Chancellors Spring Statement

Spring Statement 2019

Chancellor Philip Hammond presented his second Spring Statement to the House of Commons on 13 March 2019, alongside the publication of the Office for Budget Responsibility’s updated forecasts for growth and borrowing.

Below, are the key points he delivered in his speech. To view the full speech, please click the following link.

About this report
This report was written immediately after Philip Hammond delivered his speech and has been prepared from press releases and other documents. It is not intended to cover every aspect of the Statement but, instead, is designed to act as overview only. No liability is accepted for any action taken or refrained from in consequence of its contents. Advice should always be sought from a professional.

The government claim their efforts to build a stronger, fairer economy are paying off and that the economy remains resilient, and is forecast to continue growing:

  • there have been nine consecutive years of growth, and the OBR has forecast further growth every year for the next 5 years; 1.2% in 2019, 1.4% in 2020 and 1.6% for the next three years, thereafter.
  • since 2010, the economy has grown faster than France, Italy and Japan.
  • the OBR expects inflation to stay close to or on target for the duration of the forecast.
  • business investment is forecast to start growing again from next year, once businesses have the certainty they need to invest.
  • borrowing has already been reduced by four-fifths since 2009-10 and debt has begun its first sustained fall in a generation; 2018/19 £22.8bn, 2019/20 £29.3bn, 2020/21 £21.2bn, 2021/22 £17.6bn, 2022/23 £14.4bn, 2023/24 £13.5bn   
  • debt fell last year, and is forecast to fall continuously, to 73.0% of GDP in 2023-24, compared to the peak of 85.1% in 2016-17.
  • the public finances have continued to improve since the autumn. Borrowing and debt are lower in every year of the Spring Statement 2019 forecast than at Budget 2018.
  • the government is focused on keeping debt falling so as to not burden the next generation. The government is taking a balanced approach, reducing borrowing and debt, while supporting public services, investing in the economy and infrastructure, and keeping taxes low
  • and employment continues to break records;
    • since 2010 there are over 3.5 million more people in work, and the OBR forecast employment will increase by a further 600,000 by 2023.
    • the unemployment rate of 4.0% is the lowest rate since 1975. The OBR forecast it will remain near historic lows over the next five years.
    • wages are increasing at their fastest pace in over a decade, and are forecast to continue growing faster than inflation, which means more money in people’s pockets.
    • since 2010, there are a million fewer workless households and every region and nation of the UK has higher employment and lower unemployment.

Ensuring people have the skills that employers need is vital to creating the workforce of the future. The Budget set out steps to equip people with the skills to succeed in the modern economy, and today the Chancellor announced:

  • updates to apprenticeship reforms announced at Budget, mean from April 1st, employers will see the co-investment rate they pay, cut by a half from 10% to 5%, at the same time as levy-paying employers are able to share more levy funds across their supply chains, with the maximum amount rising from 10% to 25%.
  • to tackle period poverty in schools, the Department for Education will lead work to develop a national scheme in England to provide free sanitary products to girls in secondary schools.
  • the government has appointed Professor Arindajit Dube to undertake a review of the latest international evidence on the impact of minimum wages, to inform future National Living Wage policy after 2020.

Tax

Making Tax Digital(MTD) – Mandatory digital record keeping for VAT for businesses over the VAT threshold (with turnover over £85,000) comes into force from 1 April. This is an important first step in this modernisation of the tax system to which the government remains committed. The government can confirm a light touch approach to penalties in the first year of implementation. Where businesses are doing their best to comply, no filing or record keeping penalties will be issued. The focus will be on supporting businesses to transition and the government will therefore not be mandating MTD for any new taxes or businesses in 2020.Today the government will publish:

