Chancellor Philip Hammond delivers Budget 2018 and declares 'era of austerity finally coming to end'

Philip Hammond has set out his Budget plans in the House of Commons, where he confirmed a £20.5 billion real terms increase for the NHS over the next five years and stated that the "era of austerity is finally coming to an end".

  • Ending austerity

The Chancellor's announcement follows Theresa May's declaration in her Conservative Party conference speech that the era of austerity was finally ending with a cautious loosening of the public spending purse strings.

The Chancellor said the Office for Budget Responsibility (OBR) expected "resilient" growth over the coming years, resulting in a "brighter future" as more can be spent on public services following years of constraint imposed following the financial crash.

Addressing the Commons Mr Hammond told MPs that the Office for Budget Responsibility (OBR) has upgraded its forecast for gross domestic product (GDP (the market value of all the final goods and services produced)) growth in 2019 from 1.3% to 1.6%, then 1.4% in 2020 and 2021; 1.5% in 2022; and 1.6% in 2023.

However, the OBR's forecast is based on a smooth and orderly Brexit.

He continued the OBR predicts 800,000 more jobs by 2023, resulting in over 4.2 million net new jobs since 2010.

The 62-year-old added the OBR has forecast sustained real wage growth in each of the next five years, which ITV News Economics Editor Joel Hills described as a "double end to austerity".

The OBR also forecast that the deficit will be less than 1.4% next year, falling to just 0.8% by 2023/24.

Borrowing this year will be £11.6 billion lower than forecast at the Spring Statement, at 1.2% of GDP, and is then set to fall from £31.8bn in 2019/20 to £26.7bn in 2020-21, £23.8bn in 2021/22, £20.8bn in 2022/23 and £19.8bn in 2023/24, Mr Hammond continued.

Mr Hammond said he is predicted to meet his structural borrowing target three years early, with borrowing of 1.3% of GDP in 2020/21, maintaining £15.4 billion headroom.

He continued that debt peaked in 2016/17 at 85.2% of GDP and then falls in every year of the forecast from 83.7% this year; to 74.1% in 2023/24 - lower in every year than forecast at the Spring Statement - allowing the Government to meet its target to get debt falling three years early.

Mr Hammond continued that he had set out a five-year plan for departmental spending which will see Whitehall budgets rise by an average of 1.2% a year - although the majority of this will be spent on the NHS.

Treasury sources reported that OBR figures had improved because there is expected to be lower unemployment which would lead to an increase in taxes, as well as much stronger tax receipts and slightly lower spending, particularly as a result of lower debt interest on bonds.

The end to austerity will see increased Whitehall spending and early tax cuts for millions of workers, Mr Hammond announced, giving more detail later in his speech.

  • What are the key points from the Budget?

  • Money for Brexit

Monday's annual financial statement is expected to be Mr Hammond's final budget before Britain leaves the EU, although there was little mention of the UK's departure from the EU in Mr Hammond's speech.

Due to the uncertainty surrounding Brexit negotiations, Mr Hammond said he has set aside an extra £500,000 for different Cabinet departments to spend on Brexit preparations for 2019-2020.

Mr Hammond also warned that the spring statement could become an emergency budget if the UK leaves the EU without a deal.

  • Robert Preston on whether or not this budget is a signal that the UK might be close to getting a deal with the EU

  • NHS funding and healthcare

The Chancellor also confirmed the NHS would see a £20.5 billion real terms increase in funding over the next five years.

Following the original announcement in July to mark the 70th anniversary of the creation of the NHS, the health service was told it would have to come up with a 10-year spending plan.

Addressing the Commons, Mr Hammond revealed this would include:

  • A new mental health crisis service, with comprehensive mental health support available in every major A&E

  • Children and young peoples' crisis teams in every part of the country

  • More mental health ambulances

  • More "safe havens" in the community

  • A 24-hour mental health crisis hotline

He added that air ambulance services in England will receive £10 million in state funding.

  • Universal Credit

Mr Hammond has indicated he is ready to bow to the growing clamour from Tory backbenchers for extra cash to ease the transition to Universal Credit when its rolls out nationally from next year.

Many MPs fear that without further support low-paid constituents will be plunged into severe financial difficulties, prompting former prime minister Sir John Major to warn of a voter backlash akin to the poll tax protests which helped bring down Margaret Thatcher.

As a result of the backlash, Mr Hammond announced a £1 billion package of measures over five years to support Universal Credit, and said he was increasing work allowances (similar to personal tax allowances) in Universal Credit by £1,000 a year at a cost of £1.7 billion annually, helping 2.4 million working families with children and people with disabilities by £630 per year.

The tax-free personal allowance is to rise to £12,500. Credit: PA
  • National Living Wage and tax

The Chancellor also announced that from April 2019, the National Living Wage will rise by 4.9%, from £7.83 to £8.21 an hour.

