Presenting his last budget before Brexit, UK Chancellor Philip Hammond said on Monday (29 October) that the "era of austerity is finally coming to an end.”
In a speech to parliament lasting over an hour and 20 minutes, the Chancellor announced a raft of fiscal measures and said the UK income tax personal allowance will rise to £12,500 and the higher rate threshold to £50,000 from April 2019, worth at least £130 a year.
He also announced a marginal increase in UK growth forecasts, from 1.3% to 1.6% for 2019, and better-than-expected borrowing figures. ReachX rounds up the response of market commentators to various aspect of the budget.
Carolyn Fairbairn, Director General of the business lobby group the Confederation of British Industry (CBI) said Hammond brought "more treats than tricks” for British businesses ahead of Halloween.
"The budget recognises the enormous contribution enterprise has made to balancing the UK’s books through jobs, pay and tax and responds to many of the recommendations that firms have made. But while the Chancellor has reduced some of biggest barriers to growth, he has missed some opportunities."
Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: "We are delighted that the Chancellor has listened to the voice of Chambers of Commerce and has boosted the Annual Investment Allowance to £1m. This will be a huge shot in the arm for businesses across the country, giving many thousands of firms renewed confidence to invest and grow.
"While today’s Budget measures were largely positive for business, the final and most important piece of the jigsaw is a comprehensive Brexit deal that gives firms the clarity and precision they need. The pro-business measures announced in the Budget will only yield their greatest possible results when paired with a Brexit deal that delivers certainty on the UK’s future terms of trade beyond March 2019.”
However, Matt Kilcoyne, spokesperson for the free market think-tank Adam Smith Institute, said that what the Chancellor gave with one hand, he took with the other: "Quintupling the investment allowance from £200k to £1m will mean businesses invest in equipment and machinery, it’s a promise to kick-start the British economy’s makers and doers. But if the government wants to see American levels of GDP and wage growth then they should move to have all investment be deducted from profits before tax.
"What the Chancellor gave with one hand though, he took with the other as he hit firms large and small that make capital losses by restricting their exemptions—meaning less risk taking, less profit and fewer economic dividends."
Mark Littlewood, Director General of the Institute for Economic Affairs, said: "It’s laudable that the Chancellor has stuck to his commitment to raise the personal allowance – putting more taxpayer money back into their own pockets – but in many respects he is simply making up for lost time. If wages continue to outpace inflation, it won’t be long before more and more workers are dragged back into paying income tax at both the basic and higher rate.
"More broadly, it was a Budget littered with spending commitments across the board. In an attempt to signal the ‘end of austerity’, it appears this government has given up on deficit elimination. It will be more than a quarter of a century since the government last balanced the books; yet despite the deficit still sitting at £25.5bn per annum and the cost of servicing that debt ever on the rise, the Chancellor’s rhetoric suggests this is the new normal. Fiscal responsibility is being sidelined, giving way to short-term giveaways and unaffordable pledges."
In an overview of the budget, Genevieve Moore, Head of Corporate Tax at Blick Rothenberg, said it was great news that the annual business investment allowance has been increased again, "but the constant yo-yo of allowance" does not help businesses plan for future expenditure.
"I would like to see the £1m allowance here to stay for good not just for two years. Good news for smaller high street businesses with a reduction in business rates, but until the consumer is encouraged back to the high street, this alone will not save our towns. I would like to see free parking in all high streets.
"Personal allowance and higher rate threshold increased and earlier than expected meeting the Conservative manifesto pledge and delivering a real tax saving for many of Britain’s workers."
Dr Jonathan Owens, Lecturer in operations management at the University of Salford Business School, and expert in supply chains, said: "Overall I feel there were a lot of sticking plasters announced in this budget and it was disappointing. £420m to tackle potholes on our roads is only a fire fighting approach to this national transportation problem.
"Since 2014, councils in England have paid over £43m in compensation for damaged vehicles. However, this is dwarfed by the £1.7bn each year fixing damaged caused by potholes. Recent data from the AA have found the number of claims from January to April is £1m a month.
"So, how much of the £420m will actually see repairs to the road, but really ring fenced by councils to pay compensation and legal bill for the increased amount of broken vehicles? Is £650m going to be enough to stop the downward spiral on the UK high street? The main advantage of this extra money seems to favour small retailers and not the large. Shoppers are often drawn to the city and town centres by the large retailer and the smaller ones feed off the opportunity buys."
Finally, Richard Powell, partner at accountancy firm MHA MacIntyre Hudson, said: "The Budget has delivered some positive news for manufacturers, a vital sector of the UK economy, but we want to see more policies that focus on this sector in particular.
"Good news includes the £1.6bn to support the Industrial Strategy, increased incentives to invest and improvements in the apprenticeship scheme. Increased investment in research & development (R&D) has been promised, but like many reliefs, the scheme remains far too scattergun in their approach as it’s open to any business, regardless of their importance to the UK economy.
"There’s also nothing to suggest the scheme doesn’t simply give relief to those who would be investing in R&D or plant anyway – we need to see evidence on how these new packages incentivise new investment, rather than support investment that would have been made regardless."
