The Budget stage this year was set for self-proclaimed ‘Fiscal Phil’ to show us what he could do. Theresa May had declared at Conservative Party Conference that ‘austerity is over’ and the OBR also gave the Chancellor a bit of leeway by indicating that borrowing was down by £11.6bn. The question was what would he spend our hard-earned taxpayer money on?

Many of the headline announcements, such as £20.5bn extra funding for the NHS and the removal of the local authority cap on borrowing were pre-announced. However, that didn’t stop us seeing a few surprises on the day. For instance, many expected the Chancellor to abandon plans for an increase in the Personal Allowance and the higher rate band threshold. However, to much surprise, he not only delivered on these commitments, brought them forward a year; and indicated that they would be raised in line with inflation.

The Chancellor also sent some of the right signals for infrastructure and housing, with £1.6bn extra for the Industrial Strategy and a further £500m for the Housing Infrastructure Fund to unlock a further 650,000 new homes.  He also announced Stamp Duty relief for first-time buyers, extending it to shared ownership homes worth up to £500,000.

This all begs the question, how is he going balance the books? Yes, there was a Digital Services Tax on ‘tech giants’, but this is only due to raise £400m (by year 4). However, it seems that with the Brexit talks looming and the threat of the DUP and Brexiteers to vote against the Budget, Fiscal Phil has opted to delay the hard choices until the spending review in 2019.

The Chancellor has bought the Tories a bit of time today, but sooner or later he is going to face a tough choice between spending cuts and tax rises and have to try and sell them to a party without a majority, which is divided more than ever.

Key Announcements

Healthcare

  • NHS funding in England to increase by £20.5bn over next five years
  • £650m additional grant funding for English authorities to help tackle social care funding gap

Personal taxation

  • 20% lower band of tax increased to £12,500
  • 40% higher band of tax increased to £50,000
  • National Living Wage increase from £7.83 to £8.21

Businesses

  • Digital Services Tax on “tech giants” making £400m a year by 2023/24
  • Small businesses will have their business rates cut by a third (for two years), saving up to £8,000 per year
  • £675m to revive high streets
  • VAT threshold for small businesses to stay unchanged for two years

Consumer

  • Freeze in fuel duty for ninth year running
  • Beer, cider and spirits duties frozen for next year

Housing

  • A further £500m for the Housing Infrastructure Fund, to unlock a further 650,000 homes
  • Cut to stamp duty for shared-ownership homes worth up to £500,000
  • Strategic partnership with 9 housing associations to deliver 13,000 homes
  • Scrapped revenue budget cap on local authority borrowing for council housing
  • £1bn from the British Business Bank for SME builders

Transport & Infrastructure

  • £1.6bn in new investments to support Government’s Industrial Strategy
  • A £30bn package for England’s roads, including repairs to motorways and potholes.
  • Abolishing Private Finance Initiatives for future projects
  • £420m for councils for road repairs in 2018-19
  • Increasing the Transforming Cities Fund to £2.4bn
  • £37m funding for Northern Powerhouse Rail

Environment

  • £60m to plant more trees across UK
  • New tax on the manufacture and import of plastic packaging

Defence

  • Additional £1bn of funding for Ministry of Defence 2018-19
  • £10m to Armed Forces Covenant Trust
  • £10m for air ambulance charities

Education

  • £400m in-year bonus to help schools buy equipment they need
  • Smaller firms contributions to apprenticeships to be reduced from 10% to 5% (a £695m package of support for apprenticeships)

Brexit

  • Funding for preparations is up to £2bn

Economic indicators

  • £11.6bn of borrowing less this year
  • GDP Growth in 2018: 1.3%
  • Unemployment Forecast 2019: 3.7%
  • Employment Forecast 2023: 32.2m