Budget 2017: £2bn for social care and tax rise for self-employed

Chancellor Philip HammondImage copyright

Chancellor Philip Hammond has announced an extra £2bn for under-pressure social care services in England in the Budget.

Mr Hammond promised to help firms hit by business rate rises – but was accused of breaking the Conservative manifesto by increasing national insurance for self-employed people.

On the economy he said growth was expected to be higher – and borrowing lower – than forecast in November.

Labour leader Jeremy Corbyn said it was “a Budget of utter complacency”.

The government has been under pressure to offer more resources for social care budgets, with council leaders warning the entire system stands on the “brink of collapse” without an immediate cash injection and a commitment to a long-term solution.

Mr Hammond acknowledged the system was under pressure with an ageing population, and said the new £2bn for services in England over the next three years would allow councils to “act now to commission new care packages”.

He also said the government would set out the options for long-term funding of the social care system later in the year – although these would not include a “death tax”.

National Insurance up for self-employed

Media captionShadow Chief Secretary to the Treasury Peter Dowd says the government has their priorities “absolutely wrong”

Mr Hammond said he made “no apology” for raising extra money through taxation, “in ways which enhance the fairness of the system”.

In his first Budget, this included an increase in National Insurance rates for self-employed people.

He said the disparity between the rates paid by the self-employed and employees “undermines the fairness of our tax system”.

Class 4 National Insurance contributions will go up to 10% from 9% and to 11% in April 2019, he told MPs.

Media captionChief Secretary to the Treasury tells The World at One the “majority” of the self-employed will see a tax reduction

A separate category of National Insurance payments, Class 2, are already being abolished from 2018, and Mr Hammond said that taken together this meant an average 60p a week increase in NI payments for self-employed person.

The government immediately faced accusations of breaking a Conservative manifesto pledge not to increase VAT, National Insurance contributions or income tax.

Ministers said this promise related to the class of National Insurance paid by employees, not the self-employed.

Some Conservative MPs also raised concerns.

“I don’t think we should be going out of our way to tax work, growth and enterprise.and success,” said former Tory minister John Redwood,

Economy ‘confounding commentators’

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Opening his statement, Mr Hammond said the UK economy “continued to confound the commentators with robust growth”, and promised his Budget would provide a “strong and stable platform” for the Brexit negotiations to come.

As predicted, there were improved economic forecasts via the Office for Budget Responsibility (OBR).

The OBR has revised up its growth forecast from 1.4% to 2% for 2017, predicting it will slow to 1.6% in 2018 before returning to 2% in 2021.

Due to “a number of one-off factors”, borrowing was predicted to be £16.8bn lower than previously forecast, the chancellor said.

However, as the UK prepares for Brexit, Mr Hammond said there was “no room for complacency”, and that the UK’s deficit was still high, and productivity “stubbornly low”.

Tobacco and alcohol changes

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There were no unexpected rises in the Budget, with the chancellor sticking to the previously pencilled-in rises.

So a packet of 20 cigarettes will cost 35p more from 18:00, while it will be 44p more for a 30g pack of hand rolled tobacco.

A pint of beer will cost 2p more from Monday, from when duty on a bottle of Whisky will rise 36p, with gin up 34p, cider 1p and a bottle of still wine 10p.

Business rates

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The chancellor promised business rates help for firms including a discount for pubs

Mr Hammond has been facing a backlash, including from Conservative MPs, over businesses facing rates rises as a result of the revaluation of premises that is about to come into force.

The chancellor defended the revaluation, although he said he said it “undoubtedly raised some hard cases”.

He announced a £300m “discretionary fund” to be used by councils to help companies that are badly hit, and a £50-per-month cap on increases for firms facing the loss of small business relief.

In a further measure, he said 90% of pubs would be given a £1,000 business rates discount.

What else was announced?

Other announcements included:

  • The biggest money raising measure was a reduction in the tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000
  • £100m for new triages in English hospitals and an extra £325m for NHS reform programmes
  • Transport spending of £90m for the north of England and £23m for the Midlands to address “pinch points” on roads
  • £270m for maintenance of existing schools
  • Extending free transport to all free school meals pupils who attend selective schools
  • No change to previously-planned upratings of duties on alcohol and tobacco
  • Additional funding of £350m for the Scottish government, £200m for the Welsh government and almost £120m for the Northern Ireland Executive

What the other parties said

Media captionJeremy Corbyn attacks the government over Budget ‘complacency’

Responding to Mr Hammond, Labour leader Jeremy Corbyn said the Budget ignored the “crisis facing our public services and the reality of daily life for millions of people in this country”.

He accused the government of “cutting living standards for the many and raising taxes for the few”, and calculated there would be a £70bn tax giveaway for “those who need it the least”.

As an example, he said that instead of using £10m to set up a children’s funeral fund, the government was cutting support for bereaved families.

The Liberal Democrats said the social care announcement “gives sticking plasters a bad name”.

“It is a woefully inadequate response to the impossible pressure the NHS and care services are under,” Norman Lamb, the party’s health spokesman, said.

For the SNP, Stewart Hosie said Brexit had barely been mentioned, despite the “momentous” challenge it posed.

What had already been announced

Several spending announcements were made ahead of Mr Hammond’s Commons statement.

These included:

  • A £5m fund to mark the centenary of female suffrage next year
  • An extra £500m for vocational and technical education in England
  • A one-off £320m for 140 new schools in England, which could include grammars
  • Measures to protect people who inadvertently end up subscribing for services after signing up for free trials
  • Plans aimed at helping the North sea oil and gas industry
  • £500m support for electric vehicles, robotics and artificial intelligence

Aside from the Budget, several previously-announced changes come into force in April, including an increase in the personal tax allowance to £11,500, a new inheritance tax allowance, a rise in the annual ISA limit to £20,000 and the introduction of a levy to fund apprenticeships.

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The chancellor posed with his red box before leaving Downing Street to head to Parliament

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Budget 2017: £2bn for social care and tax rise for self-employed}