  • Structures and Buildings Allowance –Draft legislation, published for comment, on introducing a new, permanent allowance for investments in non-residential structures and buildings to create a more competitive tax regime for businesses, as announced at Budget 2018. The government intends to lay this legislation early this summer.
  • Aggregates Levy review – A discussion paper launching a review of the Aggregates Levy, including the Terms of Reference, information on timing and scope of the review as well as membership of an expert working group.
  • Offshore receipts in respect of intangible property – Draft regulations to ensure the provisions apply as intended, and draft guidance relating to the practical application of the measure.
  • Hybrid and other mismatches – Draft regulations to update the definition of regulatory capital instruments that are entitled to an exemption within the hybrid mismatch rules.
  • General Anti-Abuse Rule (GAAR) Amendments – A technical note alongside draft legislation on minor procedural and technical changes to the GAAR legislation to ensure that it works as intended.
  • National Insurance Contributions (NICs) Employment Allowance draft regulations – A document inviting technical comments on the draft regulations implementing the reform, as announced at Budget 2018, of the NICs Employment Allowance to restrict itto businesses with an employer NICs bill below £100,000.
  • Child TrustFunds(CTF): consultation on maturing CTFs – Draft regulations to ensure that CTF accounts can retain their tax-free status after maturity.
  • VAT Simplification and the Public Sector – A policy paper exploring a potential reform to VAT refund rules for central government, with the aim of reducing administrative burdens and improving public sector productivity.
  • VAT Partial Exemption and Capital Goods Scheme: Simplification – A call for evidence on potential simplification and improvement of the VAT Partial Exemption regime and the Capital Goods Scheme, ensuring they are as simple and efficient for taxpayers as possible. This follows on from the recommendations of the Office of Tax Simplification, who have looked in detail at our VAT system and possible areas for improvement.
  • Worldwide harmonised Light vehicles Test Procedure (WLTP)and vehicle taxes – A government response following the review into the impact of the WLTP on Vehicle Excise Duty and company car tax.
  • Consultation on the use of diesel by private pleasure craft – A consultation seeking evidence on the likely impact of the government’s proposal to require diesel-powered private pleasure craft to only use full duty paid heavy oil (white diesel) for propulsion, replacing the existing system where private pleasure craft use marked gas oil (red diesel) but pay the white diesel rate of fuel duty.
  • Review of Time Limits – A report, as required by Section 95 of Finance Act 2019, comparing the time limits for the recovery of lost tax involving an offshore matter, with other time limits, including those provided for by Schedules 11 and 12 to the Finance (No. 2) Act 2017. In the report the government will set out the rationale for the charge on disguised remuneration (DR) loans legislated in Finance (No. 2) Act 2017 and its impacts. The report will be laid by 30 March 2019.
  • Social Investment Tax Relief (SITR) – A call for evidence on the use of the SITR scheme to date, including why it has been used less than anticipated and what impact it has had on access to finance for social enterprises.
  • Enterprise Investment Scheme (EIS) approved funds guidelines –Draft guidelines for comment alongside draft legislation. The document will contain guidelines stating HMRC’s proposed policy and practice for approving funds. The legislation will include powers for HMRC to set appropriate conditions and approve funds.
  • CGT private residence relief – A consultation on the changes announced at Budget 2018 to lettings relief and the final period exemption, which extend private residence relief in capital gains tax. They will also publish summaries of responses to the following documents, launched at recent fiscal events:
    • Structures and buildings allowance – A technical note on the introduction of this allowance.
    • Protecting your taxes in insolvency – A consultation launched in February 2019, following the announcement at Budget 2018, to make HMRC a secondary preferential creditor for certain tax debts paid by employees and customers on the insolvency of a business.
    • Corporate Capital Loss Restriction – A consultation on a change announced at Autumn Budget 2018, to restrict, from 1 April 2020, the amount of carried-forward capital losses a company can offset to no more than 50% of the chargeable gains arising in a later accounting period.
    • Stamp Taxes on shares consideration rules – A consultation on aligning the consideration rules of Stamp Duty and Stamp Duty Reserve Tax and introducing a general market value rule for transfers between connected persons.
    • Digital Services Tax – A consultation on the detailed design and implementation of the Digital Services Tax that will take effect from 1 April 2020.
    • Amendments to tax returns – A call for evidence on simplifying the process of amending a tax return.

Since 2010, the government has: secured and protected over £200 billion of tax that would otherwise have gone unpaid; introduced over 100 measures to reduce avoidance, evasion and other forms of non-compliance; and continued to support taxpayers to get their tax right. Today the government will publish:

  • Tackling tax avoidance, evasion and other forms of non-compliance – A policy paper setting out the government’s achievements.
  • Offshore tax compliance strategy: No Safe Havens 2019 – A policy paper setting out the direction for HMRC’s updated strategy for offshore tax compliance, bringing together the government’s response to all forms of offshore non-compliance. This reflects the substantial progress that the UK has made since the last strategy was published in 2014 and complements the paper on avoidance and evasion activity to date.
  • Preventing abuse of the R&D tax relief for small-or-medium-sized enterprises (SMEs) – A consultation on the measure announced at Budget 2018, as part of the package on tax avoidance. This consultation will focuson how the measure will be applied, to minimise any impact on genuine businesses.
  • Insurance Premium Tax operational review – A call for evidence on where improvements can be made, to ensure that Insurance Premium Tax operates fairly and efficiently.
  • VAT Administration in the Isle of Man – HM Treasury’s findings and recommendations to ensure the right VAT continues to be paid and collected in the Isle of Man. Following the Paradise Papers allegations, the Isle of Man Government invited HM Treasury to review its VAT administration processes for the importation of aircraft and yachts.

