The 2018 Budget has been announced amid continuing uncertainty about whether the UK can secure a deal on Brexit.
Chancellor Philip Hammond told the House of Commons it is a “budget for hardworking families”, the “strivers, the grafters and the carers” who provide the backbone of the economy.
But he warned yesterday that the Treasury would need to devise a whole new set of policies in the case of a no-deal Brexit. “Frankly we’d need to have a new budget that set out a different strategy for the future,” he said.
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Theresa May has set him some major challenges by claiming that “austerity is over” and vowing to boost the NHS budget by an extra £20bn a year by 2023, while also freezing fuel duty for at least another year.
Today, Hammond told the Commons “the era of austerity is finally coming to an end”, suggesting that there is still some way to go.
So what are his plans for the public’s finances?
The Office for Budget Responsibility expects growth to improve by 1.6% next year, 1.4% in 2020/21, 1.5% in 2021/22 and 1.6% in 2022/23. Hammond said there are 3.3 million more people in work since 2010, claiming the government has created an “economy working for everyone”, to heckles from the opposite benches.
Wages are growing at their fastest pace for almost a decade, he said. Since 2009/10, the deficit has fallen by four fifths and is set to fall to just 0.8% by 2023/24. And, next year, there will be a full public spending review.
Fuel duty freeze
Hammond confirmed that fuel duty will be frozen for the ninth year in a row, as revealed by the prime minister at the Conservative Party Conference earlier this month.
Beer duty freeze
Duty on beer, cider and spirits will also be frozen.
Income tax cut
The Conservatives pledged to raise the amount workers can earn before paying tax to £12,500 by 2020/21, and to raise the starting point for 40% tax to £50,000. These pledges will now be brought forward by a year. Meanwhile, the living wage will rise from £7.83 to £8.21 in April 2019.
More money for Brexit preparations
The Treasury has already allocated £2.2bn across government departments to pay for Brexit preparations and set aside £1.5bn for 2019/20. Today, Hammond said the latter figure would be increased to £2bn.
Mental health services
The Chancellor confirmed that part of the new NHS funding will include an increase in mental health funding by £2bn a year by 2023/24.
Armed forces and counter-terrorism investment
Hammond has promised an additional £1bn to the Ministry of Defence for the rest of this year and next to boost its cyber capabilities and anti-submarine warfare capacity. He also committed an extra £160m in counter-terrorism police funding for 2019/20 and £10m to the Armed Forces Covenant Fund Trust to support veterans with mental health needs.
A pothole fund
The Chancellor said £420m will immediately be made available to help councils tackle road maintenance problems such as potholes. In total, £30bn will be invested in improving roads.
No more PFIs
Hammond said he would not sign any more private finance initiatives (PFIs) by the government. In previous schemes, private firms have competed to be contractors for government, but he said there was insufficient evidence that they worked.
Digital services tax
Digital technology giants will be taxed 2% on the money they make from UK users, announced the Chancellor. It will come into effect in April 2020 and raise £400m a year.
High street investment
A £675m Future High Streets Fund has been announced, as well as a new mandatory business rates relief for public toilets.
Increase in housing fund
The Housing Infrastructure Fund will be given a £5.5bn boost to help build an estimated 650,000 homes.
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