Philip Hammond, Chancellor of the Exchequer unveiled (probably) the last ever Spring Budget saying “our task today is to take the next steps in preparing Britain for a global future… (a thinly veiled Brexit reference) equip our young people with the skills they need, support our public services and build an economy that works for everyone.” His key message was that economic growth was not an end in itself, and the Government’s aim was to support “ordinary working families” (new buzz-phrase alert Times subscription required)
Despite his reputation as a spreadsheet nerd not a showman, Hammond didn’t pull any political punches, with several bruising (and often mildly amusing) attacks on the Labour opposition within his speech. He talked about striking the right balance between reducing the deficit and investing in our future. He gave the House a lecture on responsible economics and the need to pay off the national debt, describing the Labour Party spending commitments as recklessly irresponsible. “We will not saddle our children with ever increasing debt” he said. Our favourite line of the day was his joke that Jeremy Corbyn was “so far down a black hole even Stephen Hawkings has disowned him.” (Pick your favourite here)
The economic outlook
Quipping at his own expense, Spreadsheet Phil then came to “the spreadsheet bit … [and] asks the house to bear with me as I have a reputation to defend.” He added that the headline statistics on the economy remain positive, with the second-fastest growth rate in the G7 in 2016 and the OBR forecast for 2017 upgrading the economy from 1.4% to 2%. However, GDP was downgraded to 1.6%, 1.7% and 1.9% for the subsequent years rising to 2% in 2021-22. The employment rate is set to grow - with another 630,000 people expected to be employed by 2021 - alongside a continued increase in real wages. ‘Brexit’ was conspicuous by its absence in the speech and only got 3 mentions in the 64 pages of budget documents.
Responding to the Budget is never an easy task given the leader of the opposition has no advance sight of the speech. Jeremy Corbyn’s immediate reply was predictably full of rhetoric which bore little relation to the Budget’s contents. Strong unemployment figures, an uplift in growth for 2018 and lower borrowing costs made his job all the harder. However, all political sides recognise that these impressive looking figures hide problems such as the dramatic rise in food and energy prices – something that Corbyn has focused relentlessly on since he became leader. Close to half of his response was dedicated to the lack of government action to address the drop in wages and living standards, which he compared to the tax cuts for the wealthy and big corporations. Focusing on individual cases of cuts to social care, housing, council funding and other public services, gave decent punch to Corbyn's performance.
Since then Labour have be working hard to delve into the Red Book and get their lines out on the detail of the tricky bits that the Chancellor didn’t mention. They seized on statistics that show real household income is down on previous forecasts and the national minimum wage, which was meant to be £9 p/h by 2020 has been cut to £8.75. Chris Leslie, Labour’s former Shadow Chancellor, was hot of the mark to call out that the Conservative’s had broken a manifesto pledge with changes to National Insurance. As you will have seen from today’s front pages, this is the leading newsline from the budget, and one that Hammond’s Treasury team seemed oddly unprepared for.
Liberal Democrat leader Tim Farron tweeted that, in targeting the self-employed, Theresa May was betraying her pledge to help those just about managing (someone tell him that language is sooo last year). The Liberal Democrats will have been particularly pleased that their expression “omNICshambles” was adopted on twitter and by the Times. The initial Scottish Nationalist response criticised the Chancellor for ignoring the oil and gas sector and failing to mention Brexit.
Yesterday afternoon, our team digested the budget documents in under two hours so our clients didn't have to. If you would be interested in sector specific political news, intelligently filtered to help you sift the signal from the noise, we are here to help.
Want to know what everyone else thought? We've collated a few of the quickest reactions below. If you want to know more about getting your voice heard on budget matters, do get in touch:
- The Office for Budget Responsibility stated that the Government does “not appear to be on track to meet its stated fiscal objective”
- Carolyn Fairbairn, Director General for CBI, called the budget a “breakthrough budget for skills”. She also voiced support from firms that are “wholly committed to the health and wellbeing of their people” as being “pleased to see an increase in spending on social care”
- Stephen Martin, Director General of Institute of Directors, said that “the ‘nothing to see here’ approach” of the Chancellor would only “fly for so long”. He also said that while “business leaders would applaud the long-term focus on improving technical skills and investment”, the business community would have “hoped for much more support in the immediate term”.
- Mike Cherry, National Chairman at the Federation of Small Businesses welcomed “the fact that the Chancellor has listened to the small business-led campaign on business rates” and stated that the “immediate relief is vital in the short term”. However he is calling for “a cross party commission to create a simple, fair tax system for a modern economy”
- British Medical Association’s response is here, Dr Mark Porter said “The chancellor’s announcement of £325m of funding for some STPs is unlikely to go far enough, and we know that the plans need at least £9.5bn of total capital funding to be delivered successfully.”
- Chris Ham of the Kings Fund health think tank said “Our recent report highlighted the lack of capital funding as a significant barrier to the success of sustainability and transformation plans so on the face of it the decision to make money available to invest in the most promising plans is a step in the right direction.”
- Nigel Edwards from the Nuffield Trust health think tank said, “It’s a sensible idea to make extra capital funding available immediately to help the new local health partnerships put their plans for new facilities into practice. But given that £1.2 billion has already been taken from the NHS’s capital budget this year by the Department of Health simply to plug the gap in Trusts’ running costs, there is no point topping up capital reserves if they’re going to be raided in this way in the future.”
- Huw Evans, Director General for the Association of British Insurers, was highly critical of the budget and said it confirmed “a massive £6 million hit to the NHS” which was caused by the cut to the personal injury discount rate, and said the decision was “absurd” and “avoidable”.
- Brian Dow, Director of External Affairs for Rethink Mental Illness called the Budget “a missed opportunity” to honour the government's commitment to improving mental health treatment saying “the Government should put its money where its mouth is and ensure that improving mental health provision is a reality across all Government departments, not just rhetoric.”
- Russel Hobby from NAHT described it as “a missed opportunity” in Schools Week,
- Kevin Courtney of NUT told the BBC that schools were “on their knees”
- Dr Mary Bousted, of ATL told the Independent putting money into free schools was “a costly way of providing extra school places”.
- Peter Kellen, Chief Economist of the Education Policy Institute, concluded “there are very few areas in which you could introduce grammar schools without undermining existing high performing schools or increasing the attainment penalty for those that miss out.”
- Earlier this year the Institute of Fiscal Studies calculated there would be a 6.5% reduction in per pupil spending by 2019/20 and we’re awaiting their updated assessment on this today.
Self employed National Insurance
- The much cited Matthew Taylor told the BBC it is “fair” that self-employed people pay more tax, but that there still needs to be a “small differential” regarding differences in pensions and parental leave. In a statement on his website, revised after the budget, he reiterated that they are using the Review to explore what is driving patterns of work in the UK.
- Sam Dumitriu, Head of Projects at the Adam Smith Institute welcomed the announcement, but did warn that it must not “discourage the self-employed from investing”.
- The Institute of Fiscal Studies (IFS) issued a statement in support of the Chancellor’s decision on the basis that "a tax system which charges thousands of pounds more in tax for employees doing the same job as someone else needs reform."
- Royal London also issued a statement supporting the reforms, as it will lead to a “significantly greater” state pension boost for the self-employed.
- Recruitment and Employment Confederation response suggested it would be “more sensible to take a holistic approach to employment status and tax”, adding that they would prefer to see tax either incorporated into Matthew Taylor’s review or delayed until after the review is published.