Spring Statement 2018 – what’s in it?

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There was no Budget but a Spring Statement instead. It was quite brief, but there were some interesting nuggets. What’s in it?

Spring statement 2018 – forecasts

The chancellor said that forecasts for economic growth in the current year and next year were slightly better than they were in the Autumn Budget last year. However, in a few years’ time, the UK is expected to grow by less than forecast. GDP is expected to grow by:

  • 2017-18: 1.7% (compared to 1.5% in the Autumn Budget)
  • 2018-19: 1.5% (1.4% forecast in the Autumn Budget)
  • 2019-20: 1.3% (1.3%)
  • 2020-21: 1.3% (1.3%)
  • 2021-22: 1.4% (1.5%)
  • 2022-23: 1.5% (1.6%)

The Office for Budget Responsibility (OBR), which produces the forecasts says it’s hard to predict exactly what’s going to happen while the government is still negotiating Brexit.

Brexit Bill

The Office for Budget Responsibility predicts that the Brexit divorce bill will be £37.1 billion, with 75% of that being paid in the next five years. However, some payments will continue to be made until 2064.

The UK will continue to pay towards the EU as if it was still a member, until December 2020.

Inflation

Inflation reached 3.1% in November last year and the OBR expects it to fall to around 2% in 2019 – 2020 and remain near that level for the next two years.

Debt

Borrowing will fall to £39.5 billion in 2018-19 to £25.6 billion in 2022-23.

Debt (which is everything we owe) will peak at 85.6% of gross domestic product (GDP) this year. That’s a bit lower than was predicted last Autumn. It will fall so that by 2022-23 it will be 77.9% of GDP.

Announcements on housing

The chancellor announced a new funding to increase the number of homes built. There’s to be:

  • £100 million for 215,000 homes in the West Midlands by 2030-31.
  • £1.67 billion for 26,000 affordable homes in London
  • An extra £60 million to support small and medium sized house builders.

There’s currently a review into whether builders are land banking. Land banking refers to buying up land but not building properties on them for some time.

Sir Oliver Letwin, who’s carrying out the review, published a letter with his early findings. Having read the letter, what seems to be the case is that housebuilders control how quickly properties are built and put on the market for sale in order that the price isn’t affected (or isn’t affected much).

There are other factors affecting the rate at which properties are built, but that’s what leapt out at me.

A final report will be published later this year. You can read the letter I’ve referred to on the Treasury website.

Consultations

Cash and digital payments

The chancellor didn’t announce this consultation, but it’s on the Treasury website (but you have to look for it!). It’s a consultation into the future of cash and digital payments. There are some interesting stats:

  • Cash made up 62% of all payments in 2006 and 40% in 2016 and is predicted to fall to 21% in 2026. Only 15% of consumer spending was in cash in 2015.
  • Around 2.7 million people rely entirely on cash. Over half of those who did had a total household income of less than £15,000 a year.
  • Digital payments have grown by 85% since 2006. Contactless payments have grown by 20 times in the three years to June 2017.
  • 1p and 2p coins are only used once before they’re either saved or thrown away (apparently in 8% of cases these coins are thrown away!). That means they have to be replaced and it’s expensive to do.
  • Cash wholesalers now have a stock of coins where there’s falling demand (because more of us are using digital payments).

The Treasury is considering scrapping 1p and 2p coins, and possibly £50 notes. You can read the full consultation on the Treasury website.

VAT threshold

There’s a consultation into the VAT threshold and whether it’s a barrier to small businesses expanding. Currently, if your turnover is £85,000 or more, you have to register for VAT. You can register if your turnover is below £85,000.

Tax and online sellers

There’s a consultation into tax and online marketplaces. It’s not about the tax that global online companies pay, rather making sure that people and companies who sell through these platforms pay the right tax. You can read more in the consultation document

Single use plastic

The chancellor announced a consultation into plastic bags, cups and wrappers. If you want to read more, you can find the consultation document on the Treasury website.  It’s looking at everything from when traditional plastics could be replaced with biodegradable options and the best way to reduce their use.

Related articles:

Scottish and English income tax rates 2018/19

Autumn Budget 2017; how are you affected

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