Mr Hammond added that income tax-free personal allowance will rise to £12,500 and the higher rate threshold to £50,000 from April 2019, and both will be indexed to inflation from 2021/22.

He continued that the income tax threshold changes would amount to a tax cut for 32 million people, putting £130 a year in the pocket of a typical basic rate taxpayer meaning 1.7 million have been out of tax altogether and nearly 1 million out of higher rate tax since 2015.

The raising of both tax thresholds were Conservative Party manifestos at the 2015 General Election.

  • What were some of the other announcements in the Budget?

  • Defence spending

The Chancellor has announced an additional £1 billion for the Ministry of Defence in the period to the end of next year to boost cyber capabilities and anti-submarine warfare capacity and maintain the pace of the Dreadnought programme.

Mr Hammond's move comes after a series of clashes with Defence Secretary Gavin Williamson over funding levels for the armed forces.

However, Mr Williamson responded positively to the announcement saying it "represents a substantial financial boost and reaffirms our commitment to protecting national security.

"Not only will this funding ensure we continue to have world-leading armed forces but will also allow defence to modernise our critical assets, such as our offensive cyber capabilities, anti-submarine warfare and our nuclear deterrent."

Mr Hammond also pledged that counter-terrorism police will receive an additional £160 million in funding for 2019/20.

Mr Hammond said the Treasury will also make a £10 million donation to mark the Centenary of the Armistice by supporting veterans with mental health needs.

Counter-terrorism police will receive an additional £160 million in funding for 2019/20. Credit: PA
  • Education

The Chancellor has announced a £400 million in-year bonus to help schools buy kit - a one-off capital payment direct to schools worth an average of £10,000 per primary and £50,000 per secondary.

However, the announcement to allow schools to "buy the little extras they need" was met with anger from the opposition benches.

The Tory MP added that £1.7 million will also be set aside for educational programmes in schools to mark the 75th anniversary of the liberation of concentration camps.

Mr Hammond has promised more money for social care Credit: PA
  • Money for local councils and social care

Mr Hammond announced a further £650 million of grant funding for English local authorities for 2019/20, along with £45 million for the Disabled Facilities Grant in England in 2018/19 and £84 million over the next five years to expand the Children's Social Care programmes to 20 further councils.

However, the Chancellor's promise of more money "only just staves off total collapse" of a "broken" social care sector, a leading charity has warned.

In the last eight years, council budgets have been cut by 19% in real terms.

Jeremy Hughes, chief executive of the Alzheimer's Society charity, said: "£650m to prop up the broken social care system only just staves off total collapse.

"It does nothing for people with dementia who are footing the bill themselves, while people with other diseases are getting free support through the NHS."

Meanwhile, Glen Garrod, president of the Association of Directors of Adult Social Services (ADASS), welcomed the additional £650 million, but added: "This is still far short of the £2.35 billion that ADASS identified would be needed for social care to stand still in 2019/20; councils have been struggling with funding shortfalls for years...

"It is important to remember that social care is accounting for over 40% of council budgets, whilst still not meeting all the needs of the community...

"This Budget has failed to provide the long-term funding solution that social care desperately needs - and whilst the extra investment is welcome, the need for that long-term approach has never been more urgent.

"The time for sticking plasters is over - we now need to see a serious commitment towards making social care sustainable."

Chancellor Philip Hammond prepares the Budget. Credit: PA
  • Digital giants' tax

Mr Hammond has announced that digital giants such as Google, Amazon, and Facebook will pay a new tax on turnover so that they pay "fair" tax.

The new tax will only paid by profitable companies and those with at least £500 million of annual global revenues, Mr Hammond said.

"We will introduce a UK Digital Services Tax... on UK generated revenues," the Chancellor said.

However, according to ITV News Political Editor Robert Peston, it is thought that this new tax will only raise circa £400m a year from 2020.

Digital giants such as Facebook are set to be hit with a new tax. Credit: PA
  • Roads

An additional £420 million is being made available immediately to local highway authorities to tackle potholes, bridge repairs and other minor works in this financial year, the Chancellor has said.

  • Private Finance Initiatives

The Chancellor also announced that the Government is abolishing the use of Private Finance Initiative and PFI2 schemes for future projects

  • Business investment

Speaking in the Commons, the Chancellor unveiled a package of measures to stimulate business investment, including an increase in the Annual Investment Allowance from £200,000 to £1 million for two years; targeted relief for the cost of acquiring IP-rich businesses; and a permanent tax relief for new non-residential structures and buildings.

He continued that Start-Up Loans funding will be extended to 2021, helping 10,000 entrepreneurs, and that the contribution of smaller firms to the apprenticeship levy will be reduced from 10% to 5%.

