Download 2017 Spring Budget - SCT briefing

Spring Budget 2017
8 March 2017
Introduction
On 8 March the Chancellor of the Exchequer, Philip Hammond, made his 2017 Spring Budget
announcement in the House of Commons. The Budget was Mr Hammond’s first full Budget as
Chancellor and it outlined the Government’s spending and tax plans. It is the first full Budget since
the EU Referendum in 2016.
Alongside the Budget the OBR published its Economic and Fiscal Outlook (EFO), containing its
forecasts for the economy and the public finances.
As announced at the 2016 Autumn Statement, this Budget is intended to be the last full budget in
spring with a second full budget planned for autumn 2017. An annual timetable consisting of an
Autumn Budget and Spring Statement will commence from then on.
This briefing outlines the key announcements in the Budget, in particular those of interest to local
government. References to the relevant paragraphs in the Budget report for each announcement
are included in square brackets.
ECONOMY
GDP – GDP is predicted to grow by 2.0% in 2017 this is 0.2 percentage points less than the 2.2%
predicted in the 2016 Budget. This being said, it is important to point out that the forecasts were
made in the 2016 Budget based on the UK remaining in the EU.
Compared with the 2016 Autumn Statement, the Spring Budget announces greater growth
forecasted for 2017 but less growth for each of the following three years. The Budget states that
“real GDP grew by 0.7% in the final quarter of 2016. GDP grew by 1.8% over the year as a whole”.
A comparison of forecasts from the 2017 Spring Budget with those from the 2016 Budget (as well
as the 2016 Autumn Statement) is given below [1.20]:
OBR
2017
2018
2019
2020
2021
2016 Budget 2016 Autumn Statement 2017 Spring Budget
2.2%
1.4%
2.0%
2.1%
1.7%
1.6%
2.1%
2.1%
1.7%
2.1%
2.1%
1.9%
2.0%
2.0%
Inflation - The report states that “The OBR forecasts that CPI inflation will increase to 2.4% in 2017
before falling back to 2.3% in 2018 and 2.0% from 2019 to 2021”. [1.28]
Employment – The Budget highlights that “Employment reached a new record high” and it is
forecasted higher than expected for 2017 at 31.9m compared to a March 2016 forecast of 31.7m.
Nonetheless, wage growth has been lower than expected at 3% compared to a forecasted 4.2% for
2017.
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Technical Support Team
Society of County Treasurers (SCT)
PUBLIC SPENDING
Budget Surplus – Budget forecasts have been reassessed in the light of infrastructure investment
and the abandonment of the 2020 target. “The OBR forecasts that the current account deficit will
narrow, to 3.5% of GDP in 2017, 3.2% of GDP in 2018, 2.6% of GDP in 2019, 2.2% of GDP in 2020
and 2.0% of GDP in 2021.” [1.26]
Infrastructure Spending – The 2016 Autumn Statement established the National Productivity
Investment Fund to provide over £23 billion of high-value investment between 2017-18 and 202122. The NPIF will be invested in Digital Infrastructure, Full-fibre broadband, 5G, Transport, R&D,
Industrial Strategy Challenge Fund, Talent Funding, and Global research talent. [4.15]
Included in the NPIF is £690m of local transport funding which “Will be competitively allocated to
local authorities, with £490m made available by early autumn 2017”. Further details will follow
shortly. [4.22]
Departmental Spending Cuts – Total Managed Expenditure as a share of GDP is forecast to fall
from 39.3% in 2016-17 to 37.9% in 2021-22. This is compared to 44.9% in 2010-11 but higher than
the 2016 Budget plans of 36.9% in 2020-21. [1.57]
Efficiency Savings – The Budget continues plans to see a saving of £3.5bn from public spending by
2019-20 “supported by the Efficiency Review” [1.58]
Protected Spending: - As set out in Spending Review 2016, commitments to priority public
services, to international development and defence and to pensioners; will be maintained. [1.55]
ADULT SOCIAL CARE
Additional £2bn funding over next three years – An additional £2bn grant funding for social care
will be made available to local authorities over the next three years with £1bn in 2017/18, £674m
in 2018/19 and £337m in 2019/20.
90% of the funding will be allocated based on the Improved BCF formula with the remaining 10%
according to the ASC RNF. Allocations are expected to be published by DCLG tomorrow.
Note: Improved BCF allocations are calculated based on the assumption that all authorities will
take up the 2% increase in council tax for social care, in full. The amount that could potentially be
raised from this council tax flexibility is combined with the Improved BCF funding and distributed
according to the existing (2013-14) adult social care relative needs formula. Authorities forecast to
raise more than this allocation from council tax would not receive an Improved BCF allocation.
Authorities forecast to raise less than this allocation from council tax would receive the difference
in Improved BCF funding. However, Improved BCF grants would be scaled to the total pot available.
The funding will pooled in the BCF but will be for councils to spend on unmet pressures on older
people and stabilising the care market. The Government will be consulting with Section 151
officers on the sign off requirements for this additional money. [5.5]
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Technical Support Team
Society of County Treasurers (SCT)
Delayed discharges - The Budget statement detailed that the Health and Communities Secretaries
will announce measures to identify and support authorities struggling with delayed discharges and
to ensure more joined up working with the NHS.
