Philip Hammond delivers first Autumn Statement
Currencies Direct November 23rd 2016 - 4 minute read
Philip Hammond has delivered his first Autumn Statement, which has banned letting agents charging tenants upfront fees, cracked down on salary sacrifice schemes and boosted funding for house building.
UK chancellor Philip Hammond has delivered his first Autumn Statement, in which he announced a raft of measures intended to assist families that are ‘just managing’.
Included in his plans are a rise in the national living wage, an increase in house building, banning upfront fees from letting agents across England and a forecast for GDP.
Mr Hammond’s first budget statement comes after recent upheaval in the UK’s political situation. He replaced George Osborne, who left the cabinet when Theresa May took over from David Cameron as prime minister following the UK’s shock vote in favour of Brexit.
That contributed to the pound’s value plunging lower than it had in decades and in fact, the pound fell again prior to Mr Hammond’s speech. The fall was largely due to City fears about the chancellor’s forecasts for growth and the national deficit.
As a result of the UK’s Brexit vote, growth is expected to slow.
Mr Hammond announced that over the period until 2021, growth would be 2.4% lower than originally forecast because of Brexit. This year, he announced, the UK economy would grow by 2.1%.
Next year’s forecast was 1.4%, while 2018 would see economic growth of 1.7%. According to Mr Hammond, the economy will grow by 2.1% in both 2019 and 2020, while 2% growth would be experienced in 2021.
Government borrowing is expected to be larger than thought. In March, it had been forecast that the UK would borrow £100 billion. However, Mr Hammond announced that the predicted figure would be rising to £122 billion.
This means that the Office for Budget Responsibility’s (OBR) forecast for a surplus of £11 billion by 2020-2021 would no longer be possible. Instead, by that period, the government would owe £21 billion.
The OBR said: “The government is no longer on course to balance the budget during the current parliament and has formally dropped this ambition in a significant loosening of its fiscal targets.”
Mr Hammond said that a surplus would not be realistic until the next parliament, which could take office in 2024.
Administration fees charged by letting agents are to be banned. According to letting agents, these fees are charged to cover the costs of administration, reference and credit checks, among other things. These charges will be passed on to landlords.
Mr Hammond said that doing so would save 4.3 million families hundreds of pounds. Currently, Citizens Advice puts average fees at £337, saying that they have risen 60% in just five years.
The move follows Scotland, where letting fees charged to tenants have already been banned.
The government hopes that transferring the charges to landlords will result in more competition as people letting their properties out can shop around for the cheapest agent while tenants cannot.
However, there has been criticism of the decision, with some saying it will result in higher rents.
Richard Price, from the Association of Letting Agents, said: “A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on through higher rents.”
Mr Hammond said that he would be allocating £1.4 billion to the building of 40,000 new affordable homes in England.
It is hoped that first-time buyers will be able to benefit from buying these houses, along with former homeowners who can no longer afford to buy and those involved in shared ownership schemes who want to move.
A further £2.3 billion will be put towards building houses in high demand areas. Local authorities will have to bid for the funding.
Campbell Robb, chief executive at Shelter, said: “This extra investment will be welcome news for many of the ‘just about managing’ families crying out for homes that are genuinely affordable. It’s promising to see restrictions on funding relaxed, which should help to build the homes that those struggling actually need – including affordable homes to rent.
He went on to add: “At Shelter we see the impact of our chronic shortage of affordable homes every day, with increasing numbers of people left with no choice but to fork out most of their hard-earned wages on expensive private rents, and wave goodbye to the chance of a stable home.”
Salary sacrifice scheme
There will also be changes to salary sacrifice schemes, used as a way of providing employee benefits.
Called “unfair” by Mr Hammond, they allow employees the chance to give up part of their salary in exchange for a benefit such as a mobile phone contract or gym membership. It results in companies and workers both paying less tax and national insurance, which has caused people to use these schemes as a form of tax avoidance.
The new rules will not cover all salary sacrifice schemes, though. Those relating to pensions, childcare, cycling to work and ultra-low emission vehicles will not be affected.
It was also announced that the chancellor will increase the national living wage from £7.20 to £7.50 from April 2017, in an attempt to make life easier for those ‘just managing families’.