Budget 2017: Overview and Analysis

By : PPA Communications

Owen Meredith, PPA Head of Public Affairs, reports on the key fiscal takeaways from Chancellor Philip Hammond's 2017 Spring Budget.

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Philip Hammond took to the dispatch box in positive mood to deliver his first Budget Statement in the House of Commons this afternoon (March 8).

The Chancellor was determined to deliver an “upbeat” message about the future of the UK economy and set a course for a “stronger, fairer, better Britain".

His headline measures deliver an extra £2bn of funding for social care over the next three years (with £1bn from next April); provide a package of support to soften the impact of April’s Business Rate revaluation; and make changes to National Insurance that are designed to put the self-employed on an equal footing with employees.

With no mention of the Creative Industries or publishing, the Budget provided was, as expected, a ‘steady-as-she-goes’ affair, with the Office for Budget Responsibility (OBR) upgrading the growth forecast for this year but maintaining the overall outlook.

As the Chancellor said: "The OBR forecasts the level of GDP in 2021 to be broadly the same as at Autumn Statement. However, the path by which we get there has changed.”

Within that changed pathway, the OBR handed the Chancellor a £16.5bn cheque for this financial year, with higher growth and better-than-expected income, corporation, and capital gains tax revenues in January giving the Treasury a surprise record surplus.

That bonus is due in part to one-off accounting factors which mean that although borrowing falls from 3.8% of GDP last year to 2.6% this year, it will rise next year to leave the deficit at 2.9% before falling again to 1.9%, 1.0%, and 0.9% in subsequent years, reaching 0.7% in 2021-22.

The Chancellor’s new fiscal rule is for the deficit to be maintained below a ceiling of 2%, giving him potential wiggle room in later years of the forecast – what some have described as a £60bn Brexit war chest. This is, of course, all in the context of national debt rising to 86.6% this year, before peaking at 88.8% of GDP next year: eight years after the financial crash and following six years of ‘austerity’ the national debt is still growing.

At 2.0%, growth will be higher next year than previously expected, but it has been downgraded slightly for future years before reaching 2.0% again in 2021. There were no adjustments to previous announcements of ‘sin taxes and duties’, with planned rising coming in as expected.

The Budget confirmed the Personal Allowance will rise to £11,500 for individuals from April, while the higher rate tax threshold rises to £45,000. The Chancellor reaffirmed the Conservative manifesto commitment to a £12,500 personal allowance by 2020, while increasing the National Living Wage to £7.50 from next month.

Corporation Tax will fall as planned from April this year down to 19% and then to 17% in 2020, while much-anticipated adjustments to business rates were somewhat of a damp squib, with little change (unless you run a pub) for those hardest hit by the revaluation. Local Authorities have been granted a £300m fund to help those affected most, whilst the Chancellor committed to change the revaluation process before the next cycle and reform business taxation in the medium term to capture the digital economy that does not “rely on bricks and mortar”.

Changes to self-employment taxes, notably Class 4 national insurance, will increase rates from next April – breaking a manifesto promise not to touch Income Tax, VAT or NI – aiming to end tax advantages of self-employment. Directors Dividend allowance will also be cut from £5,000 to £2,000 from April 2018 to discourage individuals from incorporating themselves as sole enterprises for tax purposes.

A final change that could have knock on impact on publishers are the pre-trailed changes to consumer contracts, designed to prevent services that sign up new users on trial periods then automatically rolling over into a full-price service. 

We’ll be taking a closer look at these changes and how they might impact magazine and content subscription offers in more detail.

More Information

You can access the full Spring Budget 2017 here.

If you have any questions or would like to discuss any of the points raised here contact PPA Head of Public Affairs Owen Meredith.

Twitter Moment: Spring Budget 2017

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