POLITICS

Budget 2017: 10 Bits Of Bad News Buried By Philip Hammond

Blink and you miss them

08/03/2017 18:44 | Updated 08 March 2017
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Philip Hammond’s first and last Spring Budget lasted just 55 minutes.

And his ‘Red Book’ of Budget documents was a rather slim 64 pages.

Yet both it and the Office for Budget Responsibility’s thicker assessment contained some hidden items and small print that the Government seemed curiously unkeen on promoting.

Here’s 10 of them.

 

1. A Tax Hike For The Self-Employed.

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Most people see National Insurance on their pay slip every month and view it as virtually indistinguishable from income tax. It’s a ‘deduction’ from their gross salary and that’s all that matters to many.

In his Budget, Philip Hammond decided it was unfair for the self-employed to pay less in NI than those employed directly for companies. But he seemed to play down just how much cash he would raise and how much workers would pay.

A change to ‘Class 4’ NI contributions – from 9% to 11% - would raise “a net £145m a year for our public services by 2021-22, an average of around 60p a week per self-employed person in this country”.

But in fact Treasury officials conceded the hike would cost 2.4 million people an average of £240 a year. And the Budget ‘Red Book’ makes clear that the change would pull in £325m a year next year and Labour points out it will net more than £2bn in total by 2021/2.

Think tanks like the Resolution Foundation and the Institute of Fiscal Studies, as well as former Tony Blair policy chief Matthew Taylor, think the changes are “progressive” because they hit richer freelancers hardest.

Conservative Party

But White Van Man (who doesn’t get holiday pay or parental leave) won’t be happy, and neither will higher earners.

Add in the fact that the Tories have broken their 2015 manifesto pledge – something they shouted about loud and long – and you can see why this is a real political headache.

 

2. Immigration will go up despite Brexit.

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The Office for Budget Responsibility (OBR) forecasts that there will be 700,000 more people in work by 2022, three years after the UK quits the EU.

And it says that three quarters of those - 525,000 people – will be migrants.

Don’t forget that Theresa May has still not dumped the Tory pledge to cut net migration below 100,000 a year.

But the OBR says that despite a “tighter migration regime” after Brexit, it “will not be sufficiently tight to reduce net inward migration to the desired ‘tens of thousands’.”

Both Sir John Major and Tony Blair have warned May that Leave voters will feel betrayed if immigration really doesn’t go down much after Brexit. It looks like overseas workers will keep on coming.

 

3. Disposable incomes stagnate and wages weaken.

HM Treasury

The OBR predicts that “relatively weak earnings growth, together with higher CPI inflation, means that real household disposable incomes are expected to stagnate in 2017”.

And the Resolution Foundation think tank says “average earnings are on course to shrink in the second half of 2017 and, by 2021 will be £1,220 a year lower than forecast at the pre-referendum Budget last year”.

“Earnings will still not have returned to pre-crisis levels by 2022. The forecast for 15 for years of lost pay growth illustrates just how stark Britain’s living standards challenge will be over the coming years.”

 

4. The poorest get hit.

The Treasury did its usual charts showing the overall impact on people across the income scales.

And this chart suggests that the bottom three ‘deciles’ will lose out – as will the highest earners. Those in the middle will gain.

HM Treasury

5. 100 rich people have avoided tax hikes.

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Buried deep in the Budget ‘Red Book’ is a revelation that George Osborne’s dividend tax changes have been dodged by 100 very wealthy people.

Self-assessment tax bills will be £800m lower than previously expected.

But more than £100m of that is thanks to just 100 rich individuals. It writes that Osborne’s decision to pre-announce his new policy allowed the richest to avoid it.  

“HMRC analysis suggests that…[his decision] benefited just 100 individuals, who were able to withdraw dividends averaging £30 million each from their companies before the higher tax rate took effect.

6. NHS hit by Truss’s £6bn insurance bill.

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HuffPost UK revealed last month that the NHS was facing an extra £1bn a year bill thanks to a change to compensation payouts ordered by Justice Secretary Liz Truss.

The tweak in the so-called ‘discount rate’ for medical negligence cases went ahead, but Hammond’s Budget reveals just what a massive impact it will have on the health service.

The figures unveiled on Wednesday show that an eye-watering £5.9bn will be set aside to protect the NHS from the new cost.

That’s three times the £2bn handed to the NHS by Hammond for new winter crisis prevention and other schemes. No wonder Truss was forced to stand up during the entire Budget speech, with no room on the Tory front bench.

 

7. Grammars to get more cash than expected.

HM Treasury

Theresa May had already revealed that she was going to give more than half a billion pounds to school buildings, with £320m earmarked specifically for Free Schools, some of which would be ‘new grammars’ with selection of pupils on ability.

The Budget ‘Red Book’ repeats this figure, but clarifies that it is for this Parliament ie up to 2020.Yet the ‘scorecard’ shows that actually the cash earmarked for Free Schools soars in 2021/22 by an extra £655m.

The GMB union’s Tim Roach cals this “a £1bn slush fund to provide for the government’s free school and grammar school obsession”.

 

8 Mobile phone charges up.

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Mobile phone users across the EU are expecting mobile phone roaming charges to be slash in the next few years.

But while it’s unclear whether the UK would still benefit from that after Brexit, Hammond on Wednesday said he planned “to introduce UK VAT on roaming telecoms outside the EU in line with international standard practice”.

That’s a 20% hike to your phone bill overseas, folks.

 

9. Airbnb renters to be hit.

HM Treasury

Lots of people supplement their income by renting out rooms in their home through the website Airbnb. The site has rapidly become a key feature in big cities but also invaluable to the economy of seaside towns across the UK.

But they currently get a tax break and the Budget suggests it will be ended: “The government will consult on proposals to redesign rent-a-room relief, to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings.”

 

10. Diesel tax rise hint.

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Hammond didn’t utter a word about climate change or the environment.  Yet buried in the Budget documents is a line that suggests diesel-owning car and white van drivers could be hit with higher taxes:

“The Government is committed to improving air quality, and will consult on a detailed draft plan in the spring which will set out how the UK’s air quality goals will be achieved.

“Alongside this, the government will continue to explore the appropriate tax treatment for diesel vehicles, and will engage with stakeholders ahead of making any tax changes at Autumn Budget 2017.”

Gordon Brown famously cut the cost of diesel and has long been blamed for not realising the huge damage they cause to air quality. 

Ministers have resisted a car scrappage scheme to help drivers swap their cars for something cleaner, yet it looks like the court case brought by Client Earth campaigners could have a real impact later this year.

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