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Hammond boosts housing and NHS spending as growth forecasts are slashed Hammond boosts housing and NHS spending as growth forecasts are slashed
(about 1 hour later)
Philip Hammond has cut stamp duty for first- time buyers as part of a package of measures to boost the economy, despite a sharp cut in forecasts for economic growth as the UK prepares to leave the European Union. Philip Hammond has reduced stamp duty for first-time buyers as part of a package of measures to boost the economy, despite a sharp cut in forecasts for economic growth as the UK prepares to leave the European Union.
In the government’s first major economic announcement since Theresa May lost the Conservatives’ majority at the election, the chancellor axed stamp duty for the majority of first-time buyers, pumped an additional £2.8bn into the NHS in England and earmarked £1.5bn to cut waiting times for universal credit claimants. In the government’s first major economic announcement since Theresa May lost the Conservatives’ majority at the election, the chancellor axed the property tax for the majority of first-time buyers, pumped an additional £2.8bn into the NHS in England and earmarked £1.5bn to cut waiting times for universal credit claimants.
At the same time, Hammond revealed that the economy would grow much more slowly than he expected at the time of the last budget in March, shaving around half a percentage point a year off his growth forecasts for the coming years.At the same time, Hammond revealed that the economy would grow much more slowly than he expected at the time of the last budget in March, shaving around half a percentage point a year off his growth forecasts for the coming years.
“We understand the frustration of families where real incomes are under pressure. So, at this budget, we choose a balanced approach,” Hammond said.“We understand the frustration of families where real incomes are under pressure. So, at this budget, we choose a balanced approach,” Hammond said.
To pay for the raft of funding measures announced on Wednesday, the chancellor said he would sacrifice some of the wiggle room he created a year ago to smooth a potential hard Brexit.To pay for the raft of funding measures announced on Wednesday, the chancellor said he would sacrifice some of the wiggle room he created a year ago to smooth a potential hard Brexit.
Hammond said he would still be able to meet his target to cut the deficit to below 2% of GDP by the end of the parliament, albeit with less room to spare than before his budget measures are taken into account. The chancellor said he would still be able to meet his target to cut the deficit to below 2% of GDP by the end of the parliament, albeit with less room to spare than before his budget measures are taken into account.
“I reaffirm our pledge of fiscal responsibility and our commitment to the fiscal rules I set out last autumn. But now I choose to use some of the headroom I established then,” he said.“I reaffirm our pledge of fiscal responsibility and our commitment to the fiscal rules I set out last autumn. But now I choose to use some of the headroom I established then,” he said.
But although Hammond said the future was “full of new opportunities” around Brexit, he also set aside an additional £3bn in funding for any unforeseen consequences for the economy. He also said he would allocate more sums if needed. The Labour leader, Jeremy Corbyn, hit back at Hammond’s claim of economic prudence, pointing out that “the deficit was due to be eradicated by 2015, then 2016, then 2017, then 2020 and now 2025”.
Set against a backdrop of growing splits between senior cabinet ministers over talks to leave the EU, Hammond had limited political cover for any missteps. Alongside a weakening economic picture amid Brexit, he was not expected to deliver any radical policy announcements on Wednesday but announced a raft of new funding proposals. “They’re missing their major targets but the failed and damaging policy of austerity remains,” he said, arguing that wages were falling while the number of people sleeping rough had doubled since 2010.
The £2.8bn package of measures for the NHS will see £350m immediately allocated to allow trusts to plan for the winter, while £1.6bn will be given in 2018-2019 and the rest coming in 2019-20. The chancellor did not allocate specific funding to raise public sector pay, despite intense pressure to do so. Instead, he said he would allocate additional funding should independent pay bodies say nurses should get a pay rise. The Office of Budget Responsibility said the budget represented a “net giveaway” in the short-term, and one that was larger than previous financial statements from Hammond and his predecessor, George Osborne.
Hammond said he would help to boost the construction of new homes to 300,000 a year on average by the mid-2020s, up from 217,000 last year in the “biggest annual increase in housing supply since 1970”. To do that, he said the government would provide at least £44bn of capital funding, loans and guarantees to support the UK’s housing market over the next five years. Conservative MPs reserved their largest cheer for the announcement to abolish stamp duty for first-time purchases of properties worth up to £300,000, with those costing £500,000 or less maintaining a 0% tax on the same amount.
