Maitland Political Spring Statement Overview
Good afternoon all,
In an unusually upbeat mood this afternoon, the Chancellor announced at the Spring Statement that the UK economy was continuing to grow—predicted to rise to 1.5% in 2018—citing growth in the manufacturing sector and an increase in employment. The Chancellor claimed that manufacturing has had the longest period of expansion in 50 years, whilst employment has increased 3 million since 2010 alongside an unemployment rate close to a 40-year low. Meanwhile, the Office for Budget Responsibility expects inflation to fall back to target in the next 12 months leading to real growth in incomes. In 2019, he noted that GDP growth is expected to, however, fall to 1.3%, and remain at 1.3% in 2020, before increasing to 1.4% in 2021 and 1.5% in 2022.
Debt and borrowing
The Chancellor stated that the OBR had further revised down debt and borrowing. By 2018-19, he believes there will be a small current account surplus which would mean borrowing only for capital investment. This represents the first sustained fall in debt in 17 years, he said, which he described as a “turning point” in the UK’s recovery from the financial crisis. He stressed that he would be continuing to implement a “balanced approach” to the public finances but also reiterated his commitments to extra spending—for the NHS in particular.
Hammond confirmed he would set an overall path for public spending from 2020 and beyond, with a detailed spending review planned for 2019 to decide how to allocate funding between Departments. He explained that, if the UK’s public finances continued to show improvement in the months ahead, he would have “capacity” to look at increasing public investment in the Autumn Budget.
Nevertheless, he agreed that there was still much to do in terms of backing UK businesses and addressing long-standing productivity challenges. The Chancellor stated that business rates were being reduced, as previously laid out at the Autumn Budget and announced that the next business rates revaluation was being brought forward to 2021. Subsequently, it is due to take place on a triennial basis. Hammond also reiterated the commitment to delivering 3 million apprenticeship starts by 2020, and specifically noted that £80 million would be made available for small businesses get more involved.
Since the Budget, the UK had made “substantial progress” in Brexit negotiations, he argued, and claimed he expects an “important step forward” at the upcoming March European Council. He also announced that the Treasury Chief Secretary would be shortly publishing the departmental allocation of £1.5 billion Brexit preparation funding announced at the Autumn Budget.
Further, he highlighted a number of upcoming consultations and forthcoming policy documents, including the following:
- Corporate tax and the digital economy – an update on the Government’s position paper on the challenges posed by the digital economy for the international corporate tax framework.
- Cash and digital payments in the new economy – a call for evidence looking at the role of cash and digital payments in the new economy.
- Business rates: delivering more frequent revaluations – a summary of responses to a consultation on the implementation of more frequent revaluations of non-domestic properties for business rates purposes, and the announcement that the next revaluation will be brought forward by one year to 2021.
- Self-funded training – a consultation on improving the way the tax system supports self-funded training by employees and the self-employed.
- VAT, Air Passenger Duty and tourism in Northern Ireland – a call for evidence that will look at the impact of VAT and Air Passenger Duty on tourism in Northern Ireland.
- Improving business productivity – BEIS will publish a call for evidence to understand how best we can help the UK’s least productive businesses to learn from, and catch-up with, the most productive.
- Prompt payment by government suppliers – the Cabinet Office will launch a consultation on making a supplier’s approach to payments to its own suppliers part of the selection process for larger government contracts.
- Single-use plastics waste – a call for evidence seeking views on how the tax system or charges could reduce the amount of single-use plastics waste, to protect the environment.
- Off-payroll working – a consultation on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reform.
- Tackling Corporate Insolvency and phoenixism risks – a discussion document exploring further means for tackling the small minority who deliberately abuse the insolvency regime in trying to avoid or evade their tax liabilities, including through the use of phoenixism.
- Profit fragmentation – a consultation on the best way to prevent UK traders or professionals from avoiding UK tax by arranging for UK trading income to be transferred to unrelated foreign entities.
- Short term business visitors – a consultation on how to simplify the tax treatment of short-term business visitors from the foreign branch of a UK company, to ensure the UK is an attractive location to headquarter a business.
- Large business compliance – a response to the consultation into HMRC’s process for risk-profiling large businesses, to improve HMRC’s Business Risk Review process, reflecting and further enhancing the shift in large business compliance behaviours.