Philip Hammond, the UK’s Chancellor of the Exchequer, delivered his budget speech yesterday. It has been evaluated broadly as a steady as she goes budget with the headlines being a reduction in the tax that first-time buyers must pay on homes costing less than £300000 and the provision of a £3 billion for Brexit preparedness in case no deal is found.
Critics of the reduction in “stamp duty” for first time buyers claim that the measure will do nothing for housing supply, but may well increase the price of existing housing stock. A similar criticism has been made against the government’s scheme to help younger people to assemble a deposit to buy a home; “Help to buy”. The government hopes to stimulate the construction of 300000 new homes annually by the middle of the next decade, but this seems to be a rolling, aspirational goal that gets trotted out regularly by all UK governments.
The NHS is set to receive a £2.8 billion increase between now and 2022 (its head had asked for an immediate injection of £4 billion). He has agreed to an increase in nurses’ salaries, but only if approved by an independent review panel (i.e. it is being kicked into the long grass).
People on Universal Credit, making an initial claim, will have to wait five weeks instead of six to receive their first payment (but a cash advance scheme was always included).
On a macro-economic scale, the key message is that growth is expected to be weaker than predicted in March. The Office for Budget Responsibility (OBR) has trimmed its 2017 growth figure from 2% to 1.5%. It also cut projections for 2020 and 2021 to 1.3 and 1.5%, respectively.
The OBR deficit projections for the deficit in 2019 was increased to £34.7 billion – but obviously does not include the Brexit “divorce” settlement which is currently guessed at £40 billion.
The Chancellor again spoke of preparing to be ready to seize the opportunities of Brexit, but again failed to identify them. A telling remark in his speech noted that the strength of the economy continued to: “confound those who seek to talk it down”, but then noted that productivity was “stubbornly flat”. He then went on to “talk the economy down” by reducing the growth forecasts as mentioned above…