20.03.2018 Spring Statement 2018

20.03.2018 Spring Statement 2018

On 13 March Chancellor Philip Hammond delivered his Spring Statement. Here are the key points discussed by the Chancellor:

Growth
The Office for Budget Responsibility (OBR) revised its forecast for growth, from 1.4%, up to 1.5%; a rise of 0.1% on the previous forecast announced in Autumn Budget 2017.

Growth is forecast to be 1.3% in 2019, then 1.3% in 2020, 1.4% in 2021, and 1.5% in 2022.

Borrowing
The OBR said it expected public borrowing to be £45.2bn this year – which is about £4.7 billion lower than previously forecast. Borrowing is forecast to be 1.8% of GDP in 2018-19, 1.6% in 2019-20, 1.3% in 2020-21, 1.1% in 2021-22, and 0.9% in 2022-23.

A small current surplus is forecast for 2018-19, meaning that the government would only have to borrow to fund capital investment, and not day-to-day spending.

Debt
According to the OBR, debt is expected to start falling as a share of GDP in 2019/20, a year later than forecast in November. A share of GDP debt is forecast to be 85.6% in 2017-18, 86.5% in 2018-19, 85.1% in 2019-20, 82.1% in 2020-21, 78.3% in 2021-22, and 77.9% in 2021-22

Spending
Hammond said he would increase public spending and investment if public finances continue on this improved path.

Plastic waste
Hammond announced that there is a need to explore how changes to the tax system or charges could be used to reduce the amount of plastic waste. Also, there is a need to explore how the tax system could help to drive technological and behavioural change.

The government committed £20m of funds for the purpose of reducing the amount of single-use plastics waste by reducing unnecessary production, increasing reuse, and improving recycling.

Small businesses
The Chancellor announced at Spring Statement 2018 that the next revaluation of business rates would be brought forward from 2022 to 2021, so that ratepayers can benefit from three-year revaluations at the earliest point.

The government will launch a Call for Evidence in order to help the UK’s least productive businesses catch-up with the most productive ones and to eliminate late payments to small businesses.

Tax
The government will consult on a new VAT collection mechanism for online sales, to ensure the VAT paid by consumers reaches the Treasury. A new consultation seeks to determine steps that could be undertaken to allow VAT to be extracted from overseas sellers.

The government is also concerned that the current nature of the VAT registration threshold acts as a disincentive for small businesses to expand and improve productivity.

Northern Ireland tourism
There are particular concerns about the impact of lower VAT rates and air passenger duty (APD) on tourism in the Republic of Ireland.

The government is seeking evidence that will help to understand the significance of any impact of VAT and APD on tourism in Northern Ireland, or showing how VAT or APD might be used to support the growing success of tourism in Northern Ireland.

Skills and Digital connectivity
Hammond allocated the first wave of funding to help roll out high-speed broadband to local areas, as part of the £190m local full fibre challenge fund. About £95m were allocated to 13 areas across the UK.

The government recognized the importance of ensuring that people have the skills necessary to seize the opportunities ahead in the changing economy. Therefore, the government committed over £500m for T-levels and £50m to help employers roll out placements for T-level students. From April £50 million will be available to help employers prepare for the rollout of T-Level work placements.

The chancellor has also allocated £80m to support small businesses engaging apprenticeships.

Housing
The chancellor has expressed the commitment to tackle the challenges in UK housing market and, with an investment programme of £44 billion, to raise housing supply to 300,000 a year by the mid-2020s.

The government has just reached a deal with the West Midlands to deliver 215,000 new homes by 2030-31, with the help of a £100m grant from the Land Remediation Fund.

The size of the Housing Growth Partnership, which provides financial support for small house builders, will be more than doubled to £220m, providing additional finance for small builders.

London will receive an additional £1.7 billion to deliver a further 26,000 affordable homes, including homes for social rent, taking total affordable housing delivery in London to over 116,000 by the end of 2021-22.

Role of cash and digital payments
As more people choose digital payments over cash, the government is seeking consultation on how to ensure that cash remains accessible to those who need to pay in cash, while preventing the use of cash for tax evasion and money laundering.

Therefore, the government will
 review and analyse large cash transactions and determine why these are used. One strategy implemented by some other countries is the limitation of these transactions; this will be assessed, and the approach may be implemented by the Government.

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