However, the OBR’s outlook said the policy was likely to push up property prices and so would not necessarily tackle affordability for those hoping to climb onto the housing ladder. “Thus, the main gainers from the policy are people who already own property, not the FTB’s themselves”.
It quoted an HMRC evaluation of a stamp duty holiday for properties costing up to £250,000 after the financial crisis, which found that the move had not improved affordability and that most of those buying homes would have done so without the relief.
Hammond, who was under pressure from Brexit-supporting MPs who had branded him “Eeyore” for gloomy Treasury forecasts, insisted the future was “full of new opportunities” around Brexit. But he also set aside an additional £3bn for any unforeseen consequences for the economy. He also said he would allocate more if needed.
Set against a backdrop of growing splits between senior cabinet ministers over talks to leave the EU, Hammond had limited political cover for any missteps. Alongside a weakening economic picture and Brexit, he was not expected to deliver any radical policy announcements, but announced a raft of new funding proposals.
The £2.8bn package of measures for the NHS will see £350m immediately allocated to allow trusts to plan for the winter, while £1.6bn will be given in 2018-2019 and the rest coming in 2019-20.
The cash injections will be a one-off and fall short of the £4bn additional next year that the Kings Fund and the NHS chief executive, Simon Stevens, claim is necessary.
The pro-European Labour MP Stella Creasy pointed out that the NHS cash was less than the sum for Brexit:
Just to be clear then, government planning to spend more on brexit than the NHS - £3bn to £2.8bn. Look forward to seeing the bus with that on driving around... #brexithaos #budget17
The chancellor did not allocate specific funding to raise public sector pay, despite intense pressure to do so. Instead, he said he would allocate additional funding if independent pay bodies were to recommend it. The red book suggested that the funding would be for NHS staff on the Agenda for Change contract, listing nurses, midwives and paramedics, but not doctors.
He unveiled a £1.5bn package to ease problems with universal credit, including a 7-day reduction in the wait for a first payment, currently set at up to six weeks, and targeted funding for areas badly affected by the housing benefit freeze. The charity Shelter welcomed the move, but said it hoped the chancellor would go further and unfreeze housing benefit, warning that failure to do so was pushing people into homelessness.
The charity backed Hammond’s plans to boost housebuilding, which included a pledge to increase the construction of new homes to 300,000 a year on average by the mid-2020s – up from 217,000 last year – in the “biggest annual increase in housing supply since 1970”. To do that, he said the government would provide at least £44bn of capital funding, loans and guarantees to support the UK’s housing market over the next five years.
The measures follow calls from MPs across the political spectrum, including some of the chancellor’s senior cabinet colleagues, to make a break with austerity to fund a massive expansion in housebuilding. Sajid Javid, the communities secretary, had previously suggested the government should borrow £50bn to invest in housing.The measures follow calls from MPs across the political spectrum, including some of the chancellor’s senior cabinet colleagues, to make a break with austerity to fund a massive expansion in housebuilding. Sajid Javid, the communities secretary, had previously suggested the government should borrow £50bn to invest in housing.
However, cut in economic growth forecasts will prove troubling to the chancellor as the UK leaves the EU. Growth will slow to 1.5% this year, down from 1.8% in 2016, slowing to 1.4% in 2018. However, the cut in economic growth forecasts will prove troubling to the chancellor as the UK leaves the EU. Growth will slow to 1.5% this year, down from 1.8% in 2016, and fall to 1.4% in 2018.
However, the chancellor said the UK “continues to grow, continues to create more jobs than ever before and continues to confound those who seek to talk it down”. The chancellor said the UK “continues to grow, continues to create more jobs than ever before and continues to confound those who seek to talk it down”.
•Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. But the Lib Dem leader, Vince Cable, said the economy would be £45bn smaller in 2021 than predicted in March. “And this is the least-worst-case scenario,” he said.
“Philip Hammond might as well have sat down and stopped talking once he announced this slump in growth figures. Britain has gone from top of the growth league to deep into the relegation zone, with each person set to be £687 worse off per year.”
However, other measures – the freeze in petrol and diesel duty; the reduction in the business rates rise; and the jettisoning of plans to reduce the VAT threshold for companies – led the Federation of Small businesses to call it “a business friendly budget”.
• Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here.