Interestingly there was no mention at all of housing in the Chancellor’s statement. While this was greeted with relief by some who feared further punitive measures on housing increasing, and the sector continuing to be treated as a political football, it was also a missed opportunity to cut the three percent surcharge for second homes and to slash stamp duty.
Opening his statement, the Chancellor announced improved growth forecasts for the UK economy to 2%, while borrowing was cut to GBP51.7bn in 2016-17.
New measures included in the budget have been seen as a raid on the Conservative heartland, as the government proposed to raise National Insurance for the self-employed from 9% to 11% by 2019, in a bid to raise an estimated GBP4.6 billion.
The National Insurance hike was by far the most controversial measure in the budget as it is not only a tax on what is seen as core Tory supporters – the likes of self-employed accountants, but also builders and other day labourers, as well as an abandonment of a key election pledge. David Cameron made the promise in 2015 not to raise National Insurance rates, and even used it as a means of goading his opponent, Ed Milliband, when he detected his rival’s hesitation to follow suit.
Hammond explained the decision for the hike as a means of addressing a multibillion pound shortfall in National Insurance, as more and more workers across the country continue to make the switch to being self-employed. “The lower National Insurance paid by the self-employed is forecast to cost our public finances over GBP5 billion this year alone. That is not fair to the 85% of workers who are employees,” commented the Chancellor in his statement to the House.
A cut in business rates across the board means that firms will now save GBP435 million annually. Funding will be put aside for a further 110 new free schools on top of the existing 500, including new specialist maths schools, meanwhile GBP270m will be made available for maintenance of existing schools.
The Scottish government is set to benefit from a GBP350 million funding boost as a result of measures announced in the budget, while a review was announced into North Sea taxation, which is expected to give causes for relief for oil and gas exploration and servicing companies. The Welsh government will receive GBP200 million and the Northern Ireland Executive is on track to receive almost GBP120 million.
The economic projections contained in the statement were almost all cause for cheer, and the portents of doom forecast by the Remain voters in the run up to the EU referendum all seem a distant memory, according to the chancellor. The economy grew at the second-fastest rate in the G7 after Germany (and there has even been commentary that this was only down to the UK having more bank holidays in the preceding year). Unemployment has fallen by a marginal degree – down 7,000 to 1.6 million between October and November. Government borrowing in this fiscal year is expected to fall GBP51.7 billion, lower than the GBP55.5 billion forecast in pre-Brexit vote projections.
So, what does this mean for the UK’s housing market? As mentioned before, in a highly unusual move, the housing market was not mentioned at all. As a result, the market is expected to continue in its current state – a supply/demand imbalance which is likely to continue, gradually increasing prices. Stamp duty remains in its current state, tempering the rate of any rise, but helping to prevent any bubbles forming. Further commitment to spreading funding around the country, with recommitments to the Northern Powerhouse and Midlands Engine strategies also mean that funds are expected to continue to flow to cities such as Manchester and Liverpool, catalyzed by government spending. Above all the economy continues to look attractive and will provide underlying strength to the property market.
A solid, if unspectacular budget, which should maintain the kind of stability the government needs if it is to negotiate a clean break from Europe and keep the economy healthy.