Mr Hammond added that Employment Allowance will be targeted at small and medium businesses with an Employer NICs bill under £100,000 a year from April 2020.

  • Tax avoidance

Measures to clamp down on tax avoidance, evasion, and unfair outcomes will raise £2 billion over the next five years, the Chancellor has said.

  • Helping the high street

Following the collapse of numerous high street giants in recent months, the Government is co-funding £675 million for a Future High Streets Fund to support councils in improving their high streets, the Chancellor has said.

He added that business rate bills will be cut by one-third for the next two years for all retailers in England with a rateable value of £51,000 or less, delivering an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes.

In a bid to attract more people to town centres, Mr Hammond announced a mandatory business rates relief for all public lavatories made available for public use, whether publicly or privately owned, making light of the point with a series of toilet-related gags.

  • How will the budget affect families?

  • Video report by ITV News consumer editor Chris Choi

  • Home ownership

In a bid to help more people onto the property market, Mr Hammond said the Government will abolish Stamp Duty all first-time buyers of shared ownership properties valued up to £500,000, applied retrospectively to the date of the last Budget.

He also announced a further £500 million for the Housing Infrastructure Fund, designed to unlock a further 650,000 homes; a new wave of strategic partnerships with nine English Housing Associations to deliver 13,000 homes; and up to £1 billion of British Business Bank guarantees to support smaller housebuilders.

Mr Hammond added planning restrictions which make it hard for shops to be converted into homes will be reduced.

  • Devolved administrations

Decisions announced in this Budget mean an additional £950 million for the Scottish Government, £550 million for the Welsh Government and £320 million for a Northern Ireland Executive in the period to 2020/21.

The Chancellor also announced £2 million help towards the recovery of Belfast city centre following the Bank Buildings fire, and £300 million for shared and integrated education in Northern Ireland.

  • Plastics

In a bid to cut down on plastic waste, the Chancellor has announced a new tax on the manufacture and import of plastic packaging which contains less than 30% recycled plastic.

  • Fuel duty

As petrol and diesel costs continue to rise, Mr Hammond has announced that fuel duties will be frozen for the ninth successive year, bringing the total saving to the average car driver to more than £1,000 and to the average van driver to over £2,500.

  • Alcohol and tobacco

Tobacco duty will continue to rise at inflation plus two percent, the Chancellor has announced.

Meanwhile duty on beer, cider and spirits will be frozen for the next year, saving 2p on a pint of beer, 1p on a pint of cider, and 30p on a bottle of Scotch or gin compared to the inflation assumption in the OBR forecast.

Duties on wine to rise in line with RPI inflation and white ciders will be taxed at a new higher rate.

Jeremy Corbyn denied that austerity is over. Credit: PA
  • Reaction

Speaking after Mr Hammond had delivered the Budget, Labour leader Jeremy Corbyn told the House of Commons: "The reality is that whatever the Chancellor claims today, austerity is not over."

He added that the economy is being damaged by a "shambolic Brexit".

He continued that austerity is not coming to an end because it has worked "that is absolutely the opposite of the truth.

"Austerity needs to end because it has failed."

Mr Corbyn also labelled the Budget a "broken promise Budget".

He said: "What we've heard today are half measures and quick fixes while austerity grinds on.

"And far from people's hard work and sacrifices having paid off, as the Chancellor claims, this Government has frittered it away in ideological tax cuts to the richest in our society."

He continued that the "precious" NHS is a "thermometer of the wellbeing of our society", adding: "But the illness is austerity - cuts to social care, failure to invest in housing and slashing of real social security.

"It has one inevitable consequence - people's health has got worse and demands on the National Health Service have increased."

The Labour leader also criticised pay levels for public sector workers, adding: "Every public sector worker deserves a decent pay rise, but 60% of teachers are not getting it - neither are the police nor the Government's own civil service workers."

The Islington North MP added that injustices have increased in Britain under the Conservative Government, saying: "Far from tackling the burning injustices as the Prime Minister said her Government was going to do, they have actually made them worse and increased the injustices in our society."

Opposition MPs applaud the Waspi protesters. Credit: House of Commons
  • Protesters in the gallery

Women Against State Pension Inequality (Waspi) protesters held up banners and shouted from the public gallery as the Budget statement concluded.

Waspi campaigns against the way in which the state pension age for men and women was equalised and calls for the millions of women affected by the change to receive compensation.

Women bearing purple banners stood up and banged on the glass window of the public gallery, before being escorted out by door staff.

Around 20 women appeared to be taking part in the protest.

One held a banner which read: "The Great Pension Robbery", and others said: "Waspi".

Labour and SNP MPs stood up and applauded the protest before Mr Corbyn began his response.

Mr Corbyn then criticised the Government for not setting money aside for the Waspi women.

He said: "There was not even recognition, let alone money set aside, for the women born in the 1950s who have been denied pension justice."