Spring Statement 2018. Main points
On the 13th of March the Chancellor has presented his first Spring Statement to Parliament.
25-minute statement had no major tax or spending announcements as predicted, but a number of new consultations.
The Spring Statement:
- gives an update on the overall health of the economy and the Office for Budget Responsibility (OBR) forecasts
- gives an update on progress made since Autumn Budget 2017
- invites people and businesses to give views on changes the government is considering
Economy and fiscal forecasts
The economy continues to grow, continues to create jobs and continues to beat expectations.
The economy has grown for five consecutive years, and exceeded expectations in 2017.
The OBR has increased their forecast for growth this year.
Manufacturing has had the longest period of expansion in 50 years.
Employment has increased by 3 million since 2010, which is the equivalent of 1,000 people finding work every day. The unemployment rate is close to a 40-year low. There is also a joint record number of women in work – 15.1 million. The OBR predict there will be over 500,000 more people in work by 2022.
The OBR expect inflation to fall over the next 12 months, and wages to rise faster than prices over the next five years.
The UK’s public finances have reached a turning point, with borrowing down and the first sustained fall in debt for 17 years.
Borrowing has fallen by three-quarters since 2010. In 2009-10 the UK borrowed £1 in every £4 that was spent. The OBR expect that we will borrow £1 in every £18 this year.
Debt will start falling as a share of GDP next year.
Even so, the UK’s debt remains too high, equal to around £65,000 per household. This makes the economy vulnerable to future shocks. It also imposes a significant burden on future generations.
The cost of debt interest payments is around £50 billion each year – more than the amount spent on the police and armed forces combined.
The government has a balanced approach to get debt falling while funding our vital public services, keeping taxes low, and investing in Britain’s future.
Progress since Autumn Budget 2017
Over £1.5 billion allocated to departments and devolved administrations to prepare for Brexit in 2018-19
It is part of the £3 billion to be spent over two years announced at Autumn Budget 2017.
An ambitious plan to tackle the UK’s housing challenge and build the homes the country needs.
To help people getting onto the housing ladder, stamp duty for first-time buyers of homes under £300,000 was abolished at Autumn Budget 2017, with buyers of properties up to £500,000 benefitting from the change. An estimated 60,000 first-time buyers have benefitted so far.
Helping households with the cost of living
In April 2018 the National Living Wage will rise to £7.83, worth £600 extra a year for a full-time worker. National Minimum Wage rates for under 25s and apprentices will also rise – the largest increase in youth rates in 10 years. Over 2 million people are expected to benefit from April’s increases.
The tax-free personal allowance – the amount you earn before you start paying income tax – will rise to £11,850 from April 2018. This means that in 2018-19, a typical taxpayer will pay £1,075 less income tax than in 2010-11.
Helping businesses by bringing forward the next business rates revaluation to 2021
At Autumn Budget 2017 it was announced that business rates revaluations will take place every three years, rather than every five years, following the next revaluation. This makes bills more accurately reflect the current rental value of properties.
Spring Statement 2018 announces that the next revaluation, currently due in 2022, will be brought forward to 2021. This will mean businesses can benefit from the change to three-year revaluations earlier, with the first taking place in 2024.
A number of consultations were announced, the results of which will be discussed at the end of the year in the Budget. This includes:
- Tax on single-use plastics to reduce waste and environmental effects
- Changes to how multinational digital businesses are taxed in order to curtail tax avoidance
- Discussion on how to increase digital payment uptake whilst reducing cash-based laundering and tax evasion
- Discussing creating a tax-relief for people who are self-employed or employed and paying for their own training. This would be aimed at employees who are not refunded by work for training courses and self-employed people who train to attain new skills - both of which are currently provided the benefit of tax relief.