Wednesday, 22 November 2017

The Autumn Budget

The Chancellor's credibility was severely dented after his first budget in March when he had to backtrack on national insurance rises for the self employed which were at odds with a manifesto pledge not  to increase NIC levels.

Shortly afterwards, the PM called a snap election which failed to deliver the increased majority and left the Government without a majority and now relying on the DUP. Added to this is the well-documented Tory in-fighting over Brexit which is creating a very unsettled feel at the top table.

Against this difficult backdrop, Hammond has to balance the books and continue the efforts to reduce the borrowing deficit whilst trying to counter the allure of Labour's borrow & spend strategy which seemed to be popular at the general election, particularly with the younger voters.


Our borrowing is still not under control. Net PSBR now stands at £1.8 trillion which is almost 4x the figure for 2007 (~£500bn). Admitedly  the annual deficit has been gradually coming down year on year since 2009 when we borrowed £152bn but the fact remains we continue to borrow each year - estimates for this year are £60bn.

Last month alone, the government paid £6m in debt interest - the highest amount for a single month on record.

The more we borrow, the more we pay in interest which is linked to inflation rates and this means less to spend on welfare and essential public services, housing and infrastructure. At some point we have to grasp the nettle and start to live within our means.


Unfortunately, the chancellor's scope for big changes has been curtailed by the OBRs forecast for productivity and growth. Whilst employment has risen to near record levels in the UK , productivity growth has averaged just  0.1% since 2008, compared to 2.1% in the previous decade. The OBR has revised down its forecast for GDP growth in 2017 to 1.5%.

The OBR forecast debt will peak at 86.5 % of GDP in 2017-18 the highest it has been in 50 years.

On Brexit, the government have set aside a further £3bn of new money to prepare for the possibility of a 'no deal' which looks to be a prudent provision given the way negotiations are shaping up.

On a more positive note, I am pleased to see that pensions and savings have been left alone. The relevant changes are few :
The starting rate for savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2018-19. 
After a big jump last year, the ISA limit for 2018-19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 will be uprated in line with CPI to £4,260. 
The lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018-19. 
From next April, personal allowances will increase from £11,500 to £11,850 (up 3% in line with inflation) and HR tax allowance up to £46,350.


As widely forecast, there was a focus on the housing situation. There was an extra £15bn of new money bringing the total to £44bn over the next 5 years combined with a reform of planning laws to free up available land for more houses. The target is for 300,000 new homes per year by the mid 2020s.

In addition stamp duty has been abolished for first time buyers of properties up to £300,000. So, likely to push up prices - particularly in London and the SE, which will make buying a house even more unaffordable.

Of course there are many other provisions in the budget - help for those on Universal Credit, an increase in the national living wage, more money for the NHS etc. but notably there is nothing on the thorny issue of funding for long-term care which became a big issue at the last election. Here's the Budget from HM Treasury in full.

The chancellor has been under pressure from many quarters in recent months and the relationship with the PM is strained. I suspect he has bought himself a little more time with this relatively 'safe' budget...time will tell.

What do you make of it all? Were there any benefits for you? Feel free to leave a comment below.


  1. I suspect you are incorrect. As from April 2018 dividend income before the payment of tax has been reduced from 5000 to 2000. Also one can earn 1000 from saving interest before paying tax.

    1. You may be confusing two aspects...the zero rate TAX BAND remains for the first £5,000 of savings interest which means anyone with a total taxable income of less than (currently) £17,500 would not pay tax on savings income.

    2. Many thanks for such a good response