a surplus as soon as possible in the next parliament, public sector net debt falling by 2020 and welfare spending within the cap.

Hammond has been keen on the idea of boosting growth through more spending on infrastructure projects. He announced a new National Productivity Investment Fund to spend on innovation and infrastructure over the next five years. He also pledged this support would be ongoing, spending over 1% of GDP every year after 2020.

Hammond had already announced a £400 million fund to bring ultra-fast broadband to homes in the UK. At the moment, super fast broadband is delivered to cabinets on British streets, and then from there it is taken to the surrounding houses by copper wire - which slows the whole thing down. Hammond announced plans to take the cable all the way to 2 million homes. He also announced investment in 5G mobile, taking the total investment in digital infrastructure to £1 billion.

Research and development
Theresa May had already told the Confederation of British Industry there would be a £2 billion investment in R&D by the end of this Parliament.

Before the Statement, Hammond announced £1.4 billion for 40,000 affordable homes. However, he added in his speech that one of the problems locals experience when new homes are built is the pressure on existing infrastructure, so infrastructure investments will be focused partly on unlocking new land for development. He announced £2.3 billion would be invested in a housing infrastructure fund.

He has announced £1.1 billion to reduce congestion and upgrade local roads, as well as £220m to tackle 'pinch-points' and a £27 million new expressway north of London. There will be an additional £420 million for digital signaling on the railways - to improve reliability and increase capacity. The idea, he said, was to enable productivity growth to stretch from London to the rest of the country.

Business investment
Hammond outlined his belief that businesses also needed encouragement to invest, highlighting a number of measures to free up investment capital and enable businesses to grow. He also pledged to keep to the plan for lowering corporation tax to 17%, and announced a number of tax reliefs including an increase to rural rate relief and a lower transitional relief cap, which he described as "complicated but good news".

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Popular and cost-effective moves

Ban on pension cold calling

This was revealed at the end of last week - but was watered down in the speech from an outright ban to a consultation. The concern is that pension freedoms have made pensioners even more attractive to scammers, who call offering a review of pension investments, and use the chance to switch pensioners into bogus investments and take their life savings.

Any ban will mean that all pensioners know that anyone calling them offering them a pension investment is breaking the law on cold calling, and should be avoided. We can only hope we move quickly from a consultation to a definite plan.

Ban on letting fees
This was actually a Labour Manifesto pledge - banning letting agents from charging fees to tenants. It's expected to save around 4.3 million renters over £300 in fees. Of course the risk is that they charge landlords the fees instead, who pass the cost on to renters through higher charges.

The move was announced before the speech, and immediately caused some concern. Rebecca Wilkinson, corporate tax manager at accountancy firm, Menzies LLP, said: "While reducing the burden of costs on tenants where possible is in everyone's best interests, 'letting fees' are designed to cover landlords' out-of-pocket expenses for checking tenant references and credit histories, as well as running immigration checks and the decision to ban fees could mean that corners are cut. These costs will also become payable by landlords and rents could rise as a result."

She added: "The timing of the ban on letting fees is going to be a sore point for B2L landlords, coming on top of other recent tax changes including increases in stamp duty, a restriction on interest rate relief and the removal of wear and tear allowance."

New savings bond
He announced that the March Budget will see a new savings bond through NS&I, which he expected to offer 2.2% over three years - for up to £3,000.

The £102 million raised by the Libor levy on banks was pledged again to projects supporting the armed forces and emergency services. The £3 million raised by the tampon tax will be given to Comic Relief to distribute to women's charities.

And a couple of money-spinners

Insurance Premium Tax

From next June this will rise from 10% to 12%. Hammond highlighted that this would be offset for motorists by lower premiums as a result of a clampdown on whiplash claims However, it will make all insurance more expensive.

National Insurance
He announced that Employer National Insurance would rise to match that paid by employees. He emphasised that this wouldn't cost staff anything, and played down the cost to business, saying it would be a maximum of £7.18 per employee. For those with a large workforce, however, this is a bitter pill.

Salary sacrifice
A number of workplace schemes let people give up a chunk of their salary in return for some workplace benefits - which can be offered tax-efficiently (ranging from company mobile phones to health screenings). The taxman has been consulting on this since the summer, and Hammond announced that from April, the tax benefits will be removed. Fortunately, however, pension schemes, childcare and cycle to work schemes are excluded.

Tax clampdowns
Hammond announced a number of measures, including that the money purchase annual allowance would be reduced to £4,000, to stop people taking advantage of double tax relief.

He added that he would stamp out tax reliefs exploited by the self-employed, and multinationals.

The Statement included an opaque reference to ensure the taxation of different ways of working - enabled by technology - is fair. We can only assume this means looking at tax within the gig economy.

Interestingly, he added that anyone enabling the use of a tax avoidance scheme that HMRC subsequently challenged and defeated would face a fine.

The unexpected
Hammond announced that he would use some of the money made from planned departmental cuts to pay for 2,500 more prison officers.

He said he would protect commitments to budgets for defence, overseas aid, key services and the triple lock for pensioners. One very unexpected announcement was a possible threat to the triple lock in the next parliament. He announced that given the increases in longevity and the challenges facing the economy, he would be reviewing the future of the triple lock.

But perhaps the most unexpected was the announcement that there will be no more Autumn Statements. There will be one more Budget in March, and after that Budgets will move to the Autumn - so there's plenty of time for scrutiny before measures are brought in - and the Spring statement will simply be a comment on the economic picture - except in unusual circumstances.