UK Spring Budget 2017 Review
On 8 March, the UK Chancellor Philip Hammond unveiled his first and last Spring Budget, promising to build the foundations for a “stronger, fairer, more global” Britain. We have outlined the key economic announcements contained in the Budget.
Despite positive economic news and borrowing figures, there were no major giveaways in this year’s UK Spring Budget, with the Chancellor emphasising the importance of shoring up financial reserves ahead of Britain’s departure from the EU.
Prior to the Budget, the UK’s Chancellor made it clear that he was determined to ensure there was enough “gas in the tank” for Britain to weather any potential economic storms that could lie ahead.1 The Prime Minister Theresa May is expected to trigger Article 50, the formal mechanism for leaving the EU in just a few days’ time.
This is the final Budget which will be held in the Spring. Starting later this year, there will be an Autumn Budget instead, so that tax changes can be announced well before the start of the new tax year on April 6.
Although many feared that the British economy would be severely hampered following the UK’s vote to leave the EU, latest figures show that growth has so far proved resilient.
The UK economy grew by 0.7% in the fourth quarter of the year, according to Office for National Statistics (ONS) figures released in February, helped by higher household spending.2
The Office for Budget Responsibility (OBR), the UK Government’s tax and spending watchdog, has upgraded its 2017 growth forecast to 2%, up from its 1.4% projection given in the Autumn Statement.
However, the OBR’s growth projection for 2018 has been downgraded from 1.7% in October to 1.6%. The OBR forecasts growth of 1.7% in 2019, 1.9% in 2020, and 2% in 2021.
Public sector net borrowing excluding state-owned banks was in surplus by £9.4bn in January, an increase of £300million year-on-year.3
Government borrowing in the current financial year is now forecast to be £51.7 billion, £16.5 billion below the forecast of £68.2bn made in the Autumn Statement.
The OBR forecasts borrowing of £40.8 billion in 2018-19, £21.4 billion in 2019-20, £20.6 billion in 2020-21, and then £16.8 billion in 2021-22.
Debt as a proportion of GDP is expected to be 86.6% this year, peaking at 88.8% in 2017/18 and then gradually falling to 79.8% by 2021-22.
The Chancellor announced in November that the Government plans to spend between 1% and 1.2% of GDP on infrastructure by 2020.
He said in the Spring Budget that infrastructure funding totalling £216m will be used to rebuild and refurbish existing schools. He also promised funding to cover the cost of 110 new free schools, on top of its current commitment of 500.
He is also aiming to boost Britain’s productivity levels by investing £500m a year from 2019 in skills training for 16 to 19-year-olds.
The Chancellor said that £690m would be spent tackling urban congestion on Britain’s roads.
After dedicating £1 billion to ensure homes and businesses can access faster broadband speeds in the Autumn Statement, the Chancellor released more details about the UK’s 5G strategy, promising £16m for a new 5G mobile technology hub.
He also pledged £270m to keep the UK at the forefront of disruptive technologies like biotech, robotic systems and driverless cars.
The 2017 Spring Budget confirmed several other measures which previously had been announced, including:
- Corporation tax: The current rate of corporation tax will be reduced from 20% to 19% on April 1. It will fall to 17% by April 2020. This was originally announced by George Osborne, Hammond’s predecessor, in last year’s Spring Budget.
- Higher National Living Wage: The National Living Wage will increase from £7.20 to £7.50 an hour from April.
Remember that tax rules can change in future and their effects on you will depend on your individual circumstances, which can also change over time.
Please bear in mind that this article is for general information purposes only. If you are unsure about how any Budget measures could affect you, seek professional independent advice.
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