“Our circumstances have changed.”
Philip Hammond, October 2016
On 16th March 2016 George Osborne delivered his fifth spring budget; a goal to balance out the budget deficit by 2020, a new lifetime ISA, an 8% reduction in CGT, new sugar tax and no change in pensions. 99 days later on 23rd June 2016, the UK announced its decision to leave the EU. What next?
No less than 20 days after Brexit, Britain had a new Prime Minister and cabinet. Theresa May rapidly assembled her new government, casting aside George Osborne as Chancellor to make way for former Foreign Affairs Secretary Philip Hammond. A bold move given that both May and Osborne had been staunch advocates for Britain to remain in the EU, but a move that signalled her intent to take Britain into the unknown.
On Wednesday 23rd November, Philip Hammond will present his first budget as Chancellor, and what a time to make a debut. At the time of writing, with the pound at a 30 year low, the FTSE100 breaking above the 7,000 mark and the news that Article 50 will be triggered before March 2017, the contents of this Autumn budget have never been more crucial. With the Bank of England in control of the monetary supply and the current state of the UK economy, Mr Hammond only has fiscal policy to play with and has already suggested that he may have to “reset” this when he delivers his budget.
So what can we expect to hear from Mr Hammond? We’ve already heard him say at the Conservative Party Conference on 3rd October 2016;
“At the Autumn Statement in November I will set out our plan to deliver long-term fiscal sustainability while responding to the consequences of short-term uncertainty, and recognising the need for investment to build an economy that works for everyone. A new plan for the new circumstances Britain faces.”
Furthermore the government has already stated that Mr Osborne’s planned agenda to get the budget deficit back on track by the end of the decade will have to be scrapped following Brexit. Despite this, Mr Hammond outlined that he does wish to achieve a balanced budget by 2020 and we can certainly expect to hear how he plans to do so.
During his speech at the recent Tory party conference Mr Hammond admitted Brexit will come at a price, and he predicts leaving the EU will have a negative impact on economic growth. To counter this, he wishes to borrow to invest in infrastructure and productivity to ensure that the UK can stand on its own two feet once it has left the EU. There was also an announcement that £3bn will be set aside to increase homebuilding which includes using public land and brownfield sites.
George Osborne made sweeping changes during his tenure, with headlines on pension freedoms and the lifetime ISA. It will be interesting to see whether any reforms will be made next month, with particular interest being on the standard lifetime allowance which was controversially lowered to £1m in April 2016. Theresa May has a strapline for her government to produce “a country that works for everyone”, and COURTIERS will be awaiting this next budget with an eager eye. As usual, we will report on Twitter as significant announcements are made, and outline a full budget review shortly afterwards to include in depth comments and analysis. Follow us on Twitter or subscribe to our email updates below.
What George Osborne told us…
In the spring budget of this year he announced, the headlines were the Lifetime ISA he brought in, another was an 8% reduction in Capital Gains Tax which was a very welcome tax relief for everyone. He also brought in the well-known sugar tax as well, I don’t know if Mr Hammond will make any changes there. He was looking forward and the main thing that he did want to do was reduce the budget deficit by 2020.
It was interesting that Theresa May decided to remove George Osborne given that he’d been Chancellor for six years and was established in the government, and going with a safe pair of hands in Philip Hammond. One thing I was surprised at was the fact that Theresa May and George Osborne were both in the Remain camp to remain in the EU, so it was interesting that she decided to go with someone different and remove him, but I think that was for Theresa May to decide that she wanted a fresh direction for her government, and didn’t want to keep George Osborne as Chancellor and wanted someone new to put forward her direction as to where she wants the country to go.
What Philip Hammond might tell us…
There haven’t been too many clues as yet. We were expecting to hear a bit during the recent Tory Party Conference. The only thing he has really mentioned was that he’s going to have £3bn to use towards the housing budget for the UK. He’s big into infrastructure and he wants to build the country. But in terms of actual investments – pensions, ISAs – we haven’t really heard anything there, so it’s going to be interesting given that – well, what George Osborne outlined in the spring Budget this year, I think it’ll be interesting to see if Philip Hammond will sort of be able to make his mark and show the direction that he wants to go in with this budget. But I think any headline figures or headline policies that he will introduce will most likely be announced in the spring budget of 2017 – that’s when Chancellors normally put their headline policies in place. I can’t see anything too radical being released in this budget, but I may be proved wrong!
So with Brexit not having been implemented yet, Philip Hammond is going to have to be quite careful on this budget given that the FTSE’s broken through 7,000 which I don’t think many people predicted after the June 23rd Referendum, and the fact that the pound’s at a 30 year low – he’s going to have to be very careful with how he delivers this budget. I know he’ll have a huge team behind him to work this out but it’s going to be quite a tough debut to make as a Chancellor with this budget.
At COURTIERS we’re going to be closely following what developments are happening with regards to the budget coming up, and on the day of the budget we’re going to be tweeting all of the key points from Philip Hammond’s debut as Chancellor and this will be then followed up with an in-depth article outlining the key points that Philip Hammond is making in the budget and of course, anything that’s in there that will affect our clients with regards to their investments. So please, keep an eye out on Facebook, Twitter and the website for any updates on there.
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