The Chancellor delivered his first Autumn Budget and walked the tightrope between the Brexit issues that the country faces and the problems of making big policy announcements when you have a minority government. He confirmed, what many had thought, that Gross Domestic Product (GDP) would be revised downwards providing further evidence of the productivity gap that has existed since the start of the recession. On the flip side though, the Office of Budget Responsibility are also predicting that borrowing will reduce to its lowest level in 20 years and by 2022/23 to 1.1% of GDP. So, against this backdrop and with some extra money in his pocket the Chancellor set about laying the foundations for a dynamic and innovative economy.
He started by extending by one year the National Productivity Investment Fund, which is being used to improve infrastructure across the country, by giving it further funding and taking the total allocated to £31bn. He then gave further relief for Research & Development Tax Credits, backed up by a commitment to spend more on teaching Maths & Science to create the innovators of tomorrow.
The continued freeze on fuel duty is always welcome in areas as geographically diverse as Cumbria, Yorkshire and Scotland where this can be a major cost for businesses and individuals alike. The Northern Powerhouse was mentioned again with increased funding for cities although without an elected mayor, Leeds will need to bid for any extra funds.
From a business perspective the change from RPI to CPI when setting business rates will be a much welcomed change, as well as addressing the so called “staircase tax” whereby businesses which operated on more than one floor could be taxed on a valuation that looked at the value for each floor, which was generally greater than the whole. The Government is looking to legislate soon to remove this unfairness and bring business rates back to their previous levels.
For Corporates, the Chancellor chose to remain on the low tax path delivering a rate of 17% Corporate Tax by 2020 but he will address the Capital Gains Tax allowance that companies can claim in line with inflation. He mentioned the recent suggestion that the VAT threshold should be reduced, as this is a block on growth for smaller businesses, but he has chosen to hold the threshold steady for now although will consult on this suggestion which could lead to changes in the future.
There was further progress towards the manifesto pledge of a £12,500 personal allowance and a £50,000 higher rate band threshold with increases to £11,850 and £46,350 respectively from April next year. I was slightly surprised that there was no further restriction on pension tax reliefs which had been widely trailed.
The centre piece of this budget was the exemption for the first £300,000 of a property’s value from Stamp Duty Land Tax, for first time buyers, which would have pleased many of his backbenchers who had felt that the Government were out of touch with the younger generation.
The Chancellor was always going to have a difficult job to balance the budget and make an impact on the economy and it looks like he has got it right but, as we have to settle our bill with the EU and then get a trade agreement in place it won’t take much to knock him off balance.