Budget 2018: Comment
A Budget for the strivers, the grafters and the carers
This year’s Budget statement from Chancellor Philip Hammond was strongly messaging the success of the Conservative Government’s austerity measures, reporting a substantial upgrade to the health of the public finances by the Office for Budget Responsibility (OBR) – with unemployment at its lowest rate since the 1970s, wage growth at its strongest in a decade and the country’s deficit at its lowest level since 2001.
In his last Budget before Brexit, the Chancellor claimed the “hard work” of the British people since the financial crisis is “paying off”, paving the way for a brighter future.
The big giveaways included increased social care funding, a one-off payment for English schools, more money for mental health services in England and Wales and a pot shot at potholes.
For Scotland, the Barnett formula workings result in over £950m new funding for the Scottish Government. The elephant in the room is, of course, Brexit and the small print of today’s announcement states that the OBR has made broad brush assumptions around Brexit and now assumes a transition period postponing the point at which the EU exit affects imports and exports to 2021.
The backdrop of a positive financial environment let the Chancellor open his wallet to a range of incentives as he looks confidently to the future; adding in a proviso that we can’t be complacent and should Brexit result in any major economic or fiscal disturbance, there could be another Budget in Spring 2019. For the moment at least, it’s the ending of austerity and a focus on unleashing Britain’s innovative and entrepreneurial appetite to prove that it’s a Britain that’s open for business.
For Scottish businesses, a range of tweaks to the tax system are ahead, including tax reliefs to encourage investment in commercial buildings and assets used in the trade, a review of Small Brewers Relief, and amendments to the Petroleum Revenue Tax rules on retained decommissioning costs, to simplify the way older oil fields can be sold to new investors; £10m for fisheries innovation.
There was good news for charities with a number of measures introduced to reduce their administrative burden, including an increase to the upper limit for trading without incurring a tax liability from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000; also an increase in the individual donation limit under the Gift Aid Small Donations Scheme to £30, which applies where it is impractical to obtain a Gift Aid declaration.
For Scottish individual taxpayers, the Budget accelerated the income tax divergence between Scotland and the rest of the UK with the higher tax rate threshold set to increase.
It remains to be seen whether the Scottish Government will use its £950m windfall to address the differential. With just six weeks until Derek Mackay delivers the Scottish Budget on 12 December, there are clearly some important decisions to be made.
Susie Walker is Head of Tax at Johnston Carmichael