Philip Hammond outlined his plan on Tuesday for the 2017-18 fiscal year, laying the foundations for what he called a “stronger, fairer, better Britain” outside the EU.
One of the most closely watched questions ahead of the budget was whether the government would help small firms facing large increases in “business rates,” the property taxes paid by companies. More than a third of small firms expect rates to rise, and 20 per cent are preparing for increases of more than 40 per cent, a survey by the Federation of Small Businesses showed.
London is likely to be particularly hard hit because property values have soared since the financial crisis.
Hammond said he would study the matter, and offered relief to the majority of local pubs — in recognition of their special place in many communities. He also provided £300 million to provide discretionary relief for difficult cases in local areas.
Prime Minister Theresa May and her predecessor have presided over seven years of austerity as they struggled to close a budget deficit that ballooned during the financial crisis.
“The only responsible course of action ... is to continue with our plan undeterred by any short-term fluctuations,” Hammond said. “We will not saddle our children with ever-increasing debts.”
Hammond nonetheless offered a surprise influx of £2 billion ($2.4 billion) for social care over three years, responding to a crisis in funding care for the country’s ageing population.
The caution over spending comes despite an improvement in government finances. While the latest figures from the independent Office for Budget Responsibility show government borrowing during the 2016-17 year will probably be about £16.6 billion less than previously forecast, Hammond noted Britain is still £1.7 trillion in debt.
The Office for Budget Responsibility also upgraded its forecast for economic growth this year, saying the economy will likely expand 2 per cent, compared with the previous estimate of 1.4 per cent. But it downgraded the outlook for 2018 to 1.6 per cent from 1.7 per cent and in 2019, to 1.7 per cent from 2.1 per cent.
“The Chancellor’s Budget today showed that the UK economy remains fundamentally strong,” Samir Brikho, UK Co-Chair of the UAE-UK Business Council, said in a statement to Gulf News.
Going in to the budget statement, the UK’s real GDP growth was 2 per cent year on year, whilst unemployment in December 2016 stood at 4.8 per cent, the lowest since September 2005.
Marie Owens Thomsen, Chief Economist at Indosuez Wealth Management in Geneva, Switzerland, is not optimistic about these key markers.
“We think that these numbers are likely to deteriorate from here. Uncertainty around the Brexit negotiations is likely to weigh on investment, and the pound sterling depreciation (see chart) is set to dampen growth in private consumption,” said Thomsen via email.
The challenge for Hammond, the UK’s finance minister, Thomsen argued, “is to present a credible scenario that sets the fiscal outlook on a positive footing in spite of the Brexit challenges. This could allow the UK bond market to hold up, although the risks of a loss of confidence is material.”
(With input from agencies)