Welcome to Hitachi Capital Vehicle Solutions’ live blog of Philip Hammond’s first Autumn Statement.
Here we will be adding commentary throughout the day to give insight into the following questions:
1. How will the economic and fiscal forecasts change after the EU referendum?
2. Which parts of the country will benefit from new investment in roads, rail and other infrastructure?
3. Will the Government protect Car Salary Sacrifice schemes from tax changes?
Follow along for the answers to all these questions and more – with expert insight and analysis from Suzanne Phillips and Paulo Larkman of our consultancy team.
Hammond started with the good news: the UK is expected to be the fastest-growing advanced economy this year, and employment is higher than ever. But then came the bad news: the growth forecast for next year has been lowered to 1.4%, from 2.2% in March, due to lower consumer demand and greater economic uncertainty.
- A £2.3bn housing infrastructure fund to help provide 100,000 new homes in high-demand areas
- £1.4bn to deliver 40,000 extra affordable homes
Transport / infrastructure
- £1.1bn extra investment in English local transport networks
- £220m to reduce traffic pinch points
- More than £1bn for digital infrastructure
Lower growth forecasts
Lower growth forecasts have forced Hammond to officially drop the Conservative pledge to balance the books by 2020. He's replaced it with three fiscal rules: 1) Balance the public finances as soon as possible after 2020 and get the cyclically-adjusted deficit below 2% by 2020. 2) Have debt falling as a share of GDP by the end of the Parliament. 3) Keep welfare spending within a 'realistic' cap.
This year it is now expected to be higher than previously thought: £68.2bn instead of £55.5bn. And the Government now plans to borrow £21.9bn in 2019-20, instead of the £10.4bn surplus forecast in March. Higher borrowing means more debt, and the Government now expects debt to hit 90% of GDP in 2018 – a threshold that George Osborne had been keen to avoid.
Corporation tax will follow the same trajectory that George Osborne set out, falling from 20% now to 17% by 2020.
Tax-free personal allowance
One of Hammond's biggest tax announcements is a reaffirmation of an existing policy: the tax-free Personal Allowance will rise to £12,500 by 2020 as planned. However, he has different intentions than George Osborne for after that date. From 2020 onwards, it will now rise in line with inflation rather than with the National Minimum Wage.
Again, Hammond repeats one of Osborne's policies. Instead of rising next year, Fuel Duty will be frozen at its current rate of 57.95 pence per litre for what will be seven years in a row. This is a relief for motorists who, thanks to other inflationary effects, face rising fuel prices.
At last we have the results of HMRC's consultation into Salary Sacrifice. From April 2017, cars will be treated like income and be subject to Income Tax with one exception. ULEVs will be exempt from these changes. Hammond did suggest that some long-term arrangements will be protected until 2021, but we don't know the details of these until we see the Autumn Statement documents after his speech.
Autumn Statement Final Comments
Hammond finishes his first Autumn Statement by abolishing Autumn Statements – sort of. As of next autumn, the main Budget will be moved to the end of the year, with a smaller supplementary statement at spring time. Whether this is anything more than just a cosmetic change depends on how many policies he tries to include in that Spring Statement. For the time being, we'll concentrate on the policies in this Autumn Statement. Stay tuned for more coverage.
Salary Sacrifice Update
Following the results of the HMRC consultation announced today, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions, childcare, Cycle to Work and ultra-low emission cars.
This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. However, arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
For more information on this, please visit https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016.
Concerned about the Salary Sacrifice Consultation and how this might affect your fleet and employees? Need to discuss leasing solutions for your company cars, vans HGVS, Plant and specialist vehicles and assets? Then get in touch today with our Consultancy Team, Consultancy_Team@hitachicapital.co.uk, who will be happy to discuss your requirements.
Page last updated: 23 Nov 16 14:30