Autumn Statement November 2016 by Rob Cressey Group Finance Director
As Group Finance Director for LTE group, I listened to Phillip Hammond’s first Autumn Statement this week with great interest. I have summarised the key announcements and how they might affect our organisation and colleagues as individuals.
- There is no change to the spring budget’s settlement on corporation tax and business rates which confirmed that Corporation Tax will fall from 20% to 17% by 2020.
- National Insurance thresholds for employers and employees are to be equalised at £157 per week (currently £155 for employees and £156 for employers). This means that both employees and employers will pay less national insurance
- There was no specific update on the role of employees on organisation’s boards, despite a lot of talk in the press in the week beforehand
- Insurance Premium Tax will increase from 10% to 12%. This has an impact for LTE group but also for individuals on insurance policy costs
- The National Minimum Wage increases from £7.20 per hour to £7.50 in April 2017. This will not impact LTE as we have adopted the Living Wage already, and this is significantly above the minimum wage
- Tax savings on salary sacrifice and benefits in kind to be stopped, with the exception for pensions, childcare and cycling. LTE is to consider whether this has any impact on our internal Reward approach to colleagues
- Maintained the budget settlement of tax-free personal allowance threshold increasing from £11,000 to £11,500. By the end of this parliament it will rise to £12,500 and the upper tax bracket threshold to £50,000
- A new savings bond will be introduced through NS&I, which will give 2.2%gross for three years up to £3,000 balances only. More detail in the spring budget
- No increase in fuel duty.
Education and skills
- Spending by Ministry of Justice will be the main exception to the rule on not increasing departmental budgets as £500m is to be made available for prison safety and reform to the justice system (including the recruitment of 2,500 extra prison officers as previously announced)
- No changes to existing settlement for 16 to 18 or 19 plus funding, nor anything about learner loans
- An additional £2bn by 2020 for Research and Development investment for Higher Education institutions.
- Capital fund to support the Government’s policy on grammar schools.
Devolution to cities and regions
- Publication of Government strategy on boosting productivity across the Northern Powerhouse (to be followed by one for the Midlands Engine)
- £1.8 billion to be allocated from the Local Growth Fund to the English regions
— £556m to LEPs in the North of England
— £542m to the Midlands and East of England
— and £683m to LEPs in the South West, South East and London
- New borrowing powers for mayoral combined authorities, including Greater Manchester Combined Authority
- The budget for the Work and Health Programme, subject to certain conditions being met, will be devolved to the Greater London Authority and to Greater Manchester
- The Government will begin talks on funding for transport with Greater Manchester
Welfare and benefits
- All welfare spending to be kept below its cap. No plans to introduce any further welfare measures in this parliament (ie no new spending on welfare).
- A ban on imposition of up-front fees by letting agents
- A £2.3bn Housing Infrastructure Fund will lead to 100,000 new houses in areas of most demand and £1.4bn specifically on building 40,000 additional affordable homes (a wider range of types of homes will qualify).
- The Help to Buy equity loan scheme and Help to Buy ISA to continue.
Infrastructure and innovation
- Reflecting the need to invest in infrastructure and innovation for productivity. There will be a National Productivity Investment Fund of £23bn to fund infrastructure projects; an additional £2bn by 2020 for R&D investment, and a commitment to spending by Government between 1% and 1.2% of GDP from 2020 on economic infrastructure.
- £1bn to be spent on digital infrastructure for 5D. Also business rate relief of 100% on investment in new fibre, from April 2017.
- Announcement of £1.1bn to fund English local transport network with an additional £220m on traffic pinch points, £450m on digital rail signalling, and £390m on low emission vehicle development. More detail on specifics for Transport for the North in the coming weeks.
My opinion on the budget as a whole is that it reflects the current state of the economy. The Chancellor has presented a budget that is designed to continue investment in infrastructure, housing and transport. For LTE group, there are elements for us to consider around spending by the Ministry of Justice, investment for Higher Education institutions and more devolved spending powers.
For individuals, it is more of a ‘mixed bag’ with news of the national minimum wage, personal allowance increase, a freeze on fuel duty, and tax savings on salary sacrifice and benefits in kind to be stopped meaning different impacts depending on individual circumstances.