The Government's Budget 2018, included significant additional support for cutting-edge science and technologies that they claim will  transform the economy, create highly skilled jobs, and boost living standards across the UK. Today the Chancellor:

  • welcomed the Furman review, an independent review of competition in the digital economy, which has found that tech giants have become increasingly dominant. The Chancellor announced that the government will respond later in the year to the review’s calls to update competition rules for the digital age – to open the market up and increase choice and innovation for consumers
  • has written to the Competition and Markets Authority (CMA) asking them to carry out a market study of the digital advertising market as soon as is possible. This was a recommendation of the Furman Review
  • committed to funding the Joint European Torus programme in Oxfordshire as a wholly UK asset in the event the Commission does not renew the contract, giving the world-leading experts working at the facility certainty to continue their ground-breaking fusion energy research
  • invested £81 million in Extreme Photonics (state-of-the-art laser technology) at the UK’s cutting-edge facility in Oxfordshire.
  • boosted the UK’s genomics industry with £45 million for Bioinformatics research in Cambridge.
  • announced £79 million funding for a new supercomputer in Edinburgh – five times faster than existing capabilities – whose processing power will contribute to discoveries in medicine, climate science and aerospace, and build on previous British breakthroughs including targeted treatments for arthritis and HIV

As the UK leaves the EU, the Government said it is vital that the world knows the UK is open for business and attractive to international visitors. At the Spring Statement is was announced that:

  • from June 2019, citizens of the US, Canada, New Zealand, Australia, Japan, Singapore and South Korea will be permitted to use e-gates at UK airports and at Eurostar terminals. This will significantly reduce queues and improve the flow of passengers and the overall experience at the UK border.
  • landing cards will also begin to be abolished from June 2019. This will reduce bureaucracy for travellers and speed up the processing of passengers on arrival in the UK.
  • research institutes and innovating businesses will benefit from an exemption for PhD-level occupations from the cap on high-skilled visas from this autumn. Overseas research activity will also count as residence in the UK for the purpose of applying for settlement, meaning researchers will no longer be unfairly penalised for time spent overseas conducting vital fieldwork

The government said it is determined to fix the broken housing market. They went on to say, building more homes in the right places, is critical to unlocking productivity growth and makes housing more affordable. At Autumn Budget 2017, the government set out a comprehensive package of new policies, to raise housing supply by the end of this Parliament to its highest level since 1970, on track to reach 300,000 a year on average. The Spring Statement set out further steps to deliver this ambition:

  • published a consultation on Infrastructure Finance, seeking views on how the government can best support private infrastructure investment in the context of the UK’s changing relationship with the European Investment Bank.
  • reiterated the government’s commitment to publishing a comprehensive National Infrastructure Strategy – the first of its kind – setting out the government’s priorities for economic infrastructure and responding to recommendations in the National Infrastructure Commission’s National Infrastructure Assessment.
  • £717 million from the £5.5 billion Housing Infrastructure Fund to unlock up to 37,000 homes at sites including Old Oak Common in London, the Oxford-Cambridge Arc and Cheshire.
  • through the Affordable Homes Guarantee Scheme, the government will guarantee up to £3 billion of borrowing by housing associations in England to support delivery of around 30,000 affordable homes
  • further progress on delivering growth in the Oxford-Cambridge Arc including £445 million from the Housing Infrastructure Fund to unlock over 22,000 homes, and a joint declaration with local partners, affirming our shared vision for the Arc.
  • up to £260 million for the Borderlands Growth Deal, which on top of the £102 million announced recently for Carlisle from the Housing Infrastructure Fund means up to £362 million UK Government funding into the Borderlands area.

The Budget 2018 set out how the government is accelerating the shift to a clean economy, building on the Industrial Strategy, Clean Growth Strategy, and 25 Year Environment Plan. The Spring Statement builds on this commitment:

  • to help smaller businesses reduce their energy bills and carbon emissions, the government is launching a call for evidence on a Business energy efficiency scheme to explore how it can support investment in energy efficiency measures.
  • to ensure that wildlife isn’t compromised in delivering necessary infrastructure and housing, the government will Mandate net gains for biodiversity on new developments in England to deliver an overall increase in biodiversity.
  • to help meet climate targets, the government will advance the decarbonisation of gas supplies by increasing the proportion of green gas in the grid, helping to reduce dependence on burning natural gas in homes and businesses.
  • to help ensure consumer energy bills are low and homes are better for the environment, the government will introduce a Future Homes Standard by 2025, so that new build homes are future-proofed with low carbon heating and world-leading levels of energy efficiency.
  • to explore ways to enhance the natural environment and deliver prosperity, the government will launch a global review into the Economics of Biodiversity.
  • to give people the option to travel ‘zero carbon’, the government will launch a call for evidence on Offsetting Transport Emissions to explore consumer understanding of the emissions from their journeys and their options to offset them. This will also look into whether travel providers should be required to offer carbon offsets to their customers.
  • to help protect critical habitats, the government will support the call from the Ascension Island Council to designate 443,000 square kilometres of its waters as a Marine Protected Area, with no fishing allowed
Philip Hammond | Chancellor of the Exchequer

