The Chancellor, Philip Hammond, delivered the Spring Statement earlier today, announcing more affordable housing and proposals to increase consumers’ power against tech giants.
Set against continuing uncertainty over Brexit, and just hours before MPs were due to vote on whether to exit the EU without a deal, Mr Hammond devoted much of his speech to the possible effects leaving the European Union could have on the UK’s finances.
He repeated a stark warning on the dangers a no-deal Brexit would have on the UK economy, warning fiscal and monetary policy could only be a temporary fix, and highlighted the negative effects of current uncertainty on the UK’s businesses and global reputation.
But, he also said he was hopeful that a deal would be agreed – and if so, the UK could see ‘a deal dividend’, giving the UK an economic boost in business confidence and investment.
So, what does the Spring Statement mean for your finances? Which? explains what was announced for consumers, and what you need to know.
What is the Spring Statement?
In the past, the Chancellor would deliver two statements to Parliament each year – one in the spring containing budget measures and tax changes, and one in the autumn with economic forecasts.
This changed in November 2016, when Mr Hammond announced that, going forward, he would hold an Autumn Budget and Spring Statement – the latter of which tends to mainly report on the UK economy and sets out fewer policy changes.
This year’s Spring Statement has continued this pattern.
- Find out more: Autumn Budget 2018 – our coverage explains all of the changes that were proposed back in October 2018.
An improved outlook for the British economy
The Office for Budget Responsibility (OBR) has updated its fiscal outlook since the Autumn Budget last year.
While the UK’s GDP growth was below expected – 1.2% rather than 1.6% – the OBR’s predictions for UK GDP growth for the next five years are still slightly better than its November forecast, as the graph below shows.
Borrowing was reportedly £3bn less than expected, and the Chancellor remained confident that the economy would stay on track to reduce the UK’s spending deficit ahead of schedule.
This was put down to the fact that earnings growth is bringing in more tax – in fact, an unprecedented £21bn was collected via income tax and corporation tax in 2019.
On the topic of wages, the OBR report expected wage growth continue to grow, reaching 3% every year until 2023. If inflation remains on target, this would mean less of a pinch on your spending power.
More power for consumers in the digital economy
Mr Hammond introduced a new report into digital businesses, which found that tech giants have become increasingly dominant, and a threat to competition.
The review recommended updating competition rules to target digital businesses. The government is due to respond to the review’s recommendations later in the year.
If the recommendations are implemented, there could be several benefits for consumers.
More competition in digital markets means more innovation and improved services, better privacy and transparency, and more consumer control as they have the power of choice, the report found.
Investment in affordable housing
In a pledge to help ‘fix the broken housing market’, the Chancellor announced a new Affordable Homes Guarantee Scheme. This will guarantee £3bn of borrowing by housing associations in England to support the building of 30,000 affordable homes.
A further 37,000 homes are due to be built at sites including Old Oak Common in London, Cheshire and the Oxford-Cambridge Arc, as part of the £5.5m Housing Infrastructure Fund.
Find out more: how does affordable housing work?
A review of the National Living Wage
Turning to the National Living Wage, the Chancellor confirmed the remit for the Low Pay Commission in 2019 and said a new remit would be extended in 2020.
He also announced a new review into the effect of minimum wages around the world, and whether the UK could benefit from implementing innovations from other countries.
This is being done with ‘the ultimate objective of ending low pay in the UK’, Mr Hammond said.
The future of financial services
In the immediate aftermath of Britain’s exit from the EU, there will be new Financial Services legislation outlining plans on how to maintain regulatory standards, remain open to international markets and new trading opportunities for financial firms.
The government will also consult on how to ensure the Financial Services regulatory framework can adapt once the UK has left the EU.
Of course, there are no specific details yet, as the terms of the UK’s exit have not been decided.
Helping with ‘period poverty’
In response to reports of girls taking time off school as they don’t have the money for sanitary items, the Chancellor announced that the Department for Education will develop a national scheme in England to provide free sanitary products to all secondary schools.