Spring Budget 2017: A summary
Published Friday, March 17, 2017
A summary of Spring Budget 2017 and the Office for Budget Responsibility's forecasts for the economy and public finances. This briefing now includes detailed discussion of changes to National Insurance contributions for the self-employed and the tax-free allowance for dividend income.
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Spring Budget 2017 was presented by the Chancellor of the Exchequer to Parliament on 8 March. At the same time the Office for Budget Responsibility (OBR) published updated forecasts in its economic and fiscal outlook.
- The main rate of self-employment Class 4 National Insurance contributions to rise from 9% to 10% in April 2018 and 11% in April 2019. The Class 4 rate is currently levied on self-employment profits above £8,060. This change raises between £325 million and £645 million a year. See section 3 of this briefing for more on this change.
- The tax-free allowance for dividend income to be reduced from £5,000 to £2,000 from April 2018. This change raises over £800 million a year from 2019/20. See section 3 of this briefing for more on this change.
- Local authorities to receive around £300 million over the next three years to provide discretionary support for businesses facing increases in business rates bills following April 2017’s business rates revaluation in England.
- Additional funding of £20-25 million a year to support some businesses that no longer receive small business rate relief after the revaluation.
- A 25% charge to be introduced targeted at those seeking to reduce the tax payable by moving their pension wealth to another jurisdiction. This change raises around £60 million a year.
- UK VAT of 20% will apply to mobile phone use by UK residents when outside the EU. Currently VAT is applied when UK residents use their mobile phone inside the EU, but not when outside. The change ensures mobile phone companies cannot use the inconsistency to avoid UK VAT. This change raises around £65 million a year.
- Local authorities in England to receive £2 billion of additional funding over the next three years to spend on adult social services.
- NHS in England to receive an additional £100 million in 2017/18 for capital investment in A&E departments. The funding will support up to 100 new GP triage projects.
- NHS in England to receive £325 million over the next three years to invest in local Sustainability and Transformation Plans (STPs). STPs are locally developed proposals to improve local health and care.
- £320 million of additional spending this Parliament to extend the free schools programme introducing new schools in England, including selective schools. Over £500 million will be provided in 2021/22.
- Additional funding for 16-19 technical education in England. New T-levels, offering technical training routes, will be introduced from 2019/20. Around £300 million will be provided during this Parliament.
- An additional £216 million spread over 2018/19 and 2019/20 for school maintenance.
- The Scottish Government (£350 million), Welsh Government (£200 million) and Northern Ireland Executive (£120 million) receive additional funding through the Barnett formula.
OBR forecasts for the economy
In its March 2017, forecasts compared with its November 2016 forecasts, the OBR:
- expects annual GDP growth to be higher in 2017 but lower in 2018, 2019 and 2020. The forecast for the overall level of GDP from 2019 is very similar
- has left its CPI inflation forecasts broadly unchanged
- has raised average annual earnings growth forecasts for 2017 but lowered them in every year afterwards
- has lowered its unemployment rate forecasts in each year
OBR forecasts for the public finances
In its March 2017 forecasts, compared with its November 2016 forecasts, the OBR:
- lowered its forecast for borrowing in 2016/17 by £13.4 billion (on a like-for-like basis) to £51.7 billion, or from 3.3% of GDP to 2.6%
- expects broadly similar borrowing in each year from 2017/18 to 2021/22, which means the deficit will rise in 2017/18 compared with 2016/17 before falling in future years
- forecasts debt as a proportion of GDP to be lower in all years
The OBR assesses that the Government is more likely than not to meet its fiscal targets for: (i) the cyclically-adjusted, or structural, deficit to be below 2% of GDP by 2020/21, and (ii) debt to be falling as a percentage of GDP by 2020/21.
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