"We have huge opportunities ahead of us: Our Capital is the world’s financial centre; Our Universities are global powerhouses of discovery and innovation; Our businesses are at the cutting edge of the tech revolution; And we have shown that we are not shy, as a nation, of the tasks that lie ahead: We are addressing the environmental challenges that threaten our planet; We are building the homes that the next generation desperately need.

We are investing in our future, tackling the productivity gap and embracing technological change, rising to its challenges and seizing its opportunities. Our potential is clear, our advantages are manifest. We are the fifth largest economy in the world. A proud, successful, outward-looking nation, with no limit to our ambition and no boundaries to what we can achieve. A brighter future is within our grasp."

John McDonnell | Shadow Chancellor

"Let me thank the Chancellor for providing me with an early sight of his statement – no matter how heavily redacted. We have just witnessed a display by the Chancellor of this government’s toxic mix of callous, brutal complacency over austerity and its grotesque incompetence over the handling of Brexit.

Whilst teachers are having to pay for the materials their pupils need; working parents are struggling to manage as schools close early and their children are sent home. 5,000 of our fellow citizens will be sleeping in the cold and wet on our streets tonight. Young people being stabbed to death in rising numbers. And, the Chancellor turns up today to threaten us that austerity can only end if we accept a bad Brexit deal. Let’s look at some of the Chancellor’s claims.

The Chancellor has boasted about the OBR forecast of 1.2% growth this year. What he hasn’t mentioned is that the forecast has been downgraded from 1.6% – downgrading forecasts is a pattern under this Chancellor. In November 2016, forecasts for the following year were downgraded from 2.2% to 1.4%. In autumn 2017, forecasts for the following year were downgraded from 1.6% to 1.4%."  Read full statement here

Adam Marshall | Director-General of the British Chambers of Commerce

"Against this backdrop, the focus of the Spending Review and Autumn budget later this year must be on fixing the fundamentals here at home from productivity and skills, to digital and physical infrastructure, to enable businesses to drive UK economic activity through Brexit and beyond.”

Rain Newton-Smith | CBI Chief Economist

“Against a hugely uncertain political backdrop the Chancellor has made an admirable attempt to set out a long-term vision for the UK economy, yet remains shackled by Brexit. This year’s forecast downgrade brings the danger of no deal to the UK economy sharply into view. It must be avoided. Meanwhile, space must be found for the UK’s domestic agenda. Standing still while the world continues to turn is not an option.

The Chancellor’s rightly identified the need to go further and faster in combating climate change. His ambition for all new homes to be heated sustainably will ensure we make better progress towards a zero-carbon economy. Prompt payment practices are good for businesses throughout the supply chain, so if reporting encourages better behaviour from firms that should be welcomed.

However, going it alone on a digital services tax is high risk, especially at a time when the UK already looks increasingly isolated. The EU has dropped their plans and got behind the OECD’s efforts - the UK should follow suit. The government needs to be doing all it can to encourage investment in the UK and adoption of new technologies, not putting up barriers.”

Edwin Morgan | Interim Director General of the Institute of Directors

“In all honesty, today’s Spring Statement will barely register with most business leaders, as Brexit uncertainty continues to cast a shadow over their organisations. Warm words and proposed consultations are not enough for businesses at a time when confidence is rock bottom and investment plans are eroding away, and many will find it difficult to tread water until more decisive action at the Autumn Budget.

While a ‘no deal’ would wreak certain havoc for many firms, we must also avoid being lulled into thinking an exit deal alone is a substitute for providing a real economic impetus that lowers costs, spurs productivity growth, and supports businesses as they adjust to Brexit, whatever its form. Indeed, the fact that the OBR lowered its forecast for GDP growth this year – based on a smooth exit from the EU – highlights just how much the economy is set to fall below its potential, even in a relatively benign scenario.

On the upside public finances are in rude health, but the Chancellor missed a vital opportunity to outline more clearly how this might be used to build a positive long-term economic vision for businesses to get behind. Today has turned out to be even more of a non-event than anticipated, and it is yet further evidence of how the Brexit process is sapping the momentum from our domestic economic policy agenda.”