What Does the Spring Statement Mean For You?
- Spring Statement announced yesterday
- Main points include faster growth, possible wages increase, and environmental plan outlined
- What’s missing- no clarification on public spending increases, or pay rises for public sector workers
The Spring Statement was announced yesterday by Chancellor of the Exchequer, Philip Hammond.
The Statement gives an update on the overall health of the economy and an update on progress made since the Autumn Budget in November 2017.
No major changes were announced, instead the Chancellor focused on new consultations and reviews.
What are the key points from the announcement?
The Economy is Growing Faster Than Expected
This is good news for your finances, as it should mean higher wages and lower unemployment.
Many have faced stagnant wages and high rates of inflation due to slow economic growth, but with growth rates better than predicted, this should change.
It should, in theory, also mean higher spending on public services, as the government will have to borrow less, but there was no mention of this in the statement.
Wages Could Rise Above Inflation
Hammond announced that inflation is forecast to fall this year, which is great for making your money go further.
For those on minimum wage, they will already see an increase from April this year, as minimum wage is increasing to £7.38 an hour.
Recently, inflation rates have been way higher than the rise in wages, meaning your money is worth less than before.
But Hammond predicted that by the autumn, real incomes will rise for the first time in two years.
End of the £50 note, 1p, and 2p coins?
One big, and unexpected announcement, was that the Chancellor will have a review on the role of cash and digital payments.
A review will look into the £50 note, the highest bank note in the UK, which are frequently used for money laundering and illegal transactions.
Last year, 500 million 1p and 2p coins fell out of circulation, leading some to question their worth as currency.
The reviews will look into the possibility of scrapping or replacing the £50 note and low value coins.
Update on the Government’s Environmental Battle
A few weeks ago, the government announced a new environmental plan that is aiming to reduce the amount of plastic that the UK uses.
Last week, it was revealed that this would not include the ‘latte levy’, and now Hammond has helped to clarify what will be included.
More tax could be put on chewing gum, crisp packets, and take away boxes to try and cut down on their use.
Other measures might include deposit schemes for plastic bottles, which will reduce littering and boost recycling.
This will mean that products with more plastic in the packaging will probably be going up in price.
In the spirit of helping the environment, there will also be tax breaks proposed for van drivers who buy “clean” models.
Van drivers who buy more eco-friendly new models will be offered cheaper road taxes in the future.
More Affordable Homes
In the Autumn Budget, the Chancellor announced plans to get rid of Stamp Duty Tax for first time buyers so that housing would be more affordable, and more people would be able to get on the property ladder.
Hammond has now announced that there will be an extra £1.67 billion given to build more affordable homes in the UK so that more people will be able to own their own property.
This money should build 27,000 new homes across the UK in the next five years.
Boost for Small Businesses
He also announced an extra £80 million in help for small businesses, including bringing forward a revaluation for business rates.
There will also be a review on a new tax break for startups, called Entrepreneurs’ Relief.
What is Happening to Public Spending?
While nothing was explicitly stated, Hammond dropped a very broad hint that spending increases for the public sector will increase later in the year, possibly in the Autumn Budget 2018.
The Office of Budget Responsibility predicted there would be a £5 billion deficit in the government’s budget, meaning that this will be extra money to spend when it gets to Autumn.
Hammond said that this would give him the capacity to enable increases in public spending and investment in the years ahead.
An increase in public spending could also involve a pay rise for public sector workers, whose pay has been stagnant this year.
This means that should the economy strengthen as forecast, we will see more public spending announced.
What do you think of the proposals? Let us know in the comments.