Spreadsheet Phil has delivered his “upbeat” budget, heralding a “new chapter” in Brexit Britain. £435m for firms affected by increases in business rates, 110 new schools in England, £2bn extra for adult social care and an economic growth forecast raised for 2017 to 2% were just some of the key points Hammond put forward. The announcement, while nothing too particular cavalier, has received mixed reviews from across the spectrum of business, politics and the media.
In The Times, John McDonnell wrote this morning that the Budget will “ignore the real issues facing Britain” and that “the chancellor is sticking to the austerity measures that have inflicted the worst cuts in public spending for generation.” Labour’s Jeremy Corbyn gave the opposition response, stating that this budget was based on “utter complacency” and the reality of daily life for millions of people in the UK. Meanwhile Chuka Umunna highlighted how the Conservative manifesto in 2015 promised four times not to raise national insurance, whereas Mary Creagh suggested that “according to Chancellor, Brexit and climate change simply don’t exist” as Hammond’s hour-long talk barely spoke of either. Lib Dems read between the lines of the announcement that UK will still borrowing £100bn more over next 6 years than forecast pre-referendum, arguing the increase is directly as a result of the Government’s “hard Brexit plans.” UKIP accused the Chancellor of attacking enterprise and betraying the self-employed while the SNP accused Hammond of “living in a parallel universe” on issues like Brexit and austerity.
Meanwhile, business leaders in the UK had mixed views on the announcements. Director General of the British Chamber of Commerce (BCC), Adam Marshall, described the government’s decision to reduce of tax-free dividend allowance from £5,000 to £2,000 was a small but real hit for entrepreneurs. This was followed by an initial reaction statement by the BCC that said “government is sending mixed signals by holding investment largely steady at precisely the time that it is exhorting British businesses to double down”. The Director of the CBI, Carolyn Fairbairn, responded positively to the newly announced technical education for young people, describing it as “a breakthrough Budget for skills.” However, Russell Hobby, general secretary of school leaders’ union NAHT, responded that “Schools are being pushed beyond breaking point. The budget today does nothing to change that.”
The FTSE 100 dropped in the lead up to Hammond’s announcement, however appears to be recovering steadily as no ground-breaking economic decision were made, likewise the pound dropped against the dollar. The Institute of Fiscal Studies’ Paul Johnson told the BBC that earnings and income forecasts have gone down and describes “talk of building up a Brexit war chest” as nonsense noting that “there is still £1.7tn of debt.”
From an energy perspective, carbon pricing was a key topic for Richard Black, director, Energy and Climate Intelligence Unit who said that “UK carbon price will be essential… But ministers need to say soon what the price will be, because energy companies are already signing power contracts for 2021.” The Government’s move to review taxes for North Sea oil and gas deals was met with general positivity, though Derek Leith EY’s head of oil and gas tax warned “the right assets need to be in the right hands to maximise economic recovery late in the life of the North Sea.”
All in all, it has been a lot of talk around very little. Hammond has eased himself into his first budget with a relatively low key set of announcements. The real test will be seeing if this so-called “upbeat” budget will translate into an upbeat Britain.
By Harry Goodwin