Budget speeches can sometimes be taken with a pinch of salt. After all, many policies and ground-breaking initiatives which are announced never see the light of day, or are watered down from the initial glory they are coated in. Yet Wednesday’s address in the House of Commons seemed to carry an extra weight of importance, given that we currently find ourselves on the cusp of departing the EU, and the inevitable economic uncertainty that such a process will entail.
As is the case with any Budget speech, there are many ways to interpret the key points, and some people will be placated while others may be outraged. It is a difficult job trying to please everyone, particularly against the backdrop of a challenging economic climate and spiralling national debt. But can Hammond’s first (and final) Spring Budget be considered a success?
Here are the most notable takeaways from his soiree at the despatch box on Wednesday with regard to personal finance:
National Insurance hikes
The most controversial announcement by some distance was the news that Class 4 NI contributions for the self employed would be rising by two per cent by April 2019, bringing it just one per cent shy of the amount paid by those who are on PAYE. Hammond justified it by citing the fact that the self-employed now have equal access to things like the state pension, but many will see it as a tax on aspiration and, indirectly, job creation – not to mention that it effectively breaks a pledge from the 2015 Tory manifesto.
Tax-free dividend allowance cut
In a further blow to the self-employed, not to mention pensioners, shareholders and directors of small firms, the Chancellor confirmed that the tax-free dividend allowance would be slashed from £5,000 to £2,000 next April. It’s a cruel blow to those in retirement who depend upon such payments to fund their golden years. That said, there was at least the crumb of comfort in the fact that the ISA allowance is increasing, and with new types of ISA making the market more appealing, there is scope for a boost to tax-free returns.
Business rates
There had been a great deal of controversy surrounding business rates in the build-up to the Budget, with outcry across all wings of the media at the largely random reasoning for increases which had the potential to cripple small businesses. Many expected these to be scrapped or delayed, but Hammond instead took the approach of cushioning the blow, with £300m set aside for those worst affected as part of a collective £435m package. There was also some good news for pubs with a rateable value below £100,000, who will get a discount of £1,000.
A new savings bond
The NS&I savings bond concept had been broached at the Autumn Statement, and it was confirmed that it will be in circulation for a 12-month period. As expected, the rate on offer will be 2.2 per cent, with the money tied up for a three-year period. Yet with inflation forecasts for the year having soared towards 3 per cent for 2017, it is no longer as attractive a proposition as it was in November – albeit that it still beats any other offers from banks or building societies currently.
Other points of interest
There were other bits of good news. The public finances appear to be in better fettle than previously predicted, with borrowing coming in £16.4bn lower than forecast. At individual level, there was also confirmation that the personal tax-free allowance will indeed be rising to £11,500, and £12,500 by 2020. There was also money dedicated to social care, infrastructure, technology and education, although insurance premiums, cigarettes and alcohol are braced for increases in duty.
On the whole, it’s fair to say that Hammond’s debut at the Spring Budget has been met with mixed reviews at best, and certainly his ‘attack’ on the self-employed has courted plenty of controversy. ‘Spreadsheet Phil’ exuded more charisma than expected, and painted a somewhat upbeat picture of the state of our economy. But, all things considered, Spring Budget 2017 is a day he will want to forget sooner rather than later.
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