The Autumn Budget had a few surprises. How did it compare to the rumours?
Chancellor of the Exchequer Philip Hammond delivered his first Autumn Budget at 12.30pm today (22 November).
Yes, it was his first. It may feel like the Budget happens every few months just recently, but now the whole spending announcement has been moved to November, with the Autumn Statement scrapped.
There will now be a Spring Statement, but it will be a much less significant event (in theory at least – six months is a long time in politics and even longer in economics).
As we’ve already had a Spring Budget this year, it’s unlikely that there will be too many major changes. There were rumours about what the Chancellor has planned. How did they stack up with the speech on the day?
Housing
The Evening Standard reports that the Chancellor could scrap Stamp Duty for first-time buyers as part of his plan to win back younger voters and promote ‘intergenerational fairness’.
According to the Land Registry, the average price of a property for first-time buyers in London is £428,546, which means handing over £11,427 in Stamp Duty. Use our Stamp Duty calculator guide to find out what you’ll pay.
The Chancellor is also set to give a £10 billion boost to the Help to Buy scheme.
Time will tell whether that proves successful, but as our writer explains here, we don't think it's a particularly clever move.
Likelihood rating: High
While there have been no ‘official’ leaks, the Chancellor will be keen to show younger voters that he is helping them and a Stamp Duty holiday for new buyers could do just that.
Housebuilding
It’s becoming apparent to pretty much everyone that tinkering with tax rules or funding Help To Buy won’t solve the housing crisis on its own.
No, the Government recognises that it needs to deliver more new homes and now Hammond has pledged that 300,000 new homes will be built a year.
It’s a likely vote winner among younger Brits but we don’t have the details yet, including whether any will be affordable housing or social housing.
Communities secretary Sajid Javid has called on him to dedicate £50 billion to housing.
Likelihood rating: High
Well, Hammond may not announce £50 billion on a new house building strategy but he’s been dropping a lot of hints that homebuilding will feature prominently in this Budget.
Fuel Duty
Recent Budgets have typically left Fuel Duty alone but a swirl of rumours suggest that diesel drivers face a hike, potentially to pay for a cut for petrol car owners.
The Telegraph reports that Hammond is keen to be seen as an environmentally-minded Chancellor and so is considering a number of options including hiking costs for existing diesel drivers rather than only on new models.
It could be particularly bad news for motorists who already face rising prices at the pump.
Likelihood rating: High
It is very likely that some action will be taken that penalises diesel drivers. The Treasury has explicitly commented: “The Government’s clean air strategy had stated that it would tax new diesel cars differently."
However, whether the Chancellor chooses to target existing diesels as well remains to be seen. It risks being unpopular but the clean air strategy could be seen as even more important.
Pensions
Rumours suggest that the Chancellor is plotting a raid on older workers to fund tax breaks for younger people.
The Telegraph reports that Hammond wants to ‘restack the deck for the next generation’.
Dubbed the "tax on age", the plan could see pension tax relief cut for older workers to fund a reduction in National Insurance Contributions for workers in their 20s and 30s.
Nigel Green, CEO of deVere Group, an independent financial services firm, reckons the rumour has legs.
He said: “Unfortunately, this misguided measure seems like it is almost a certainty as the Government looks to raise revenue in a slowing economy.
“Following a less-than-desirable election, the Treasury will not be keen to increase VAT or income tax. Instead, they can be expected to go for pensions. This attack on people’s retirement nest eggs demonstrates once again that the British Government, which needs to bolster its coffers, views people’s retirement savings as easy, low-hanging fruit to be plundered.”
Likelihood rating: Low
Time will tell but this move seems awfully brave for a Chancellor whose Government has only a precarious hold on power.
Much of the press has already attacked any move towards a ‘tax on age’ and Hammond will surely remember the bruising the Conservatives took during the election campaign over plans to increase the amount older people needing care would pay.
Driverless cars
The Chancellor says that there will be driverless cars on our roads by 2021 but that’s something that requires spending to ensure the infrastructure is ready.
