Chancellor Philip Hammond has just delivered his first (and last, but more of that later...) Autumn Statement.
HR magazine rounds up the key points HR professionals need to be aware of.
General economic outlook
The chancellor revealed borrowing is forecast to be £122 billion higher in the period until 2021 than forecast in March's Budget, and that the country’s debt will also be higher.
Regulations surrounding salary sacrifice benefits will be altered so that particular employee benefits, such as mobile phone contracts, health checks and gym memberships, will lose their tax relief status. However, certain schemes such as pensions, childcare, cycle to work, and low emission car schemes will be exempt. The chancellor described salary sacrifice schemes as “unfair”, and said the new rules will come into force in April 2017. “Employers and employees will pay the same tax that everyone else does,” he said.
National Living Wage rises
The National Living Wage, which applies to those aged over 25, is set to rise to £7.50 from April next year. “This is an extra £500 per year for a full-time worker,” Hammond said. Originally proposed by previous chancellor George Osborne, the wage is now likely not expected to rise to £9 per hour by 2020, and falls short of some predictions of what it may have reached by 2017.
Personal allowance rises
The chancellor confirmed that the tax-free personal allowance will rise to £11,500 next year, and that it will continue to rise to £12,500 by the end of this parliament. After that the incumbent chancellor will judge further increases. “This will provide a massive boost to low- and middle-income earners,” Hammond said.
Productivity and innovation investments
Hammond said the government will form a new national productivity investment fund with a focus on innovation and infrastructure. It will be worth £23 billion. Additionally, investment in research, development and innovation will rise by £2 billion a year by 2020. The chancellor said tackling the productivity gap is key to delivering the “high wage, high skilled” economy the UK needs to remain globally competitive.
Focus on management
The government will be funding John Lewis Partnership chairman Charlie Mayfield’s work on boosting management skills across the UK. Mayfield's initiative will be receiving £13 million. The news has been welcomed by the CIPD and the CMI.
No more Autumn Statement
“This is my first Autumn Statement and it will also be my last,” said Hammond. Instead of an Autumn Statement and a Spring Budget the chancellor will deliver a budget in the autumn, and a statement in the spring that will not contain any major tax changes. “This brings us into line with global best practice,” he said.
HR magazine will have more analysis tomorrow.
Update - a pervious version of this story said that the government was still on track to raise the national living wage to £9.00 per hour by 2020.. However, more recent projections from the government see the actual figure falling short.
