The Autumn Statement: what to expect
We offer a brief round-up of predictions for the UK Chancellor’s mini-Budget
Chancellor Philip Hammond has delivered his first Autumn Statement.
Also known as the mini-Budget, it was introduced by Gordon Brown as a Pre-Budget Report in 1997. It has increasingly become a platform to announce major policies. The Budget remains the main financial and economic update for the UK and is usually delivered in March.
The policies announced during Autumn Statement or Budget speeches have an impact on the pockets of all British citizens in many ways. But the most closely watched have been changes that people feel most keenly – changes in income tax, inheritance tax and VAT. And also numerous overhauls and adjustments made to pensions and the world of savings and investments.
Short-term economic forecasts will probably be little changed from March with 2016 growth expected to be very close to the forecast made at the Budget, of 2%. Projections for economic growth in 2017, previously at 2.2%, are expected to be lower.
A view from the Schroders Economics Team will be published here after the speech.
You can follow also Twitter updates @schroders_uk
Here are some of the rumours trailed so far in the press.
The Conservatives made a manifesto pledge to increase the income tax personal allowance – the first portion of untaxed pay – from £11,000 to £12,500 by 2020, and to increase the higher-rate threshold from £43,000 to £50,000. The Chancellor is expected to stick to the pledge, especially given the signalled intention to help the “JAMs” – people who are “just about managing”. A timetable may be set out in the Autumn Statement.
The Chancellor may hint at a cut in VAT, from 20% to 17.5%, which would also be seen as a policy to help the JAMs.
A promise to order further cuts in corporation tax is also possible. Prime Minister Theresa May wants the UK to have the “lowest corporate tax rate in the G20”. Plans have already been made to cut it to 17% by 2020. President Elect Donald Trump has previously promised he would cut corporation tax in the US to 15%.
Employment perks such as health checks, gym membership and mobile phone contracts could be made subject to income tax and national insurance, the Sunday Telegraph has reported. It is part of a wider review of "salary sacrifice" perks offered in the workplace.
Road and transport
The Chancellor has signalled additional economy-boosting spending would be centred on roads and railways. A £1.3bn programme to tackle road congestion has been announced. More details on this are expected to follow in the statement. There could also be a freeze in an expected 2p rise in fuel duty, given the rises in the price of petrol, a result of the falling pound, since Brexit.
Infrastructure bonds for savers
The Financial Times has speculated that the government may issue bonds to fund new infrastructure programmes. The Treasury, it said, had explored the option of offering these to savers through National Savings & Investments, the government-backed savings bank.
Letting agents will be banned from charging tenants. Tenants can be charged fees for a range of administration, including reference, credit and immigration checks. Agent will instead rely on fees paid by landlords.
The Daily Telegraph has run a campaign to scrap a surcharge on stamp duty that is applied to those buying a second home. Buyers are forced to pay an additional three percentage points. Aimed at buy-to-let investors, it has also caught out other buyers, including those trying to help their children on to the property ladder. There have been few reports about adjustments being made to stamp duty.
Measures to encourage smaller housebuilders are expected while a £3bn housing fund to “get Britain building” has already been announced. It will help small family-run companies to build 25,000 new homes by 2020.
Pensions are often mentioned in Autumn Statements. This one is expected to be no different. No major policy changes are expected.
The Chancellor will confirm a ban on pension cold calling, where pensioners are persuaded to transfer their pension savings.
He may also explain in more detail the reason behind the the u-turn on allowing people to sell back annuities to insurance companies.
Some commentators have also observed that the annual pension saving allowance of £40,000 could be reduced.