Yesterday marked the last major springtime fiscal event from the Government for the foreseeable future as Chancellor Philip Hammond gave his first and final Spring Budget. He announced during the Autumn Statement that he was “not going to make significant changes twice a year just for the sake of it” and from now on the Budget would be held in the Autumn each year to allow scrutiny of any new measures ahead of the end of the financial year in April.

In the media build up it was anticipated to be a “cautious, careful, and continuity” Budget from Spreadsheet Phil – as he is affectionately known – and really this proved largely to be an accurate assessment. Better than expected growth forecasts and tax receipts – due to no negative effects of last June’s Brexit vote appearing as of yet – meant that the Chancellor had much more room for manoeuvre than was envisaged. However, Hammond avoided using this an excuse for a spending binge, and preferred to bank the difference in preparation for possible stormy times ahead. In fact, he also felt the need to increase some taxes…and this is where the trouble started with his own Party.

National Insurance fury – the headline stealer

One relatively minor tax change has resulted in quite substantial fallout from the Budget, with the Chancellor seemingly going back on a pre-election manifesto commitment not to raise National Insurance. Whilst the proposed rise was small (an extra £145m income by 2020), and focused on the self-employed, the issue has blown up in the media big time. Partly it is because the Treasury Ministers are refusing to admit a manifesto commitment has been broken; partly because so many Conservative backbench MPs are against the rise, as they see it as an attack on entrepreneurship; but also because it brings back memories of the mishandling of George Osborne’s so-called ‘pasty tax’ ‘omnishambles budget’ of 2012. That resulted in a humiliating U-turn for the then Chancellor and the media, backbench Conservative MPs, and opposition parties, smell blood. This issue will run for the next few weeks at least.

 

Business Rates

The upcoming rise and revaluation of Business Rates – the first in seven years – has, over the past couple of months, prompted a mass backlash from many that will be affected by the increase, from small independent retailers to the country’s biggest chain and department stores. The Department for Communities and Local Government are working on plans to create a £150 million relief fund – giving close to 100,000 small traders a discount worth up to £1,500 each – to ease the initial impact of the rates rise that in some places has been calculated as a 400 percent increase.

Last November, the Treasury announced a £3.6 billion transitional relief fund and, to head off any more criticism, the Chancellor yesterday promised a further £435 million in additional support for English businesses. This figure includes £300 million going to Local Authorities giving them the ability to allocate “discretionary relief” to alleviate the hit of the revaluation on businesses affected the hardest within their area. Additionally, Public Houses with a rateable value of less than £100,000 will receive a discount of £1,000 for one year from the revaluation introduction, 90% of all Public Houses in England will benefit from this.

The question is, is this enough to stop the protests?

Training and Education

With the Chancellor calling Training and Upskilling a “priority”, and the increasing skills gap, funding for these areas was almost inevitable. On the eve of the budget a Treasury spokesperson said the Government will invest “in young people’s ability to go to a good school, get good qualifications and get the right skills, equipping them for the jobs of tomorrow”. Hammond introduced a series of technical qualifications – dubbed T-Levels – to put technical education on equal footing with academic. These courses would include engineering and manufacturing, business and administration, catering and hospitality, construction and social care. Funding of more than £500 million each year is to be made available for these changes.

Alongside T-Levels, the Government will also extend Further Education Maintenance Loans to those studying within technical sector at institutions such as National Colleges and Institutes of Technology. These loans – much like the ones already available to university students – will also be available to adults wanting to retrain. In a further commitment to retraining and upskilling, a fund of up to £40 million will be spent by 2018-2019 to explore the best practice approach for lifelong learning.

These changes come at a time when the skills deficit in the construction industry is so large that it has been referred to as more of a gulf than a gap. Will they be enough to make a difference?

Health and Social Care

Together with business rates, the biggest issue in the news in the run up to the Budget was Social Care. As it stands right now, the country has been described as being in the midst of an adult social care black hole crisis, with many councils struggling to fund care and over spending in this budget area by millions. Hammond announced an additional £2 billion in spending for Social Care over the next three years, with one billion of that to be spent immediately. Following the strain the NHS was put under last winter, a much needed cash injection of £100 million to fund triage projects in A&E departments is to be made available in the hope that this will go some way to alleviate the anticipated pressure the health system will put under next winter.

However, it is unlikely this cash injection will stop local Councils demanding more money in the future. And many MPs will continue to campaign loudly on the issue: when Philip Hammond announced that the £2 billion in Social Care funding would be spread over three years, cries of despair rang out from the opposition benches in the House of Commons.

 

If the Chancellor can weather the storm over NI contributions – with most of the pressure coming from his own Party’s MPs – this might turn out to be just the dull budget everyone expected. It will give the Chancellor 8 months to prepare for his newly scheduled Autumn Budget, by which time Brexit will probably have been triggered and he and other forecasters might be able to see more clearly what the financial road ahead looks like and take appropriate action. However, as George Osborne learned, minor and even logical changes to the tax system can create a big backlash. A U-turn on NI looks very much on the cards. And we would not rule out more money for Social Care or the NHS being made available before the end of the year. One thing seems sure though: that was no pre-election budget. It seems to rule out an early election this year, unless something drastic happens with the Lords on Brexit.

If you are interested in a more detailed briefing and to hear more about our Public Affairs Practice, please contact David Park (Partner) at david@nudgefactory.co.uk