The return of Box Office Phil: Eulogy’s take on Budget 2017
Phillip Hammond is not known for delivering a political thriller.
On Tuesday, ITV’s Political Editor Robert Peston predicted a drab affair in this year’s Budget. ‘I wouldn’t be at all surprised if this is the dullest Budget of the 60 odd that it’s been my joy and privilege to cover.’
But, to the surprise of almost everyone, this Budget marked a noticeable shift in both tone and direction for the Chancellor. “He’s gone from Eeyore to Tigger. He was brilliant today,” remarked Harlow MP Robert Halfon. Hammond succeeded in retaining control of a very raucous House of Commons, which is no mean feat.
Despite the backdrop of ongoing uncertainty – largely due to Britain’s vote to leave the EU – there was a strong sense of forward-looking positivity in his statement. The majority of his pledges seemed to be addressed to younger audiences, with a strong focus on education, housing and employment.
Hammond’s language contained plenty of phrases such as ‘boundless opportunity’, ‘embracing change’ and ‘building a Britain fit for the future’, however speedily glossed over the other B-word casting a shadow of uncertainty over productivity and financial growth. It was a make or break Budget for Hammond and most would agree that he passed the test in his speech. The challenge now is to turn his well-delivered words into action.
Read on as we take a look at the key takeaways from this year’s Budget, and explore what they mean for British businesses. What were the key pledges? What has been the media reaction? Did Hammond really do that cough sweet gag?
Theresa May embraced the media’s obsession with her shoes, but Hammond is less than keen to accept his John Major-like portrayal as the man in grey. Peppered with jokes and even a visual gag from his humble assistant, the Prime Minister, he managed to conclude with a surprise stamp duty announcement likely to grab the morning’s headlines.
“He’s not called Box Office Phil for no reason,” quipped BBC Political Editor Laura Kuennssberg in her post-Budget analysis video.
Even Twitter was ablaze: the #BudgetBantz showed praise for the Hammond’s “classic puns.” City AM and the Evening Standard immediately published lists of their favourite gags. Even the Guardian’s Andrew Sparrow concluded that the speech “wasn’t quite as boring as some people were expecting.”
Despite the jokes, the Guardian’s Matthew d’Ancona admitted that Hammond’s Budget was not a “substance-free Budget” as the Chancellor tackled a number of serious topics.
The Sun acknowledged that the Budget was aimed at “winning over” the young. The Independent’s Ben Kentish did the maths, remarking that “it says it all that in the Chancellor’s 70-minute speech there were just three mentions of the word “deficit”, and ten of the national debt. In contrast, the Chancellor said “invest” 34 times and “fund” on 30 occasions.”
Boring though he may be beneath the speechwriters, it seems Hammond is smart enough to know that the Tories won’t survive another failure on the front bench.
“Good politics, but is it good policy?,” tweeted the Daily Telegraph’s Steven Swinford, ominously.
In an initial statement, the director-general of the CBI said “this has been a good Budget for a country in tough times.’
But it was hard to escape the bigger picture facing Britain in 2017. The Office for Budget Responsibility (OBR) has cut its forecast – again – for UK economic growth, and the economy is now expected to grow by 1.5 per cent this year, a downgrade from the 2 per cent forecast made in March. Growth predictions have also been cut to 1.4 per cent in 2018 and 1.3 per cent in both 2019 and 2020.
As Jeremy Cook, chief economist at WorldFirst put it: “Thank god for the tax free on spirits, beer and wine because, given these numbers, we’re going to need it.”
The good news for businesses is that rate changes have been brought forward by two years, to April 2018. According to the Chancellor, the move is worth £2.3 billion to businesses over the next five years. Hammond also announced that the point at which small businesses pay VAT will be frozen at £85,000 for the next two years. As the BBC’s Simon Jack pointed out on Twitter, ‘that was a very obvious banana skin to walk around.’
Following the decision, Dr Adam Marshall, director general of the British Chambers of Commerce (BCC), said that “while more remains to be done to reduce the impact of business rates on investment and growth, the Chancellor’s decisions will lessen the impact of rate rises on hard-pressed firms in many parts of the country from next April.” The new measures mean that 90% of pubs in England will receive a discount, while small firms set to lose their rate relief will see increases capped at £50 per month.
Following the Paradise Papers leak earlier this month, it’s perhaps not surprising that cracking down on tax avoidance would be a key pledge in this year’s Budget. Mr Hammond says the Government will start charging more tax on royalties relating to UK sales paid to low tax jurisdictions.
Retailers across the industry have been calling on the Government to freeze business rates, and it looks like their concerns have finally been addressed. Pegging business rate rises to the CPI measure of inflation has been welcomed by the British Retail Consortium (BRC), which released this statement yesterday:
“It’s clear that the Chancellor has listened to the retail industry and the growing chorus from across business and commercial life who have spoken up in favour of action to mitigate rising rates bills. This will be particularly critical at a time when shoppers’ disposable income is being squeezed further and the growth projections for the economy have been downgraded.”
Hammond also announced that the ‘staircase tax’, which adds additional charges to businesses that trade from multiple offices, will be eliminated.
While it’s great news for retail employees, the decision to raise the National Living Wage by 4.4% in April 2018 could offset the gains retailers have made from the adjustments to business rates.
In other news, Hammond announced that duties on ciders, wines, spirits and beer will be frozen in a bid to protect pubs and relieve pressure on the public purse. “Merry Christmas, Mr Deputy Speaker!”
