Ageing Rock Star Delivers his Spring Statement

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Ageing Rock Star Delivers his Spring Statement

By Mark Richards

Yesterday was the first of Chancellor Philip Hammond’s Spring Statements, with the traditional Spring Budget having been moved to the Autumn. There were all the usual facts and figures on the state of the economy, but the really interesting details were at the end when Hammond gave an indication of what we might see in future Budgets. Could he have signalled the end of cash and a Chewing Gum Tax…

In 2016 Britain voted to leave the EU, David Cameron resigned and the new Prime Minister, Theresa May, invited the Chancellor George Osborne to consider an alternative career. She replaced him with Philip Hammond, the less-than-charismatic MP for Runnymede and Weybridge – a man nicknamed ‘Spreadsheet Phil’ by his Commons colleagues.

Five months later Hammond stood up to deliver his first Autumn Statement and immediately announced it would be his last. “No other major economy,” he said, “Has two financial statements in a year.” Thus the Budget was moved to Autumn and, from 2018, the Spring Budget would become the Spring Statement.

So at 12:30 yesterday there we were in the Commons as the Chancellor bounced to his feet, compared himself to Tigger and had the nation hanging on his every word.

The Speech

Expectations for a Philip Hammond speech are never very high and journalists and commentators were quick to downplay what might be in store: ‘Don’t expect Hammond to pull a rabbit – or even a March hare – out of the hat’ was the general consensus.

This view was supported by Liz Truss, Chief Secretary to the Treasury, who wrote in The Times,

“There will be no red box, no rabbits and no tax changes. Our message is simple. Let’s keep on course, keep our economy strong and focus on the opportunities ahead of us. We want to keep taxes low so that the weekly budget goes further.”

But you could almost see Mrs Hammond’s note in red ink at the top of every page. ‘Don’t be dull, Philip. And remember your joke.’

The Chancellor did indeed tell a joke – inevitably, directed at Shadow Chancellor John McDonnell – and then he launched into the facts and figures. He rattled off the stats and the good news like an ageing rock star running through his greatest hits at a farewell concert. ‘500,000 more jobs by 2020,’ ‘Borrowing down by three-quarters since 2010’ and, of course, that timeless rock classic, ‘Net public sector debt will fall as a percentage of GDP.’

Good news and bad news

In fairness to the Chancellor, he did have plenty of good news to report. The UK’s debt is falling – for example, in 2010 the Government borrowed £1 in every £4 that it spent: today it borrows £1 in every £18. More jobs are being created and the unemployment rate is the lowest it has been for 40 years.

Philip Hammond delivers Spring Statement signalling a Plastics Tax

Growth for this year is forecast to be 1.5% (up from an earlier forecast of 1.4%), followed by two years of growth at 1.3% before it picks up again. But the OECD has predicted that the UK will have the slowest growth of all the G20 countries this year and, while inflation is expected to start falling, it will probably be next year before people see their wages increase in real terms.

…And there will not be an end to austerity. As the Chancellor said on the BBC’s Andrew Marr Show on Sunday,

“This (austerity) isn’t about some ideological issue. It’s about making sure we have the capacity to respond to any future shock in the economy.”

Can we trust the forecasts?

The Chancellor confirmed that Government borrowing for this year would be £45.2bn, “£4.7bn lower than forecast in the Autumn Budget.” That forecast came from the Office for Budget Responsibility – and yet it was effectively 10% out in just five months. So it is probably sensible to take all the forecasts with a large pinch of salt: given all the variables which will affect the UK economy – Brexit, Donald Trump’s trade policies and the rate of growth in China – any forecasts can only be best guesses.

What about wages and taxation?

As Liz Truss stressed before the speech there were no new taxes or major policy changes announced in the speech. But it is worth reminding ourselves of some key points that will affect millions of us:

  • The National Living Wage will rise to £7.83 an hour from April
  • All the other minimum rates will rise in line with the increase in the headline rate, with the youth rate seeing the largest increase for 10 years. In total this should benefit around 2m people
  • The tax-free personal allowance (the amount you are allowed to earn before you start paying tax) will increase to £11,850 from April, and the threshold for higher rate tax will also increase
  • The revaluation of business rates will be brought forward, from 2022 to 2021. We have written many times about the problems of the retail and hospitality/catering sectors: this move is intended to help them, but many businesses need help now, not in three years’ time

What could we see in the future?

The pundits had speculated that the Chancellor would only speak for 20 minutes or so. 20 minutes came and went and MPs who had planned on a decent lunch started looking nervously at their watches. But in some senses, this last section of the speech was the most interesting, as it gave a clear indication of the measures we might see in future Budgets.

Philip Hammond delivers Spring Statement signalling a Plastics Tax

The Plastic Tax

This has been widely trailed – it is also referred to as the ‘litter levy’ – and the Government will use the tax system to “encourage the responsible use of plastic throughout the supply chain.” This will include items such as coffee cups, plastic cutlery and foam takeaway trays. The Chancellor did not mention chewing gum specifically but the rumours are that it will also be included in the measures. “Some of the money raised from any tax changes” – for which you can read, ‘there will be tax changes’ – will be used to encourage the creation of newer, greener products. But rather than taxing us all, could we not just penalise the people who drop litter? No, I thought not…

Taxing the tech giants

What would a Budget speech – or a Spring Statement – be without an attack on the tech giants who are “not paying their fair share of tax?” The Government will once again be considering ways in which to tighten up on Facebook, Amazon, Google and friends. But as we wrote last week, five or 10 years from now it may also need to consider how to tax the Chinese tech giants such as Alibaba, Tencent and JD.com.

White van man goes green?

Philip Hammond delivers Spring Statement signalling a Plastics Tax

At the moment there is tax relief given for agricultural diesel but the Chancellor said he would “call for evidence” on whether this is contributing to air pollution. And in the days when every delivery from Amazon arrives in a white van, he announced that he would consult on tax cuts for low-emissions vans.

Giving people the skills they need

Clearly improving skills benefits not just the individuals concerned but the wider UK economy and the Chancellor gave a clear hint that he will offer tax relief to both employees and the self-employed who fund their own training.

Goodbye to cash?

Clearly far more of us now use digital payments rather than cash – although the UK has some way to go to catch up with some countries (such as Sweden) where cash has all but disappeared. The Chancellor is ‘seeking views’ on encouraging businesses who want to use digital payments. And why wouldn’t he? Digital payments can be tracked and taxed and would represent a way to strike back at the black economy.

And with that veiled threat to hairdressers and window-cleaners up and down the country, our ageing rock star played his encore, declaring that he was keeping the UK on course to be “an outward-looking, free-trading nation, confident that its best days lie ahead.”

Unless you want to pay in cash, of course…

By | 2018-03-14T12:27:11+00:00 March 14th, 2018|Economy, Politics|0 Comments

About the Author:

A previous financial services business owner, Mark is an experienced Journalist Speaker, Speechwriter and Coach. He has written for a number of websites related to the financial sector and won numerous awards. Mark has also published a number of books.

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