An Insight Into The Autumn Budget & The Economic Future of the UK

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Last week, Philip Hammond’s second budget was announced to the backdrop of the ever-increasing uncertainty surrounding Brexit, the continued squeezing of public finances, and the wider economic outlook worsening. This highly anticipated event was eagerly anticipated, and followed on from projected forecasts for growth being cut back with Britain sliding to the bottom of the G7 Growth table.

This was Hammond’s first opportunity to strike back after falling victim to a steady and unrelenting stream of criticism earlier this year. His first budget in the Spring was met with a flurry of criticism across both the political and public spectrum as the Conservatives abandoned a pre-election pledge not to increase National Insurance contributions.

However, the Chancellor then announced a series of measures to clampdown on tax breaks for the self-employed, which led to a sustained backlash from various quarters, and eventually, an almighty U-turn.

Following on from Theresa May’s uninspiring conference speech, the latest budget was being billed as Hammond’s final opportunity to deliver a budget which would galvanise the image of the Conservatives amongst the younger generations, and reset the balance of inter-generational fairness, on which the party continues to trail behind Labour.

But how did Hammond fare on delivering for the younger generations?

The Good

To his credit, Hammond went someway to addressing the concerns of the young with the following initiatives.

There has been extensive coverage regarding the difficulty facing first-time buyers getting on the property ladder. The biggest giveaway in this year’s budget was the abolishment of stamp duty for first-time buyers on properties with a value of up to £300,000, which equates to a reduction for 80% of first-time buyers. Those spending between £300,000 to £500,000 on their first home will save £5,000 in stamp duty, which was made effective immediately.

However, since this policy was announced, there has been widespread discussion as to whether the policy will have the desired effect and enable first time buyers to climb onto the ladder. The Office for Budget Responsibility has warned that the move will simply lead to an increase in house prices, benefiting those who already own property.

There was also some good news for both Generation Rent and Tory-voting landlords, Hammond signalled that the Conservatives would be exploring the possibly of offering desirable tax breaks for landlords who are willing to offer longer-term secure tenancies to tenants.

The Bad

In terms of overall economic growth, Britain is facing its most challenging period in more than half a century. Official data has revealed a country that continues to be pegged back by weak productivity across a variety of sectors.

The Treasury’s official forecaster delivered its weakest GDP forecasts for the UK since it was first established in 2010; GDP growth is expected to slow to a mere 1.5% this year, before falling to only 1.3% in 2019, when the country is timetabled to leave the European Union. This appears to have been incredibly sobering in terms of revenue planning and forecasting for the treasury, which has had to attempt to plug an ever expansive budgetary black hole.

It is currently expected that growth will increase to 1.6% in 2022, still less than the 1.8% that we saw in 2016. The OBR had predicted that the economy would grow by 7.5% over the five years leading up to 2021-22, however growth is now expected to be somewhere closer to just 5.7% over the period.

How Will The Budget Affect The Future Of The UK Economy?

It should be noted that the UK’s economy has continued to grow- as the chancellor highlighted in his budget speech. However, as discussed earlier, the UK has now fallen to the bottom of the G7 Growth Table, falling behind the traditional holders of the proverbial wooden spoon, Japan and Italy.

It is not viable to attribute this dramatic slide to the performance of the wider global economy. The poor growth overall can be attributed to a reduction in consumer spending, mostly due to the rise in inflation and the depreciation of the pound. However, Hammond has attempted to kick-start the faltering economy to counter the unprecedented downbeat forecasts provided by the OBR. There have been moderate increases in public spending, as well as an attempt to increase consumer spending through increasing the personal tax allowance and abolishment of stamp duty for first-time buyers.

However, the overall economy has been offered limited support to generate substantial and sustainable growth, especially as the tax burden in 2018-2019 is expected to be the highest recorded in just under half a century.

After being one of the leading and dominant economies in the west over the 1990s and 2000s, the UK now finds itself in the unenviable position of being in an increasingly weak position as the world’s economy shows signs of growing strongly. It is challenging not to feel that Hammond neglected to undertake any serious tax reforms that would have led to a real level of growth as Britain enters the great unknown

However, the gravest concern is that the OBR’s predictions have been based upon the fact that there will be a strong upturn in productivity around the corner. Sadly, there is little evidence to suggest that this is on the cards; meanwhile the Great British public continue to monitor the situation from the side-lines and carry on as we always have done.