In an Autumn Statement broadly welcomed by the investment community, Chancellor Hammond delivered few surprises, focusing on closing the UK’s productivity gap, the housing challenge and rebalancing growth and prosperity across the country.
The main headline was that borrowing will be higher than previously expected, as a result of market uncertainty following the Brexit vote, but that only a minor slowdown in growth is expected in the next two years. However, he said the economy had been resilient with GDP growing steadily through the first three quarters of 2016, and employment and living standards continuing to rise.
The Office for Budget Responsibility (OBR) has forecast that UK GDP growth will slow to 1.4% in 2017, and then recover to 1.7% in 2018, 2.1% in both 2019 and 2020, and 2.0% in 2021. Chancellor Hammond said this relatively modest slowdown confirmed the underlying strength and resilience of the British economy in a challenging period – in fact the IMF predicts the UK will be the fastest growing major advanced economy in the world this year.
The Chancellor announced a new GBP23 billion ‘National Productivity Investment Fund’ (NPIF) – which will focus over the next five years on raising the UK’s productivity across a range of areas, from housing to transport upgrades, digital communications and research.
The government also welcomed the National Infrastructure Commission’s report into the Cambridge-Milton Keynes-Oxford growth corridor and the need for an Oxford-Cambridge expressway, to which it committed GBP27 million of development funding.
The government’s Northern Powerhouse Strategy was also published, focusing on unlocking productivity across the North of England through greater devolution of powers and funding of local infrastructure schemes. A plan for the Midlands is due to follow shortly.
Letting agents’ fees
There will be a ban on letting agents’ fees to tenants, often relating to the administration around reference, credit and immigration checks. This ban will happen “as soon as possible” as the government wants to improve competition in the private rental market and give renters greater understanding and control their costs. The Department for Communities and Local Government will consult ahead of enacting legislation and we await further clarity on how this might be delivered.
A GBP3.7 billion package of measures was announced, which will aim to support the delivery of 40,000 more affordable homes in England. Earlier this month it was revealed that the number of affordable homes being built in England had sunk to its lowest level in 24 years.
The package also includes a new Housing Infrastructure Fund of GBP2.3 billion funded by the NPIF, which aims to provide infrastructure targeted at encouraging the construction of new private house building in high-demand areas. There will also be a large-scale regional pilot of the Right to Buy scheme for housing association tenants, with more than 3,000 tenants being able to buy their own home with Right to Buy discounts.
The full details of the government’s plan to increase housing supply and improve affordability will be revealed when they publish their Housing White Paper.
The Personal Allowance, the amount of income earned before one starts paying income tax, will rise from GBP11,000 this year to GBP11,500 in 2017-18. The point at which one pays the higher rate of income tax will increase from GBP43,000 this year, to GBP45,000 in 2017-18. Once the Personal Allowance reaches GBP12,500, it will increase in line with inflation.
A raft of major investments in the UK have been announced since the EU referendum, from firms such as GSK, Nissan, Google, IBM and Facebook. Hammond revealed the government would make “business-led recovery” a key pillar of its strategy, with an announcement that the current rate of corporation tax of 20% will be cut to 17% by 2020.
The significant investment in infrastructure and housing should aid regeneration in many parts of the country and stimulate growth, productivity and property prices. Despite any short-term uncertainty and volatility as the UK negotiates its departure from the EU, we remain confident in the UK’s medium-to-long-term economic prospects.