Autumn Statement: Chancellor invests in infrastructure

Investment in infrastructure was a key theme of today's Autumn Statement in an attempt to boost the UK's low productivity as the Chancellor made the surprise announcement of a £7.6m fund to "save" the largest privately-owned house in Europe, Wentworth Woodhouse.

Hammond: This is my first Autumn Statement and it will also be my last
Hammond: This is my first Autumn Statement and it will also be my last

Against a grim economic outlook - Philip Hammond announced that national debt will peak at a national record of 90.2 per cent of GDP in 2017/18, borrowing will reach £69.2bn in 2016 and £59bn in 2017 and the Office of Budget Responsibility cut its growth forecast for 2017 from 2.2% to 1.4 per cent - the Chancellor outlined:

  • a £2.3bn housing infrastructure fund to help provide 100,000 new homes in high-demand areas
  • £1.4bn to deliver 40,000 extra affordable homes
  • £100m in development funding for a new Oxford-Cambridge rail link
  • £27m for development of an expressway between the two cities 

Continued freeze in fuel duty

in his first Autumn Statement other measures included a cut in corporation tax of 17 per cent and a continued freeze in fuel duty, which he said would save the average van driver £350 a year. A doubling of rate relief for rural businesses to 100 per cent from April only applies to lone village shops, post offices, pubs or petrol stations in communities of under 3,000 people.

Hammond said the statement was "based on a sober analysis of our fiscal position but also on a realistic appraisal of the weakness of UK productivity, and the urgent need to address our fiscal challenge from both ends."

He added: "We choose in this Autumn Statement to prioritise additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising Britain’s productivity."

Employers paying the minimum wage, rebranded the National Living Wage by the Government, will see a wage bill increase from April, as the rate rises for the over 25s from £7.20 an hour to £7.50, although this is less than was expected under Osborne’s tenure. Employee and employer National Insurance thresholds will be equalised at £157 per week from April 2017 and insurance premium tax is to rise from 10 per cent to 12 per cent next June.

Klondyke chief executive Bob Hewitt said the garden centre group had budgeted for the increase but added: "It's a challenge. They're all overheads and are something we're going to have to live with. The important thing is having staff hours in the right place. Is 9-5 every day what you want? It's more about looking at structure."

NFU director of policy Andrew Clark said the NFU strongly supported the living wage but was concerned about the speed of implementation. "Accelerating increases will make this even more difficult for employers and we remain concerned about the lack of consultation with the agricultural and horticultural sector on these measures and how they will affect farm businesses," he said.

Chief executive of the British Retail Consortium Helen Dickinson said: "The key takeaway from today’s statement is that while Brexit has not heralded the economic decline some featred the OBR is expecting a significant dent in UK GDP and hence in consumer spending also.

"Some changes will provide a bit more room to breathe for cash-strapped consumers on low and middle incomes. Today’s forecasts show that over the period to 2020 there will be £34bn less in private spending in the UK economy that the OBR predicted in March, while the medium term outlook is challenging for the industry".

The BRC added: "It is positive that the Chancellor has listened to an independent Low Pay Commission with his decision today to introduce a sensible increase to the National Living Wage (NLW) from £7.20 to £7.50 per hour. The retail industry supports the NLW, which is why many retailers go above and beyond the legal requirement by paying it to staff aged under 25, as well as older colleagues."

Departmental spending plans to remain in place

Despite ditching former chancellor George Osborne’s ambition to achieve a budget surplus in 2019-20, there was also no new hope for parks, alongside other public services, following a change of leadership post-Brexit as Hammond confirmed that departmental spending plans outlined last year would remain in place.

Chair of the Landscape Institute’s (LI) policy and communications committee Kate Bailey said more housing and infrastructure was commendable but said poor design was a concern.

"The UK features many poorly-designed housing estates and I believe that a landscape led approach is critical in increasing the supply of high quality liveable housing. It will help make developments more acceptable to existing and future residents and will be a positive evolution in the way we plan and deliver new communities with sustainable lifestyles fit for the 21st century."

She said local authorities should put development proposals through the LI’s 'Build for Life 12', a traffic light system which assesses quality through twelve questions, 11 of which are reliant on landscape planning and design.

The Forum of Private Business said it was disappointed Hammond did not use his first Autumn Statement to support small businesses further.

"The freeze on fuel duty is welcome for all those businesses involved in transport, and the initiatives to support house builders will be good for those businesses in the construction sector, and its supply chain," said forum chief executive Ian Cass, but said there was not much good news for high street businesses and those who relied on imports.

"It is a pity that the Chancellor did not take the opportunity to change the dividend threshold from the existing 5 per cent to 10 per cent as suggested in our 10 point plan, and that the planned reduction in Corporation Tax to 15 per cent, promoted by George Osborne in his final budget, does not appear to have been formerly confirmed by Philip Hammond. This would have gone some way to compensating for the difficulties that some businesses are now facing. It is really disappointing that he has opted for caution over stimulus.

However, HTA policy coordinator Robert Hanson said the association supported the Chancellor’s generally cautious approach "in the currently volatile and uncertain climate."

He added: "We welcome the relief on rural business rates, which according to figures quoted by Philip Hammond could save businesses up to £2,900 a year.

"While significant risks remain the overall message emphasised continuous judiciouness going forward."

Clark added that while there were some positives measures announced in the Autumn Statement, it was disappointing that it fell short of delivering measures that will enable farm businesses to maximise their potential.

"The Chancellor’s planned reduction to the rate of corporation tax, while providing benefits to the supply chain, does little to help the majority of farm businesses that are unincorporated. Farm businesses need to be able to retain and invest profits in infrastructure and equipment to improve their productivity and the tax system needs to recognise and support this, as it does other parts of the economy.

"Although the Chancellor has announced a new National Productivity Investment Fund that will add £23 billion in higher value investment over the next five years, including a £2 billion investment in research and development, it is not clear where this will be spent. The Government must continue its support of the Agri-Tech Strategy and this new investment simply must include the agri-food sector.

"British farming will need a strong and functioning research and development pipeline to deliver solutions to both increase productivity and deliver environmental goods. To achieve this ambition to be at the cutting edge of science and technology, the whole country must be digitally connected and be able to utilise technology.

"We note the announcement of £700 million into full-fibre connections and 5G. We are eager to see what this will deliver for the remaining five per cent unable to access adequate digital infrastructure at the moment – many of whom are in rural areas."

Shadow Chancellor John McDonnell was sceptical on the infrastructure announcement saying there were already £82bn of shovel-ready projects which had not started, repeating many times the refrain of "we've had six wasted years."

"The verdict could not be clearer," he said. "The so called long-term economic plan has failed."

Wentworth Woodford, whose website crashed soon after the announcement has 101 hectares of grounds and gardens and is in need of an estimated £50m to restore it to its former glory. It is not clear how much of that would be used for the gardens. The Wentworth Woodhouse Preservation Trust (WWPT) has £7m ready to buy the property from current owners, the Newbold family.

Speaking to the Rotherham Advertiser, local MP John Healey said today’s announcement was great news.

"We've been meeting ministers and civil servants behind the scenes for over a year, so I’m delighted that the Chancellor today recognised the scale of the challenge in saving Wentworth Woodhouse for the public and backed the huge potential boost it could bring to jobs, businesses and visitors in the north," he said.

Hammond refrained from pulling any metaphorical rabbits out of hats but did surprise the house, by announcing that this was his first Autumn Statement but would also be his last - because he will abolish the Autumn Statement. Instead the budget will be moved back to autumn and there will be a spring statement. Hammond said this would not ordinarily involve any big announcements.

 


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