The Chancellor Philip Hammond has delivered his second Budget in 2017, widely floated as “the budget for the next generation”. So did it live up to expectations?
There were goodies for first-time buyers, and some concessions for Universal Credit claimants, as well as people who think childhood needs a few more equations.
But it’s getting increasingly expensive to drive a diesel car, and some of the headline victories may not be as big as you think. Here’s what you need to know:
Universal Credit claimants
OK, not a big win. As I’ve written elsewhere, the six-week waiting period is only one of the flaws with Universal Credit, the new benefits system being rolled out across the country.
All the same, Hammond’s declaration that the seven day waiting period would be scrapped is welcome news. This means the wait will be reduced to five weeks, and Hammond also had some other tweaks to address the mounting rent arrears associated with the roll out. Claimants will be able to access a full month’s payment within five days of applying (although if the system works like advance payments they will still need to pay it back later), and they can apply for this online. In total, there’s £1.5bn extra for the benefit.
Hammond acknowledged that merely injecting more money into the housing market wouldn’t actually help first-time buyers trying to catch up with vastly inflated prices, but after announcing support for housebuilding he went on to… inject some more money in the housing market.
He abolished stamp duty for first-time buyers purchasing properties worth up to £300,000, and promised the same deal on the first £300,000 in cities where the average first-time buyer home is more expensive, up to £500,000.
This sounds like great news for first-time buyers in today’s property market, but it is actually far better news for sellers, who now know first-time buyers will not have to factor stamp duty into their budget, and can hike their prices accordingly.
Hammond promised to increase targeted affordability funding, which is a technical measure that allows certain local authorities to increase housing benefit for tenants rising for private landlords. Hammond said this would increase support where rents are least affordable – although it may also have the same effect as the stamp duty axe, in that landlords realise they can charge more.
There will also be a consultation on the barriers to longer tenancies and why landlords don’t offer them, which harks back to yet another Ed Miliband idea.
Electric car owners
People who charge electric vehicles at work will not have to pay a charge as a benefit in kind. The government will also invest in the infrastructure needed to charge them.
There will be a training fund for maths teachers, £600 “maths premium” for schools linked to the number of pupils taking maths, and proposals for new maths schools in England. “Don’t let anyone say I don’t know how to show the nation a good time,” Hammond declared.
There will also be more funding for computer science, but Hammond didn’t have much to say about any other subjects.
Millennial train travellers
As floated ahead of the Budget, the 16-25 Young Railcard has been extended to under 30s. Older twentysomethings can now get a third off train travel.
Duties on all but the strongest alcohols will be frozen, which according to Hammond means “a bottle of whisky will be £1.15 less in 2018 than it would be if we continued under Labour’s plans”.
Hammond hiked the personal allowance (the amount you can earn before paying tax) from £11,500 to £11,850 a year from April 2018. He also increased the higher rate tax threshold from £45,001 a year, meaning you have to earn £46,350 a year before paying 40 per cent tax on your earnings.
Health secretary Jeremy Hunt has been angling for an exemption to the pay rise cap for nurses, and Hammond signalled he wouldn’t stand in the way, by promising to provide additional funding for a settlement.
Although Hammond noted that the £85,000 threshold at which small companies start paying VAT is extremely high (in Germany, it’s £15,600), he nevertheless said he’d keep it that way for at least two years while he thought about it some more.
The Office for Budget Responsibility finds that the scrapping the stamp duty will not just benefit house sellers, but negatively effect first-time buyers, for the reasons outlined above.
The OBR states that the prices paid by first-time buyers would actually be “higher with the relief than without it”. It continues: “The main gainers from the policy are people who already own property, not the first-time buyers themselves.”
This is another sounds-like-it’s-really-good-news-but-isn’t policy. Hammond confirmed that the minimum wage for workers aged 25 or older will rise 4.4 per cent in April to £7.83. This means a £600 pay increase for full-time workers.
This pay rise outstrips inflation, which is expected to peak at 3 per cent, but it will feel more like a 1.4 per cent rise to workers faced with higher prices.
Not only that, but as the Resolution Foundation notes, the original forecast made in 2015 was for minimum wage workers to earn more than £8 by 2018. From that perspective, it’s a pay cut.
NEW updated projection for the National Living Wage. The £9 minimum wage has been pushed back from 2020 to 2022 as a result of a weaker forecast for typical pay pic.twitter.com/SheyJeq8BB
— ResolutionFoundation (@resfoundation) November 22, 2017
Diesel car owners
As predicted, taxes for diesel cars will go up after April 2018, with the only exception being new, cleaner diesel cars.
The only problem with this? The cars that meet Hammond’s standards aren’t really on the market yet.
Van drivers, however, will be exempt, with Hammond proclaiming: “No white van man, no white van woman will be hit by these measures.”
On the other hand, despite all his environmental concerns, Hammond has continued to freeze fuel duty for both petrol and diesel cars. So that’s nice then.
While whisky and wine drinkers can toast the Tories, Hammond plans to legislate to increase duties on the cheapest, highest strength alcohol.
Companies with nifty tax arrangements
From April 2018, companies that direct royalties relating to a UK sale to a low tax destination will have to pay any income tax. Hammond hinted at future crackdowns, saying “it does not solve the problem but it does send a signal of our determination” aimed at digital businesses
Second home owners
The government will legislate to allow local authorities to charge a 100 per cent council tax premium on empty properties.
Hammond confirmed the government would be putting aside an extra £3bn for Brexit costs.