The Chancellor, Philip Hammond, delivered his first Spring Statement in a new slimmed down format on Tuesday. As he had previously announced, the aim was to move to one formal fiscal announcement (the Autumn Budget) and use the Spring Statement to provide an update on economic figures from the Office for Budget Responsibility (OBR) and previously announced policies, schemes and consultations. As it turned out, the Chancellor spoke for just twenty-six minutes but there was still plenty in his speech to bear in mind when it comes to your personal finances.
Borrowing and debt are falling
Whilst the impact of this might not immediately be felt in household pockets across the land, it is important to note that borrowing and debt are down (though debt still stands at around £1.8 trillion). Although the Chancellor was hardly ready to celebrate, there was vague reference to the possibility of increased future spending, which could impact us all. “If, in the Autumn, the public finances continue to reflect the improvements that today’s report hints at,” the Chancellor said, “then, in accordance with our balanced approach and using the flexibility provided by the fiscal rules, I would have capacity to enable further increases in public spending and investment in the years ahead.”
Inflation is also down
This may be more directly felt in each of our pockets. Inflation, the Chancellor said, was likely to fall over the next 12 months, back towards its target rate of 2%. Were this to come about, it would help most working people to experience a real growth in wages again, rather than wage growth which was not keeping pace with the rate of inflation.
Tax-free allowance and higher rate threshold confirmed
As mentioned in the introduction, this was not a speech that was heavy on new news and, as such, the Chancellor used the opportunity to confirm some previously announced rises for the new tax year in April. The tax free personal allowance will increase to £11,850, whilst the higher rate threshold will rise to £46,350 (or £43,431 if you are in Scotland).
Late payments consultation
This could well be a major headline in a future budget, although it could be too far off for the Chancellor to announce anything concrete this Autumn. Mr Hammond has made reference previously to how he is aware that the late payment of invoices can have a huge impact on small businesses and SMEs, and in his Spring Statement he again mentioned “the continuing scourge of late payments”. This time, though, it was to announce a consultation on the matter, which will likely lead to policy. Business owners everywhere will be delighted by this prospect, as will workers, who can potentially look forward to working for firms who have more certainty around cashflow and less longstanding debt.
A cashless country?
Whilst the most attractive statements in formal fiscal announcements are likely to be the ones that put cash into your pockets, the Chancellor finished on one which may take it out of your wallet or purse! We are all using more and more digital payments which are attractive to the treasury because they are easier to track and therefore accurately account for tax. Alongside an announcement that he would consult on “a new VAT collection mechanism for online sales,” the Chancellor also said that he would explore “how to encourage cashless and digital payments, while ensuring cash remains available to those who need it.” Could we soon be heading to a society like Sweden, where cash is currently used for only 2% of transactions, a figure expected to drop to 0.5% by 2020? The future is now, and it is apparently cashless!