If Chancellor Phillip Hammond’s Spring Statement passed you by in a snowy haze, then Acumen is here to bring you up to speed. While the Beast from the East may have gobbled up most of the media’s column inches in March, we felt it was important to keep you abreast of the government’s latest economic forecast.
The message coming out of Whitehall, amid the Brexit negotiations and the late winter snow flurries, was one of calculated positivity. The broad brush strokes of which were that the economy “continues to grow, continues to create jobs and continues to beat expectations”.
After five years of consecutive growth, the Office for Budget Responsibility’s (OBR) forecasts hinted at green shoots of optimism. GDP is predicted to rise to 1.5% this year; up from 1.3% in 2017. While inflation is expected to fall over the next 12 months, and wages are predicted to rise faster than prices over the coming five years.
The OBR also reported that employment had risen by 3 million since 2010. That’s the equivalent of 1,000 people finding work every day, bringing the unemployment rate to a 40-year low. A joint record number of 15.1 million women are now in work and the OBR predict that by 2022 there will be more than 500,000 more people in work overall.
But what other predictions and measures mentioned in the Spring Statement could affect you, your family and business over the coming year? Let’s find out.
Borrowing and debt set to fall
After years of belt-tightening and austerity measures, it seems the UK’s public finances may have turned a corner. Borrowing has fallen by 75% since 2010. During the 2009-10 financial year, the UK borrowed £1 of every £4 spent. This year, the OBR expects that figure to be more like £1 of borrowing for every £18 spent. This heralds the first sustained fall in debt for 17 years, amid predictions that debt will fall as a share of GDP.
Sounds rosy doesn’t it? Well, to put that into context, the UK’s debt is still too high at around £65,000 per household. This puts the economy in a precarious position and presents a huge burden for future generations. Alarmingly, our annual £50 billion debt interest payments are greater than the amount spent on the UK’s police and armed forces combined. So, whilst the national debt is moving in the right direction, there is still some way to go yet.
Housing shortage and first-time buyers
During his Autumn Budget speech, the Chancellor announced a £44 billion investment programme over the next five years to raise the supply of homes to an average of 300,000 a year by the mid-2020s. Since then, the Treasury reported that 44 areas of the UK had bid for a share of the £4.1 billion Housing Infrastructure Fund to help build the homes that the country needs.
Positive Autumn Budget news for those of you with grown-up children looking to get on the property ladder was that stamp duty for first-time buyers of homes under £300,000 was to be abolished. Since then, an estimated 60,000 first-time buyers have benefitted from these new rules, according to the Treasury. With the National Living Wage, National Minimum Wage for under 25s and apprentices set to rise, and the tax-free personal allowance all set to rise, the future looks somewhat brighter for our younger generations.
Housing shortage and first-time buyers
The Autumn Budget speech revealed that business rates revaluations will now take place every three years, rather than every five, to ensure bills more accurately reflect the current rental value of properties. Now, in his Spring Statement, Phillip Hammond announced that the next revaluation will be brought forward from 2022 to 2021, so that businesses can benefit from the changes earlier.
Another development set to benefit business owners is the rollout of the government’s £190 million Challenge Fund to roll out full-fibre to local areas. Since this fund was announced at the Autumn Budget, 13 areas across the UK have successfully bid for a share of the £95 million worth of first wave funding. Blackpool and Manchester are among the areas in our immediate north west vicinity that are set to benefit.
Who says all economic forecasts need to be bleak?! We hope this round-up of the Spring Statement gives you food for thought. If you’d like to talk to one of our expert financial advisers about your circumstances and aspirations, then please call Acumen today on 0151 520 4353 or email us at [email protected].