Good With Money gives its opinion on the Budget, so you don’t have to come up with one….
Besides making 4 jokes, mostly at the expense of Europeans, proposing to save a dilapidated country house in the North, mentioning infrastructure at least 12 times, promising to abolish the Autumn Statement, and fabricating £23bn for spending out of thin air, what did Philip Hammond say in yesterday’s Autumn Statement worth noting?
Suspend the cynicism momentarily, there’s some hope in amongst the usual taking-with-one-hand-giving-less-with-the-other carousel of announcements. But what should you think about all these measures?
Here are his main plans, a rating out of 5 for goodness and a bit of explanation of what the Dickens it all means:
Government to support construction of 100,000 new homes and extend help to buy with £2.3bn of funding and a white paper with details of how it will happen. 100,000 after years of not-enough is still not really enough. You can’t force housebuilders to dig, after all, and at the moment, with all the economic uncertainty, they aren’t sure if doing so will be profitable for them.
Robin Fieth, chief executive of the Building Societies Association, said: “BSA research shows that the main reason why people oppose new houses being built in their area is because of concerns about increased pressure on local infrastructure. This fund should contribute to alleviating these concerns and support an increase in housebuilding. We look forward to seeing the detail in the upcoming Housing White Paper.”
National Productivity Investment Fund
A whopping £23 billion of borrowing for road, rail and housing. If it’s green, it will be good. And if we are going to survive Brexit, we will need it. Investors in infrastructure (just please make it green) stand to benefit.
Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC), said: “Infrastructure has been the fastest growing investment company sector of the last decade, with the closed ended structure the ideal home for investing in long-term infrastructure projects. This is because managers have a stable pot of money and are crucially not affected by investor inflows and outflows. Continuing this trend has been the emergence of the Renewable Energy Infrastructure sector after a spate of launches in 2013 and 2014.”
Dr Doug Parr, chief scientist at Greenpeace, said: “With a smidgen of innovation and inspiration, the new national productivity investment fund should back clean, modern and home grown technologies. Other countries are already doing this and are forging ahead in the race to dominate the booming low carbon economy. They are reaping the rewards from new jobs, increased exports and cleaner air. The government is currently holding back the very UK businesses from offshore wind to battery storage companies which should be in pole position to win this race.”
Bevis Watts, managing director of Triodos Bank, said: “The infrastructure spending plans are a missed opportunity to pivot our economy towards more sustainable alternatives. Rather than boosting old, carbon-based sectors and systems, what we really need is a strategy that looks to the future and significantly invests in green infrastructure such as sustainable transport, renewable energy and sustainable food production. If we are going to ‘future-proof’ our economy and meet our obligations to the Paris Agreement, we need to start investing in the sustainable technologies and the systems of the future.”
Rating: (it’s not a 4 because we are dubious about the massive borrowing bit and there are doubts over whether it will be green).
Support for clean vehicles
The Chancellor announced £390 million funding for low carbon transport. Clearly, a good thing.
Dr Doug Parr, chief scientist at Greenpeace, said: “The further support for Electric Vehicles and tax break for charging points demonstrates that the government is thinking about a transition to clean vehicles . While it’s a step in the right direction, its importance to recognise that meeting climate targets agreed in Paris and protecting our health from air pollution, all new cars need to be electric by 2030. Any future investments in clean technology and transport systems need to match this ambition.”
Carbon price floor frozen
Hammond confirmed that the UK’s carbon price floor will be capped through to 2020. Doug Parr, chief scientist for Greenpeace, who said: “It is good news the Government has heeded the call to provide certainty and stability for investors and business.
“This is a policy that needs to stay in place until the historic coal phaseout is locked in and renewables plus battery storage and interconnectors are lined up to fill the gap in the long run.”
Social Investment Tax Relief increase of maximum investment from £300,000 to £1.5 million
It’s not going directly in our pockets, but it will benefit society generally. Ben Faulkner, of EQ Investors explains: “Finally a significant step forward has been made with plans in place to increase investments into an SITR-qualifying social enterprise to £1.5m from April 2017. SITR was introduced in April 2014 and allows individual investors 30% tax relief on loans or equity investment made into social enterprises and charities. Previously, investment was limited to around the £300,000 mark.”
Removal of tax relief on salary sacrifice perks, such as mobile phones and gym membership
So-called “salary sacrifice” schemes give employees benefits such as private health care, dental cover, mobile phones and childcare costs tax-free. You still pay for them out of your salary, but then pay tax after the cost of the benefit has been deducted, meaning a reduced tax bill. After April next year, only childcare, pensions, cycle schemes and green vehicles will remain exempt from tax. If employees choose to keep things like their mobile phone and private health cover, they will pay tax on the full gross amount before the cost of these perks is deducted, meaning they are not really perks any more.
A negative social consequence as it will deny things like gym membership and private health cover to people who would not otherwise be able to afford them.
Raising personal allowance
The threshold at which an earner starts to pay income tax will rise from £11,000 to £11,500 in April.
On paper, this is a helpful measure to low earners, but with the removal of tax breaks elsewhere, as well as the increase in insurance premium tax (see below), the difference it will make in real terms is negligible.
Increase in insurance premium tax
The favourite stealth tax of George Osborne before him, for no reason at all, Philip Hammond has also decided to increase what is already an absurd tax from 10% to 12% of the cost of a premium. Since all of us are required by law to take out car insurance if we drive and buildings insurance if we own a property, this is unavoidable. Health insurers also pointed out that the unfairness of a tax that penalises those who currently pay for vital private health treatment that they would probably not get at all on the NHS, such as certain chemotherapy drugs.
Alex Perry, chief executive of Bupa Insurance, said: “This makes no sense. The Government has announced three rises in less than two years on what is a completely misguided tax when it comes to health insurance. It punishes those who take responsibility for protecting their health. Government should support, rather than penalise those who are using health insurance, which relieves the burden on a struggling NHS. Health insurance should be zero-rated like it is in many other countries, and like life or critical illness insurance in the UK.”
Abolishing letting agency fees to tenants
Got a lot of attention before the Autumn Statement announcement because it was the most populist winner-over of Generation Rent, and indeed it will benefit renters to the tune of about £150 a year. But commentators pointed out that letting agents will simply increase their fees to landlords instead, who will naturally pass the cost on in the form of higher rent to tenants. You lose some…. you lose some.
Minimum living wage to rise from £7.20 to £7.50 next April
Clearly, this is a win, if employers are really paying it. NB. It is not the same as the minimum wage – paying the living wage is voluntary, although all employers now have to pay the minimum living wage for employees over 21.
NS&I bond that will pay 2.2 per cent a year for 3 years
The only concession to those most concerned with poor returns on their savings (ie. mostly the over 60s), was a special savings bond that will pay a marginally higher rate than is currently available. It’s a fixed rate bond, though, which, in a high inflation environment, is hardly attractive. An inflation-linked product would have been a proper winner.