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UK Autumn Budget

On 22 November, following a particularly animated Prime Minister’s Questions with Jeremy Corbyn and Prime Minister Theresa May, Chancellor Phillip Hammond stood up to deliver his Autumn budget. GAM’s investment director Charles Hepworth highlights the key takeaways.

Wednesday, November 22, 2017

The Autumn Budget was expected to be challenging for Hammond, with little room for manoeuvre. Any easing in austerity was always going to be difficult to square with the Chancellor’s desire for fiscal prudence ahead of Brexit.

Hammond began by outlining his vision for a UK economy that is fairer, more forward looking, more meritocratic and more open to trading around the world, as well as for a transformed economy that he would be proud to leave to future generations.

The key points of this “fit for the future” budget were:

  1. The Office for Budget Responsibility has downgraded the UK growth forecast for this year to 1.5% from 2% in March. Further falls are expected next year, bottoming out at 1.3% in 2020. This is a significant downgrade.
  2. Acknowledgement of the crisis in the UK health service through increasing funding for the NHS by GBP 2.8 billion over next three years.
  3. Tax on cigarettes and high strength ciders increased but duties on all other drinks were frozen.
  4. Increase in road tax on diesel cars but not on vans. This policy seeks to rectify the polluting effects of diesel emissions via a clean air fund.
  5. Abolition of stamp duty on properties up to GBP 300,000 for first time buyers. This is a welcome policy change for younger voters and Hammond’s big budget surprise announcement.

Overall, this was a budget with very few headline surprises. The budget was focused on research and development and the digital economy, which Hammond sees as the UK’s future strength. It also acknowledged green credentials on diesel cars, pledged additional NHS support and tempted voters through housing tax reforms. In my view, this was more a give-away budget to the vast majority of the populous.

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