The dust has settled, so where do we stand after the Autumn Statement?
Philip Hammond’s first and last, as it turned out, Autumn Statement was always going to be a challenge in light of the political transformations over the summer.
With such difficult and uncertain times ahead, how did the Chancellor do answering the questions we posed pre-Statement:
- What are the Government’s plans to strengthen the £?
- How do they intend to reduce inflation?
- What steps will they take to make the UK a nation in which foreign business will invest?
- How does the Government plan to limit the cost of Brexit to the man in the street?
- What will they do to boost the earnings of the low paid in society?
Strengthening sterling in a volatile global market
Immediately after the Brexit vote value of the pound suffered a dramatic drop. Since then the markets have stabilised and Mr Hammond is reportedly happy with the overall resilience of the UK economy following the referendum result. Yet, with so little revealed about Government’s plan for Brexit, the closest Mr Hammond came to announcing plans to strengthen the £ was reiterating the need for a swift and definite exit from the EU to curb uncertainty in the markets.
Ramping up productivity in key industries
In his Statement Mr Hammond announced a new National Productivity Investment Fund (NPIF) in an effort to bring the UK up to the productivity level of countries like the US and Germany. In total the Chancellor committed to £23bn of investment in the key areas of transport, digital communications, R&D and housing which, in theory, should make the UK a more attractive investment.
April 2017 will see changes to NIC contributions
As part of a raft of measures to help low income earners the threshold for National Insurance Contributions will increase to £157 per week for both employers and employees.
Conversely, salary sacrificed items like car allowances and health insurances will now be taxable, though there is an exemptions list which includes pensions (including advice), low emissions cars, the cycle to work scheme and child care.
Initially the rules will only apply to new salary sacrifice schemes from 6th April 2017, so we may see a rush to get new ones under way prior to this date. Those in place prior to April 2017 will have up to a further 12 months of tax relief on salary sacrifice, unless the scheme ends or is changed or renewed before April 2018.
Schemes for cars, accommodation and school fees can still continue until 6th April 2021.
Changes to National Minimum Wage rates benefiting low-paid workers
Both the National Minimum Wage and National Living Wage will increase from April 2017 (read more in our latest legislation guide), an increase which will impact both employees and employers.
When the full Autumn Statement was published, it revealed the Government had accepted the Low Pay Commission’s recommendations on the increases for all the rates across all age groups, including apprentices. The increases of between 5p and 10p for the NMW and 30p for the NLW will put more page pressure on employers and apply inflationary pressure to the economy.
With the CPI (Consumer Price Index) for the year-to-date in November 2016 at 1.2% (the highest since October 2014) we will see some of that increase eroded, but more so for those on the lower increases (or indeed those with no increase at all – the squeezed middle politicians talk about).
Changing seasons for Budgets and Statements
Finally, the Statement included an announcement to change the Statement/Budget cycle to an Autumn Budget and a Spring Statement, but gave no clue to when each will happen. Will this mean late-November for the Budget (as the last Statement has been) and as late as May for the Statement?
But why can’t they just state a month?
The Gov.uk website says this means ‘tax changes will be announced well in advance of the start of the tax year’, although it’s not clear how that differs from how things are already, or were.
For example, we knew what the Tax changes for 2017 would be in the 2016 Budget last March ,
but as the Finance Bill doesn’t become an Act of Parliament much later (the 2016 Finance Bill only passed in September) it meant we were implementing them before they were ‘official’ so to speak.
This new way would seem to indicate that notification of tax changes will be made later in the year, but closely followed by the Finance Bill in the Spring – this will give employers and the payroll industry very little time to adapt to any amendments made during the Committee stage of the bill and will make for interesting times during the winter period.