Brexit continues to be the elephant in the House of Commons. Hammond kicked off his speech stating that this Budget is about “much more than Brexit.” However, for businesses and the public alike, there’s no escaping its grip on the current political and economic climate. As such, the Chancellor announced that an extra £3 billion will be set aside for Brexit preparations over the next two years to allow for “every possible outcome.”
As the New Stateman’s Julia Rampen highlighted, this means the Government will be spending more on Brexit than the NHS, which clearly demonstrates how high on the list of priorities Brexit is for the government and for Britain. Liberal Democrat leader Vince Cable was quick to condemn the gap in funding:
“£3 billion of tax payers’ money is disappearing down a black hole. It tells you everything you need to know about this Government’s priorities that more funding has been found for Brexit than for our struggling NHS, schools and police.”
It’s clear that Brexit will continue to take priority over public sector investment. Rightly or wrongly, businesses that depend on the NHS will need to tread carefully over the coming months and years.
Innovation and tech
The Budget was undisputedly tech-driven. Hammond spoke passionately about Britain being at the forefront of a technological revolution, warning that “those who underestimate Britain will do so at their peril”. The Chancellor proudly pointed out that a new tech business is founded in Britain every hour. He ambitiously proclaimed he wants to make this every half-hour. The sky’s the limit.
He pledged to invest in skills and infrastructure to ensure that Britain stays ahead and capitalises on this fourth industrial revolution. He pledged a £500 million investment in 5G mobile networks, fibre broadband and artificial intelligence. Hammond confirmed the Government’s plans to introduce driverless cars to the roads by 2021.
After cracking a joke about Top Gear’s Jeremy Clarkson’s dislike of autonomous vehicles, the Chancellor spoke in more detail about electric cars, pledging £540 million to support the development of these vehicles.
From an environmental perspective, he added that “we owe it to our children that the air they breathe is clean,” and that the increase in electric vehicles would contribute to this improvement. He announced a £220 million clean air fund, generated by tax increases on diesel engines, to help finance local authority plans to tackle traffic pollution. Some environmentalists complained that not enough was pledged to reduce air pollution.
The sizeable sums of money being promised towards innovation and tech led many to question where the money was going to come from. Hammond partly addressed these concerns by announcing that the Government will charge income tax on digital economy royalties, spelling a much-needed end to the tax avoidance of tech giants such as Amazon and eBay.
A large part of Hammond’s Budget announcement was dedicated to addressing the widespread housing shortage in the UK. In a bold move, he boosted younger voters’ housing dreams by announcing that stamp duty is to be abolished immediately for first-time buyers purchasing properties up to £300,000. This was met with cheers from the House of Commons and the UK public, and by groans from those who have recently climbed onto the property ladder, wishing with the benefit of hindsight that they had held off for slightly longer.
Hammond addressed the widespread problem of low housing supply by announcing a long-term goal to build 300,000 homes a year by the mid-2020s. The Guardian’s Jonathan Freedland pointed out “that’s a long time to wait – it won’t come in time for the next election.”
Carolyn Fairbairn, CBI Director-General, echoed the need for immediate action, stating that this “must swiftly translate into delivery”. The Chancellor has also allocated £28 million to Kensington and Chelsea council to provide counselling and mental health support for victims of the Grenfell fire and for regeneration of the surrounding area. He stressed the importance of fire safety, promising that any fire safety concerns would be addressed, with no cost spared.
Education and healthcare
Hammond acknowledged that the key to executing his vision of a successful digital revolution lies in the UK’s education system. He highlighted the importance of equipping the next generation with the necessary skills, and pledged £600 for each new pupil taking maths at A-Level. Computer science in schools has also been given a much-needed boost, with the Chancellor announcing plans to recruit 8000 new computer science teachers, tripling the current number, at a cost of £84 million.
These proposals have been greeted with enthusiasm. James Lyne, Head of Research and Development at cybersecurity training specialists SANS Institute, said: “While the country continues to innovate, we’re left with huge gaps within our workforce – skilled security practitioners who can defend our systems, critical infrastructure and digital economy – so it’s vital that we provide the pipeline of students to take up those roles when they leave school and university.”
Hammond did little to acknowledge the underperformance of schools; many would have preferred to have seen the Government invest money per pupil, regardless of subject specialisation. Green Party co-leader Caroline Lucas indignantly tweeted that “rather than ploughing billions into the Brexit chaos we should be investing in our struggling schools”—a sentiment echoed by many.
The Chancellor was effusive in his praise of NHS staff, recognising the challenging nature of their jobs. He committed pay rises for nurses, midwives and paramedics, but said the deal was conditional on reform of the current system. The Chancellor did commit £2.8 billion of further funding to the NHS over the next two years, which the Daily Express’ David Maddox likened to a “tonic to ease the strain on [the] creaking NHS”. Critics are saying that this figure is not nearly enough, and the NHS will struggle to reach key targets. The King’s Fund said the money was a “welcome shot in the arm”, but less than the £4 billion needed next year.
Reaction to this year’s budget dominated every front page this morning. The Times led with “Feel good Phil,” while The Mirror condemned Hammonds speech as a “No hope Budget.” The Chancellor managed to squeeze plenty of humour and optimism into his speech. Its tone was perhaps best summed up by The Daily Mail’s headline of “Eeyore no more!”
Despite the doom and gloom surrounding Brexit and the economy, there was plenty for Brits to cheer about in this year’s Budget. Relaxing stamp duty for first time buyers and revising business rates were definite crowd pleasers.
The annual Budget humdrum always attracts widespread media attention and fierce debate on both sides of the political spectrum. Hammond was battling for his job last week, but it seems his box office speech may have silenced critics for now.