Chancellor looks to build for the future
Chancellor Philip Hammond abolished stamp duty for most first-time buyers in his Budget this afternoon as he looked to get the nation building again.
The change, which comes into effect immediately, will mean those buying properties worth up to £300,000 - or up to £500,000 in more expensive areas - will save £5,000.
Housing and the UK’s “stubbornly flat” productivity were the key themes of Mr Hammond’s Budget address as he unveiled lower growth forecasts.
The government will also set aside £3bn for Brexit preparations, spend an extra £2.8bn on the NHS in England up to 2022 and freeze most alcohol duties.
The Office for Budget Responsibility's prediction of 1.5 per cent growth for 2017 is lower than the two per cent forecast in March’s Budget. But it aslo predicts borrowing to be lower than it did in March, at £49.9bn.
The Chancellor also announced a £44bn investment as part of the government's drive to deliver 300,000 new homes a year by the mid-2020s.
Mr Hammond said successive governments had failed on housing, and promised the "next generation" that getting on the housing ladder would not be just a “dream”.
There was good news for small businesses when he revealed he would not be lowering the VAT threshold for small businesses and it would remain at £85,000.
On Brexit, Mr Hammond said he was also ready to allocate more cash than the £3bn announced for the next two years if needed and he pledged the government would prepare for “every possible outcome”.
He told the Commons the UK economy continued “to confound those that seek to talk it down".
Mr Hammond also announced a £1.7bn ‘Transforming Cities’ fund for local transport investment – with half going to areas with elected mayors such as Liverpool and Manchester.
There were also measures to support R&D and for a national retraining scheme as part of moves to address the productivity issue.
There was also a pledge to fund a pay rise for nurses if one is recommended by an independent panel.
Sarah Barnes, head of the Residential Property team at Napthens solicitors, said: "According to the UK House Price Index for May 2017, the average property value in the UK was £220,713, so this will definitely generate some movement from the bottom up. The change will assist some downsizers as well.
"However, this change will only have a limited effect and does not provide assistance for existing homeowners who are aspiring to move further up the ladder. Those individuals still have to pay Stamp Duty at the current rates."It is important to remember that the level of Stamp Duty cannot be entirely to blame for the slowdown in the marketplace; the crisis in the availability of new homes is the real issue.
"The saving that the first-time buyers make on Stamp Duty, will assist the budgets of those individuals, but won’t necessarily have a major impact on the movement of the housing market. I don’t think it will have the effect of driving down the price of homes and making them more accessible to a larger number of individuals."The real question is whether the long-term goal of building 300,000 homes a year by mid 2020s will have an impact. Whether this is enough, remains to be seen. It is a lack of affordable homes which is the real issue."
Ed Cox, director of IPPR North, said: “We welcome the drip drip of small investments in Northern transport infrastructure but nothing the Chancellor has announced will bring the transformational change the Northern economy needs to see.
“We need £59bn catch-up cash to drive the growth that will turn around the ever-widening productivity gap between North and South. This is not rocket science”.
On R&D funding he added: “Across the North of England business investment in R&D continues to increase and now stands at over 15 per cent of the national share.
“Considering government only invests seven per cent of its R&D expenditure in the North it is either not aware of market opportunities or somehow thinks London and the South East require extra support.”
Phil McCabe, of the Federation of Small Businesses, said: “Overall, this should be seen as a business-friendly budget in challenging times.
“Measures on tax will boost confidence across the small business community as they face up to tough trading conditions. The staircase tax has been scrapped, something we campaigned for, and we welcome further support on fuel duty and business rates, a thorn in the side of many small firms.
“In addition, the Government has responded to our efforts to see off a VAT tax grab that would have caused huge economic damage. Of course, we need to go even further and FSB is ready to work with the Treasury to simplify an over-complicated tax that on average takes a business a whole week to administer every year.
“Aside from tax the measures on training and skills, particularly digital and maths, technology investment and sector-focused support for pubs are all welcome."
Colin Tice, tax partner at Cassons, said: "The Chancellor’s speech was heavily focussed on housing. A real problem for housebuilders is the lack of skilled tradesmen, and funding will be directed to encourage individuals to obtain skills in construction-related trades.
"To encourage first time buyers, stamp duty is abolished from today on the purchase by a first time buyer of a house or other dwelling up to £300,000, and on the first £300,000 of a purchase of up to £500,000. But all joint owners must qualify for the relief. This can cause a problem."If, for example, a parent helps a child onto the housing ladder, perhaps guaranteeing a mortgage, the parent will often be included on the deeds. That will not only exclude the purchase from the relief, but will incur the extra 3 per cent “second home” stamp duty charge. A purchase for £300,000 would then incur SDLT of £14,000."
Tony Medcalf, head of tax at MHA Moore and Smalley, said: “Motorists will breathe a sigh of relief at the freeze in fuel duty, however, Vehicle Excise Duty for polluting diesel cars is set to rise from next year, though Mr Hammond assured us this would not affect small business owners who drive vans.
