We round-up the top winners and losers in chancellor Philip Hammond's latest Budget.
In what is set to be the last Budget before Britain leaves the European Union, chancellor Philip Hammond agreed to a series of new spending increases, claiming that the era of austerity was nearing an end.
Here we round-up the top winners and losers from the Budget.
Hammond announced he would push on with raising the basic tax rate threshold, despite calls for him to abandon the Tory manifesto commitment.
The basic rate was raised to £11,850 in April. That will now be boosted to £12,500. At the same time, the higher rate will go up from £46,350 to £50,000. Raising these tax thresholds is an effective tax cut.
But there is a slight sting in the tail for pension savers, as this will result in previously higher-rate taxpayers slipping into the basic rate tax bracket.
As a consequence, the tax relief they receive when putting money into a pension will be halved from 40% to 20%.
For years economists have bemoaned the snail like pace of productivity growth in the UK, often linking it to equally slow wage growth. The chancellor claims that through capital investment, which will total 2.2% of GDP over the next five years, the slowdown in productivity growth will be reversed.
Hammond announced the largest ever roads investment package, confirming just under £30 billion would be used to upgrade the UK’s roads. Alongside building new roads, the money will be used to fix and upgrade existing routes.
The government has also set aside £90 million for the creation of ‘future mobility zones,’ within which new transport modes, services, and digital payments and ticketing will be trialed.
The chancellor also hopes to boost productivity by rolling out full fibre broadband nationwide.
As Hammond has previously noted: "For the 21st century broadband is to roads in the 20th, railways in the 19th, and canals in the 18th. It's the network infrastructure that will make this country work."
Over the past decade Britain’s high street retailers have seen the rise of e-commerce, among other headwinds, decrease sales and footfall.
In a bid to reverse this trend, the chancellor announced that just under half a million small retailers will be subject to business rates relief.
The chancellor also announced the creation of £675 million "future high streets fund" dedicated to improving high streets and boosting foot fall.
Pension tax relief
Despite speculation that the chancellor would tinker with pension tax relief, a better-than-expected revenue windfall meant Hammond has left it untouched for now.
However, says Steve Webb, director of policy at Royal London, this is likely to be temporary. He notes: “Having described the system as ‘eye-wateringly expensive’ it is likely to be only a matter of time before this Chancellor – or his successor – comes back for more. Today’s respite for pension tax relief is likely to be only temporary.”
Similarly, Jason Hollands of Tilney Bestinvest says: “With a potential Labour government in the wings no one should take the long-term continuity of such generous reliefs for granted because of today’s stay of execution.”
The chancellor has announced a cut to stamp duty for first-time buyers of shared-ownership homes worth up to £500,000. The measure is restrospective, so anyone who bought a house since the last Budget will benefit. A further £500 million is also being made available for the Housing Infrastructure Fund, to help build 650,000 homes.
During his speech, which took over an hour to deliver, he stated: “We can’t resolve the productivity challenge or delivery the high standard of living the British people deserve without fixing our housing market.”
Big tech companies
In the absence of any international agreement, the chancellor said the UK would push ahead with its own tax on technology giants deemed to be paying less than their fair share of revenue.
Hammond said: “It is clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without playing tax here.”
The tax, says Hammond, would only target large established tech with global revenues of at least £500 million and is expected to rise around £400 million per year for the government.
Hammond claims that the tax won’t be felt by consumers, although there is always the possibility that tech companies will move to pass on the extra taxes they need to pay to consumers in the form of levying higher prices.
The chancellor announced a further £650 million of grant funding for social care for English authorities from next April.
However, says Steven Cameron, pensions director at Aegon, while this increase in spending is welcome, it doesn’t go far enough in addressing funding for social care. He notes: “We need a long-term sustainable structure for this growing and ongoing issue.
He adds the amount is “little more than a temporary, sticking-plaster measure”. Cameron has called on the government to come up with long-term proposals to tackle the huge issue of funding social care costs.
He adds: “Our ageing population urgently needs a stable agreement on what the state will pay and how much individuals will have to fund themselves, based on their wealth, and crucially with an overall upper limit.”
The chancellor also announced that he would not be signing any more Public Finance Initiative (PFI) deals.
However, as Rupert Harrison, multi-asset strategies at BlackRock, notes, there are no PFI schemes in the pipeline.
It has been widely accepted that PFI contracts have failed to deliver what they promised: a more efficient use of public money. PFI projects, however have proven more costly. The Treasury Committee recently estimated that one hospital funded via PFI had cost 70% more to construct.
Hammond’s announcement was an acceptance of PFIs' failure and demise.