With the UK economy struggling amid Brexit uncertainty, low productivity and downgraded growth, millions of business owners were waiting to see what Philip Hammond could do to help them in Wednesday’s Budget speech.
The Chancellor announced a range of measures that are likely to have widely varying impacts on different parts of the economy. So who were the winners and losers?
The biggest roar of the day came after Mr Hammond announced his “rabbit in the hat”: abolishing stamp duty for first-time buyers on properties up to £300,000.
The Chancellor said the move would cut the tax for 95 per cent of first-time buyers – and abolish it altogether for 80 per cent of them. This should help support demand in the housing market.
However, the Chancellor also signalled that he would move to crack down on land hoarding by property developers, a practice that helps keep house prices – and company profits – high.
Markets interpreted the announcements as a net loss for the builders. Shares in big house builders like Taylor Wimpey, Barratt and Persimmon all fell sharply during and after the Budget speech.
When it came to tackling climate change, the Chancellor’s approach seemed to be, “give with one hand; take with the other”. He made great play of new backing for electric vehicles, then invoked Blue Planet II and told the chamber that the UK has “led the world on climate change agreements, and is a pioneer in protecting marine environments”.
Three minutes later, he announced a tax break for North Sea oil and gas producers, which he called “an innovative tax policy” to help encourage companies to extract the region’s 20 billion barrels of oil.
The policy means buyers of oilfields will get a tax refund on costs they incur when decommissioning a field at the end of its life. This will please fossil fuel companies, as well as many in Scotland. But it seemed in contradiction to the pledge to spend an extra £400m on an electric car charging network in a bid to tackle climate change.
Dr Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit (ECIU), said: “Despite warm words from the dispatch box, Philip Hammond has failed to deliver on low-carbon energy.”
Multinational digital businesses pay billions of pounds in royalties to tax haven jurisdictions where they are not taxed, Mr Hammond said on Wednesday. From 2019, companies like Amazon and Google will have to pay income tax on any royalties relating to UK sales that they funnel through low-tax states.
This is unlikely to have much of an impact on large digital firms. The Chancellor admitted the measure would bring in just £200m per year. That compares to Amazon’s sales of £7.3bn last year, on which it paid £7.4m in tax.
Mr Hammond said he can’t tackle the problem on his own and that international cooperation was needed, though he assured the nation that the UK is “leading the charge” on that front.
HMRC will also crack down on the £1.2bn of VAT fraud carried out on platforms like eBay and Amazon.
Three changes announced on Wednesday will help small firms worrying about big hikes to business rates (the tax they pay based on the value of their premises).
Most importantly, the Chancellor brought forward a planned switch from increasing rates in line with RPI inflation to the lower CPI measure by two years, a move he said would save businesses £2.3bn. After the next revaluation, future revaluations will take place every three years instead of every five. The measure is intended to avoid the sharp hikes in the tax which many firms are currently facing.
The so-called “staircase tax” has also been abolished. This had seen companies operating over several floors within the same property being handed separate rates bills for each occupied floor, as opposed to one bill for the entire premises.
Small businesses will also have to absorb an increase to the National Living Wage.
Alcohol duty will be frozen instead of increasing in line with inflation duty, in a move that will help the UK’s pubs, many of which are struggling.
The Chancellor also said that duty will rise on “cheap, high strength, low quality products – especially so-called white ciders”, which are tend to be purchased from off-licences and supermarkets rather than pubs. A £1,000 discount on business rates for pubs with a rateable value of less than £100,000 was also extended.
Gig economy companies
• Increase in minimum wage from £7.50 to £7.83
The increase will apply to all workers, including those in the gig economy, putting further pressure on gig-economy businesses to make their business models work, according to Rachel Farr, a senior employment lawyer at Taylor Wessing.
Gig economy firms have faced criticism after a series of accusations that they are not paying their workers the minimum wage.
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