Brexit was an undertone throughout the speech ahead of Theresa May’s imminent triggering of Article 50 with Hammond pledging to build the foundations of a “stronger, fairer and more global Britain” and promising to invest in the skills of the future, including STEM training.
“As we prepare for our future outside the EU we cannot rest on past achievements,” he said.
The chancellor spoke of robust growth but warned while the deficit is down, debt is still too high and while employment is up, productivity is still stubbornly low.
The OBR upgraded its forecast for growth this year from 1.6% to 2%.
However, in 2018/19 growth will slow to 1.6% before rising to 1.7% the following year, then 1.9% in 2020 and will return to 2% in 2021.
Inflation is forecast to be 2.4% this year, 2.3% in 2018 and 2% in 2019.
The number of people in employment is also set to grow in every year of the forecast period, with a further two thirds of a million people in work by 2021.
Hammond said public sector net borrowing as a percentage of GDP is predicted to fall from 3.8% last year to 2.6% this year.
However, Britain’s debt still stands at nearly £1.7trn, which equates to £62,000 per household in the country.
An announcement on business rates was inevitable; given the scale of criticism the topic has garnered in recent weeks as businesses prepare for dramatic changes to their rates due to come into force on 1 April following the revaluation of business properties.
Following increased pressure to reform the system, Hammond revealed he cannot abolish the rates, which raise £25bn a year, but admitted the government needs to find a better way of taxing the digital part of the economy adding that there is scope to reform the revaluation process to avoid dramatic rate increases for businesses.
The chancellor announced that the government will set out its preferred process in due course and will consult on it before the next revaluation is due.
For now, the chancellor pledged £110m to help small businesses who are set to lose their small business rates relief.
“No business losing small business rat relief will see their bill increase next year by more than £50 a month,” he said.
Hammond also announced that he will provide a £1,000 discount on business rates bills in 2017 for all pubs with a rateable value of less than £100,000 – 90% of pubs in the UK.
The chancellor will provide local authorities with a £300m fund to provide discretionary relief to businesses most affected by business rates revaluation.
The gig economy
Many predicted the chancellor would announce tax hikes for the self-employed as the UK tax system struggles to cope with the increasing amount of self employed “gig” workers.
Hammond said there are many good reasons for choosing to be self employed but stressed that these choices shouldn’t be driven by differences in the tax treatment of employed and self-employed individuals.
He added that the difference in national insurance contributions for employed and self-employed workers are no longer justified and undermine the fairness of the tax system.
Hammond said he will not reverse his predecessor’s decision to abolish class 2 NICs, describing them as “regressive”.
Instead, he will increase the main rate of Class 4 NICs by 1% to 10% from April 2018, and by a further 1% in April 2019.
This adjustment will raise £1.4m a year by 2021/22, the chancellor said.
Hammond added that the government will also consult on the disparities between parental benefits for employed and self-employed individuals later this year.
The government launched a review of the gig economy and modern employment practices in November following controversy over the rights of self-employed individuals, highlighted in the Uber case.
The Department for Business, Energy and Industrial Strategy (BEIS) also announced the launch of a research project, which aims to reveal the scale of short-term, casual work known as “gig” working and discover the reasons people take it up.
In the Autumn Statement, Hammond abandoned his predecessor George Osborne’s pledge to reduce corporation tax to 15%, opting instead to lower it to 17% by 2020, first falling to 19% in April this year, an announcement he reiterated today.
After previously pledging to delay the implementation of MTD for businesses with a turnover up to the personal allowance, Hammond committed to delay implementation for businesses with turnover below the VAT threshold.
Hammond said he is determined to make the UK the most attractive place to start and grow a business.
He also announced measures to adjust the tax advantages afforded to director shareholders.
He is reducing the tax free dividend allowance from £5,000 to £2,000 in April 2018.
The personal allowance will increase to £11,500next month and to £12,500 by end of parliament.
The higher rate threshold will increase to £45,000 next month and to £50,000 by the end of parliament.
The chancellor also applauded the success of the sugar tax in encouraging companies to reduce the amount of sugar in soft drinks.
Hammond confirmed the final rates of 18 and 24 pence per litre for the main and higher brands respectively with no changes made to taxes on alcohol and tobacco.
Hammond announced further tax-collecting measures that he said will yield an extra £820m. This includes extra VAT on telephone roaming charges outside the EU. Also, he conformed the proposed new sanctions for accountants, lawyers, tax planners and advisers who provide advice on how to avoid tax.
Under the plans those who design, market or facilitate the use of tax avoidance arrangements that are defeated by HMRC could have to pay a fine of up to 100% of the tax the scheme’s user
Post-Brexit Britain – addressing the skills gap
Hammond stressed the importance of investing in training and infrastructure to help close the productivity gap and prepare the UK for life outside the EU.
To address the skills gap and prepare UK citizens for the jobs of tomorrow, Hammond announced funding for a further 110 new free schools.
He also stressed the importance of technical education.
The chancellor confirmed maintenance loans for part time undergraduates and doctoral loans in all subjects and also announced support for 1,000 new PhD places and fellowships, focused on STEM subjects.
He committed £210m to fund excellent researchers and attract top global talent.
The chancellor confirmed the much-trailed introduction of T-levels – technical qualifications, alternative to A-levels – for 16-19-year-olds and £40m for pilots on lifelong learning projects.
He pledged £270m to keep UK at forefront of disruptive technologies like biotech, robotics and driverless vehicles.
He also committed £16m for a new 5g mobile technology hub and £200m for local projects to leverage private sector investment in full-fibre broadband networks.
Hammond also took steps to appease the devolved economies following criticism of the government’s failure to include them in Bexit negotiations, pledging £350m for the Scottish government, £200m for the Welsh government and almost £120m for Northern Ireland.
Social care funding
Hammond admitted the social care system in under pressure, in turn putting additional pressure on the NHS.
In a bid to ease pressure on the NHS, Hammond committed £2bn to social care in England over the next three years.
He also announced a further £100m of capital available immediately for up to 100 new triage projects at English hospitals in time for next winter.
He also announced a social care green paper to be published later this year.
International Women’s Day
The government is committing a further £20m of funding to support the campaign against Violence Against Women and Girls. He also committed £5m to promoting ‘returnships’ to the public and private sector to help people back into employment after a career break.