“Lower earners will welcome the slight increase in the National Living Wage and the increase in the income tax personal allowance to £11,850 from April 2018. Higher earners will also benefit from an increase in the higher rate tax threshold to £46,350.
“Businesses will be encouraged by the chancellor’s tough talking on job creation and some of the big money he plans to invest in tech initiatives like AI, fibre broadband, 5G and driverless car technology. Meanwhile, pubs and restaurants will be pleased that alcohol duty was frozen again."
Kevin Taylor, tax expert at accountancy practice WNJ, said: "The decision not to lower the VAT threshold is very welcome news for small businesses, many who would have struggled with the burden of administration and the impact it would have on their operations."It is good that the Chancellor has listened to the genuine concerns of SMEs and has decided not to take this approach. Small businesses really were fearful of the impact, especially in terms of the time they would have to spend complying.
"The increase in R&D tax credits is also to be welcomed as a positive sign of commitment to encourage innovation and it is worth remembering this is of benefit not just to high-tech companies but businesses in all sectors of the economy. The doubling of the EIS limits for certain “knowledge-intensive” companies is a further boost. The move to increase busines rates in line with CPI rather than RPI is also a step in the right direction."
Lynn Sedgwick, managing director of Clayton Recruitment, said: “We welcome the news that the Northern Powerhouse appears to finally be back on the political agenda. We are also pleased to see that, despite disappointing productivity growth, the government has announced initiatives which support research and development and emerging technology that will allow firms to innovate over the coming years.
"However, the most promising announcement for us as a nationwide recruiter is the commitment to skills via the creation of a National Retraining Scheme. The UK has long faced widespread skill shortages so initiatives that address this are welcome news. And while we await for precise details, it is certainly a step in the right direction.”
James Morris, tax partner at RSM in Preston, said: "Whilst the planned £500m investment in full-fibre broadband and 5G mobile networks will enable certain businesses to secure faster, more reliable internet connections and employees to work on the move, it is key that the government also focuses on investing in rural and other areas which still don’t have superfast broadband connections, and this is especially the case in Lancashire."
Lynn Collins, TUC regional secretary for the North West, said: “Whilst we welcome the investment in intra-city transport infrastructure for both Greater Manchester and Liverpool City Region, this isn’t the West-East, Crossrail for the North that we need and want. The closest mention was of Wi-fi on TransPennine trains, hardly the game-changing budget we were promised.”
Mike Cherry, Federation of Small Businesses national chairman, said: “With costs rising and consumer demand flagging, small firms will welcome today’s business-friendly Autumn Budget.“It was good to see the Chancellor’s speech acknowledge our concerns about the VAT threshold. Dragging thousands of more small firms into the hugely complex VAT regime would have caused a significant drag on output at an already challenging time for businesses. We look forward to working with the Government to reform this burdensome tax. Small firms spend more than a working week a year complying with VAT obligations on average. It’s time that should be spent growing their firms.
“The promise to tackle VAT evasion by online overseas sellers is welcome. No business should be gaining an unfair advantage by evading tax.
Jane Parry, tax partner at PM+M, said: "All in all this Budget was a bit of a damp squib as the Chancellor had no real room for manoeuvre - thanks mainly to the ongoing saga that is Brexit.
"In my opinion, it actually threw up more questions than answers, which isn’t great for a government that needs to promote a sense of stability in what are pretty turbulent times.
"It’s positive that he recognised that frictionless trade is important but there’s nothing he can really do to address it right now, as everything is dependent on the outcomes of our negotiations with Europe. The challenge will be to ensure that we don’t drown in a sea of trade bureaucracy once we reach 29th March 2019.
"I was pleased to hear him reassert his support for the Northern Powerhouse. However, much of the focus was on Greater Manchester but what about Lancashire and Cheshire who, just like Manchester, need long overdue investment in both connectivity and digital infrastructure? There was quite a bit of talk about cities but not much about towns.
"On a more positive note, he resisted the urge to meddle in the pension tax rules which I welcomed. I also welcome the increased investment in training and growing relevant skills for the future. Finding skilled people is a huge challenge for many businesses and anything that helps to boost the supply of those people is good news.
"For me, this Budget was missing some vital ingredients. Firstly, more effort is needed to reduce the bureaucracy faced by businesses and help them deal with the pressures that Brexit will bring in this regard. Also, instead of just increasing the main R&D tax credit to 12%, he could have flipped how it operates so it becomes a real time payment rather than retrospective claim. That simple switch would allow thousands of companies to put investment into R&D far more quickly as they would have the cash available."
Tom Kibasi, IPPR Director, said: “At the Budget today there has been deafening silence on social care funding. It seems that the backlash of May's election pledge may have extinguished her appetite for reform but neglecting social care would be nothing short of a catastrophe. "Since 2009/10 there has been a 17% cut in funding despite significant increases in demand as a result of a growing and ageing population and since 2005/6 there has been a staggering 27% decline in the number of people accessing the social care they need."