Green Paper - In the longer term, the government will set out options for the future financing of
Social Care in a Green Paper later this year. [5.6]
BUSINESS RATES
2017 Revaluation – The Budget includes three measures to help those affected by 2017
revaluation:
1. Targeted Support for Small Business Rate Relief Recipients – £110m to support small
businesses so that no business losing small business rate relief will see their bill increase
next year by more than £50 a month [3.16]
2. Reliefs for Pubs - £1,000 business rate discount for local pubs with a rateable value less
than £100,000 (this is said to be 90% of “local pubs”) for one year from 1 April 2017 [3.17].
Billing authorities will be able to claim back the discount they have given to local pubs.
3. Local Government Discretionary Relief Fund – A £300m fund to be allocated to lower-tier
authorities to offer discretionary relief for hard-hit cases; £175m in 17/18, £85m in 18/19
and £35m in 19/20 and £5m in 20/21. DCLG are expected to publish a consultation on the
formula to distribute this funding later today. This measure is in addition to the transitional
relief scheme which was announced in November 2016. [3.16]
Changes to the Revaluation Process – The Government will consult on changes to the revaluation
process before the next revaluation is due making it smoother and more frequent, to avoid the
dramatic increases that the present system can deliver. [3.19]
Digital Economy - In the medium term the Government will need to find a better way of taxing the
digital economy.
Appeals Consultation – The Government response to its ‘Check, challenge, appeal Reforming
business rates appeals’ consultation on statutory implementation has been published.
DEVOLUTION AND GROWTH
Devolution – The government has agreed a Memorandum of Understanding on further devolution
to London (including the exploration of locally-delivered criminal justice services; action to tackle
congestion; and a taskforce to explore piloting a new approach to funding infrastructure). The
government is also in discussions with Greater Manchester on future transport funding. [4.28]
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Technical Support Team
Society of County Treasurers (SCT)
PAY AND PENSIONS
Public Sector Pay and Pensions – In the 2015 Summer Budget, George Osborne announced that
public sector pay awards will be limited to 1% a year for the four years from 2016-17 onwards, in
order to protect jobs. Mr Hammond has maintained this limit.
National Living Wage and National Minimum Wage – There have been no changes since the 2016
Autumn Statement. The National Living Wage rate will increase to £7.50 from April 2017. This
represents an increase of 4.17% from April 2016. The National Minimum Wage rates will be
increased to £7.05 for 21-24 year olds, £5.60 for 18 to 20 year olds, £4.05 for 16-17 year olds and
£3.50 for apprentices, an increase of 1.44%, 0.90%, 1.25% and 2.94% respectively.
National Insurance – National Insurance contributions Upper Earnings Limit will increase to
remain aligned with the higher rate threshold. As announced in the 2016 Autumn Statement, the
NI Primary and Secondary thresholds will be £157 per week for 2017-18 (compared to £155 and
£156 respectively).
Furthermore, the self-employed will pay extra National Insurance to bring them in line with the
wider workforce. Class 2 NICs will be abolished for those who are self-employed, whilst Class 4
NICs will be raised from 9% to 10% in April 2018 and to 11% in 2019. [3.5]
CHILDREN AND EDUCATION
Free Schools – The Chancellor has announced £320m in this Parliament to help fund 140 new free
schools. 30 will open by September 2020 and count towards the government’s existing
commitment to open 500 new free schools by 2020”. [4.14]
Schools Maintenance - The government has also announced £216m of funding for school
maintenance. [4.14]
Extended Rights to Free School Transport - The Government is expanding the current ‘extended
rights’ entitlement for children aged 11 to 16, who receive free school meals or whose parents
claim the maximum working tax credit to free transport to the nearest selective school in their
area. [4.14]
Childcare – The Chancellor confirmed the rolling out of Tax-Free Childcare for working families
with children under 12 years of age providing up to £2,000 a year per child. As planned, the free
childcare offer (for 3-4 year olds) will double from 15 to 30 hours per week in September 2017.
[p3]
Soft-Drinks Levy - The Chancellor revised down estimated revenue from the upcoming soft drinks
levy due to companies changing their recipes. Hammond emphasised the health benefits of these
changes and announced that school sports funding would remain at £1bn despite decreased
revenue. The levy rate will be unchanged from last year’s announcement at 18p and 24p per litre.
[3.37]
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Technical Support Team
Society of County Treasurers (SCT)
TRANSPORT
Motoring – For the seventh year in succession Fuel Duty has been frozen, for petrol and diesel this
is at 57.95p per litre. The New Vehicle Excise Duty will be introduced in April 2017. This will tax
cars registered from April 2017 onwards at £140 per year for all cars without zero emissions (£450
for cars with list prices over £40,000). For the first year, a car’s rate will be between £10 and
£2,000 dependent on its emissions. [3.23]
REACTION
Labour – Leader of the opposition Jeremy Corbyn described the chancellor’s statement as “A
Budget of utter complacency about the state of our economy, utter complacency about the crisis
facing our public services and complacent about the reality of daily life for millions of people in
this country”.
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Technical Support Team
Society of County Treasurers (SCT)