By Lynne Gowers on 15th March 2018

Spring Statement 2018 – light at the end of the tunnel?

Spring Statement

At this time of the year we are used to seeing the Chancellor holding aloft the red box ahead of the annual Budget, but this year it was very much as case of “as you were”, with the main event of the fiscal calendar having been moved to the Autumn.

Instead Philip Hammond delivered his first Spring Statement; a summary update on the overall health of the economy.

Gone was Mr. Hammond’s downcast and defeated “Eeyore” reputation, instead he described himself as “positively Tigger-like” in his upbeat address to the House.
Here’s an overview of the key points:

Spring Statement round up

Economic growth
The Office for Budget Responsibility (OBR) has forecast a growth in the economy of 1.5%, revised up from 1.4% in November.

In 2019 growth is predicted to be 1.3%, then 1.3% in 2020, 1.4% in 2021 and 1.5% in 2022.

The Chancellor was cautiously positive regarding borrowing, announcing a revised forecast of £42.2 billion, down from the earlier projection of £49.9 billion.

A small current surplus is forecast for 2018/19, meaning that the government would only have to borrow to fund capital investment, not day-to-day spending.

Philip Hammond turned to one of his signature phrases, saying he takes “a balanced approach” on spending over reducing the budget deficit. He hinted that if the economy continues to improve, he will increase public spending and investment in future years, and confirmed a detailed spending review in 2019.

Debt is forecast to fall as a percentage of GDP in 2019/20, a year later than was predicted in November.

As a share of GDP, debt is forecast to be 85.6% in 2017/18, 86.5% in 2018/19, 85.1% in 2019/20 and 82.1% in 2020/21.

Small businesses
The Chancellor used the Spring Statement to bring forward the next business rates revaluation from 2022 to 2021.
He also announced a review into how to help the least productive businesses catch up with the most productive, and how to eliminate what he called the “scourge” of late payments to small businesses.

Thanks to a £100 million grant from the land remediation fund, the government has reached a deal for 215,000 new homes in the West Midlands by 2030/31.

The Housing Growth Partnership, an initiative which supports small housebuilders, will be more than doubled to £220 million.

Role of cash
With more people than ever using digital payment methods over cash, the government is to look at ways to ensure those who need to pay by cash are able to, and how to prevent the use of cash for tax evasion and money laundering.

The government will consult on a new VAT collection mechanism for online commerce, to ensure that VAT paid by online consumers reaches the treasury.

Digital connectivity
Mr. Hammond announced the first wave of funding to roll out high-speed broadband to local areas, as part of the £190 million challenge fund. This will see around £95 million allocated to 13 areas across the UK.

Green issues
The Spring Statement included a call to tackle what the Chancellor called the “complex issue” of plastic waste, referring to a need to reduce it and how the tax system can be used to drive technological and behavioural change.

The government also plans to consult on reduced vehicle excise duty for the greenest vans on the road.

IR35 in the private sector – no news is good news?

There was no mention within the Spring Statement of the planned consultation on extending last year’s public sector IR35 reforms to the private sector. This has lead to tentative hopes from stakeholders that the government is taking their concerns seriously. We can but wait and see.

New to IR35? Check out our FREE online videos and guides

2018/19 tax cards – free download

Our handy tax cards detail all the tax rates and allowances for the new financial year starting in April. Click here to download your free copy.

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Lynne Gowers Written by Lynne Gowers

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