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Author Gina Clarke
On Wednesday 22nd November, the Chancellor Philip Hammond will set out a new economic plan for the country. Historically, this budget will be the first to be presented in the autumn for more than 20-years.
Gone is the traditional Spring budget, to be replaced with a Spring Statement in 2018. The Government has said that this new routine not only leads to greater financial stability with just one set of tax changes to deal with per year opposed to the usual two, but the timing in the Autumn allows for time in tax changes to be implemented ready for the following April.
While the final version won’t be heard until Wednesday, what predictions are on the cards for this year? We find out.
How will Students and young people fair?
The Chancellor is currently being lobbied by social mobility charity the Sutton Trust over its plans to increase the earnings threshold for student debt repayment in April 2018 from £21,000 to £25,000.
Comments on the planned increase, which is set to cost the treasury over £3bn a year, is that despite saving graduates around £8000 in average repayments, the reform will also see a number of indebted university leavers rise from 72% to 81%.
That’s according to the Fairer Fees report launched by the charity, which instead is asking the Government to restore maintenance grants and launch means-tested loans. It would mean students from households earning under £25,000 could pay no fees at all. It remains to be seen whether the Chancellor will be altering his plans on Wednesday.
For people under 30, there looks to be an unexpected windfall in the promise of a discounted railcard. Currently, railcards save young people aged between 16-25 around £150 a year, and there is talk that the Chancellor is to extend the age range upwards to 30.
The downsides would include a one-off £30 fee and a yearly renewal, unlike the 3-year period those with the railcard currently enjoy. According to MoneySavingExpert.com, a leaked document says they’re aiming to roll out the card in early 2018.
Will there be good news for First-time buyers?
There is potentially good news for first-time buyers as the Chancellor seeks to grab the young demographic with a stamp duty cut. With the average house price worth £226,000, house-hunters could stand to save around £2000 with a stamp duty cut.
However, this wouldn’t apply to a home worth less than £125,000. In itself, this would discount a large amount of the cheaper properties in the North and has been likened to a windfall for those in London and the South West.
A spokesperson from the Treasury said, “We don’t comment on Budget speculation” but The Financial Times reported that the cut any stamp duty is expected to be temporary.
With Prime Minister Theresa May personally donning her hard hat this week to insist on building “more homes, more quickly” as her new personal mission, May is ripping up the red tape that stops groups from building new homes.
It is thought that an announcement on Wednesday will cement Communities Secretary Sajid Javid’s announcement that there will be more help for Housing Associations to build faster and that their debts have been taken off the Government’s balance sheets.
May insists her ministers “Will be going further,” in the coming weeks to fix Britain’s housing crisis.
Will Families see a rise in public sector pay?
Of course, Mr Hammond is under increasing pressure to lift the one percent cap on public sector pay. As with the Police and the Prison Service, any pay rises are likely to come with the condition that the money would need to be found from existing budgets.
The cap of 1% has been in place for 7-years and Union’s are seeing the rise of the cap in the Prison sector as a precedent for other public sector workers. Hammond is under considerable pressure to raise the cap by as much as 2.6% but with each one percent costing the tax-payer £2billion, it remains to be seen how much of an increase, if any, is likely.
But there might be good news for some as the speculation is that Hammond will freeze the cost of alcohol duty after adding 8p on to the average bottle of wine and 30p on to spirits when he last gave a budget in March.
It is also likely that the personal allowance, the amount you can earn tax-free, will be raised. Currently set at £11,500 a year it could rise to £12,000 or more, helping not just low earners but pensioners as well. Former Chancellor George Osborne announced that he was committed to raising the threshold to £12,500 by 2020.
Although a rise in the higher-rate tax threshold, £45,000 at the current rate, seems unlikely.
What about Motorists?
It could be a split budget for motorists as Hammond strides towards being seen as the ‘green’ Chancellor. A hike in fuel duty could hit diesel owners hard, by up to 3p a litre, while if rumours are true there could be extra charges added on to purchasing a second-hand diesel model or living in an area with high emissions.
Whatever his decision, it is unlikely to be well received by the motoring public. A recent FairFuel UK survey revealed 55% of the 6,200 quizzed would cut festive spending if a budget hike involved higher fuel bills. But with fuel duty frozen since 2011 the planned increase of 3p a litre in April could see up to £2 added to every tank.
Will the Chancellor be sympathetic to Pensions?
With raids on pensions becoming the norm in recent years, this may be the year for the Chancellor to surprise us. A further reduction in the 1million allowances seems unlikely, but there is always the option to move to a flat rate of relief which would be a welcome if radical, option.
In October the Organisation for Economic Co-operation and Development (OECD) recommended the Government to scrap the triple lock on pensions as the replacement rate for state pensions is one of the lowest in the OECD. Under the current system the state pension increases in line with whichever is highest: consumer price inflation, average growth or 2.5per cent.
Although scrapping the 2.5% lower limit after 2020 was included in the Conservative’s manifesto, the popular proved unpopular and was later dropped. Could this be the budget Hammond manages to reintroduce it?