It’s been pretty widely discussed ahead of the Budget that the Treasury is planning to spend £75 million supporting artificial intelligence, £400 million on electric car charge points and £100 million to encourage the purchase of clean fuel cars.
Likelihood rating: High
This is something Hammond has been fairly openly discussing and he’s even been filmed going for a ride in a driverless car. There’s little doubt that the Budget will include some spending in this area.
Universal Credit U-turn
Following intense public and political pressure it’s been widely speculated that the Government is going to be forced to cut the six-week initial waiting time for Universal Credit to a more manageable four weeks.
That might be something that Hammond chooses to include in this week’s Budget.
Likelihood rating: Medium
While the Budget might be the obvious place to make such an announcement, it risks being seen as a defeat for the Government.
Hammond may not want the headlines to focus on that U-turn instead of his other announcements, so there are no guarantees it will be included in this week’s speech to Parliament.
Rail travel
A new 'Millenial Railcard' for travellers under the age of 32 is set to be announced in the Budget. This will bag them a third off rail travel for a £30 annual fee.
Hammond reckons that the scheme will help 4.5 million people from spring next year. However, its powers are somewhat limited. It doesn't save any money on season tickets and can only be used before 10am if tickets cost at least £12.
Likelihood rating: Almost certain
Student loans
In a further move to win over younger voters, we are expecting to see a shake-up of student loans.
Speaking at the Conservative Party Conference last month, the Prime Minister pledged to freeze tuition fees at £9,250 and increase the repayment threshold from £21,000 to £25,000.
The Sunday Times reports that Hammond might also force universities to charge differently depending on a course’s employment rate.
Likelihood rating: High
This may well look like low-hanging fruit to a Chancellor who needs to show student voters that he is on their side. Expect a freeze rather than a cut; this is not a Budget that has much room for major giveaways.
Investing
Following major changes to pension allowances and buy-to-let mortgage interest relief, tax consultants RSM predict that the Enterprise Investment Scheme (EIS) could be hit next.
The EIS provides tax relief worth 30% for investments in high-risk companies plus Capital Gains Tax exemption on disposal of the shares after a set period.
RSM says the EIS has been a useful source of finance for start-up companies since its introduction in 1994, enabling investments of £15.9 billion in around 26,000 companies. But many view the EIS as a way for the wealthy to avoid paying up to £300,000 of tax.
The scheme, along with its younger sister Seed Enterprise Investment Scheme (SEIS), has been put under review this year so it’s possible the Budget could set out changes.
RSM predicts this could mean cutting the relief from 30% to 20% and increasing the period EIS shares have to be held.
Likelihood rating: Medium
Recent governments have not shied away from cutting tax relief so the question now is whether Hammond would see this as a step too far that alienates the core Conservative vote or as the next logical move.
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Single-use plastic tax
Hammond is expected to announce a crackdown on single-use plastics which could include bubble wrap, takeaway food boxes and disposable coffee cups.
The Treasury is set to launch a call for evidence in relation to single-use plastics in the new year and will conside a consultation by the environment department on a deposit return scheme for drinks containers.
Martin Kersh, executive director of the Foodservice Packaging Association, said: “The UK’s waste management system has given the public one of the best kerbside waste collections systems in the world but at the time it was developed the public consumed very little food and drink on the move. This has changed dramatically over the last 20 years and we now have an imbalance in our waste management strategy which needs to be urgently addressed.”
Likelihood rating: High
Tax avoidance
Following an outcry over the latest tax avoidance scandal, the Paradise Papers, there have been extensive calls for a crackdown on tax avoidance.
The leaked documents, most of which came from just one offshore finance firm, sparked debate about how high-net-worth individuals shield themselves from taxes.
It’s been widely speculated that Hammond will see this as a popular move and a way to get some much-needed cash back into the nation’s coffers. Labour has also been vocal on this, so a tightening of the rules could be on the cards.
Reducing the opportunities for major tax avoidance has been a priority for a succession of Conservative chancellors.
The intense public pressure following the Paradise Papers could make some sort of crackdown an obvious move for Hammond.
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