AUTUMN BUDGET 2017

HC 587 November 2017

AUTUMN BUDGET 2017

Return to an order of the House of Commons dated 22 November 2017

Copy of the Budget Report November 2017 as laid before the House of Commons by the Chancellor of the Exchequer when opening the Budget.

Mel Stride Her Majestys Treasury 22 November 2017

Ordered by the House of Commons to be printed 22 November 2017

HC 587

Crown copyright 2017

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3

Where we have identifed any third party copyright information you will need to obtain permission from the copyright holders concerned.

This publication is available at www.gov.uk/government/publications

Any enquiries regarding this publication should be sent to us at public.enquiries@hmtreasury.gsi.gov.uk

Print ISBN 978-1-5286-0119-1

CCS1117395176 11/17

Printed on paper containing 75% recycled fbre content minimum

Printed in the UK by the APS Group on behalf of the Controller of Her Majestys Stationery Offce

The Budget report is presented pursuant to section 2 of the Budget Responsibility and National Audit Act 2011 and in accordance with the Charter for Budget Responsibility. The Budget report, combined with the Offce for Budget Responsibilitys Economic and fscal outlook, constitutes the governments assessment under section 5 of the European Communities (Amendment) Act 1993 that will form the basis of the governments submissions to the European Commission under 121 TFEU (ex Articles 99/103 TEU) and Article 126 TFEU (ex Article 104/104c TEU) after the assessment is approved by Parliament.

www.gov.uk/government/publications

Contents

Page

Executive Summary 1

Budget Report

Chapter 1 Economy and public fnances 9

Chapter 2 Policy decisions 27

Chapter 3 Tax 31

Chapter 4 Productivity 43

Chapter 5 Housing 59

Chapter 6 Public services 65

Annex A Financing 71

Annex B Welfare cap 75

Annex C OBRs economic and fscal outlook: selected tables 77

List of abbreviations 85

List of tables 87

List of charts 88

1 Autumn Budget 2017

Executive summaryThe United Kingdom has a bright future. The fundamental strengths of the UK economy will support growth in the long term as the UK forges a new relationship with the European Union (EU). The Budget prepares for that: supporting families and business in the near term; setting a path to a prosperous, more open Britain; and building an economy that is ft for the future. It demonstrates the governments commitment to a balanced approach to managing the public fnances and supporting key public services. By investing in the future, the Budget will ensure that every generation can look forward to a better standard of living than the one before and ensures young people have the skills they need to get on in life. It backs the innovators who deliver growth, helps businesses to create better, higher paid jobs and builds the homes the country needs.

The Budget sets out actions the government will take to:

support more housebuilding, raising housing supply by the end of this Parliament to its highest level since 1970, to make homes more affordable in the long term and help those who aspire to homeownership

prepare for exiting the EU and ensure a smooth transition by setting aside an additional 3 billion for government

establish the UK as a world leader in new technologies such as artifcial intelligence (AI), immersive technology, driverless cars, life sciences and FinTech

give everyone the skills to succeed in the modern economy and get better paid jobs

expand the National Productivity Investment Fund (NPIF) to support innovation, upgrade the UKs infrastructure and underpin the governments modern Industrial Strategy

invest over 6.3 billion of new funding for the NHS to improve A&E services, reducing waiting times and improving performance for treatment after referral, and to transform and integrate patient care

provide more support in the short term for households, reducing costs of living, and boosting wages for the low paid through the National Living Wage (NLW)

Economic context The UK economy has shown its resilience, with solid growth over the past year and further increases in the number of people with a job. Gross domestic product (GDP) grew 1.5% in the year to the third quarter of 2017, employment remains near the record high set earlier this year and unemployment is at its lowest rate since 1975.

The Offce for Budget Responsibility (OBR) now expects to see slower GDP growth over the forecast period, mainly refecting a change in its forecast for productivity growth. It has revised down its forecast for GDP growth by 0.5 percentage points to 1.5% in 2017, then growth slows in 2018 and 2019, before rising to 1.6% in 2022.

2

Household spending continues to grow, having slowed since 2016 due to higher infation caused by the depreciation of sterling. Business investment has grown moderately over the past year and net trade has started to make a positive contribution to GDP growth. Surveys of export orders in 2017 have been strong, with some reaching their highest level since 2011.

Outlook for the public fnances The government has made signifcant progress since 2010 in restoring the public fnances to health. The defcit has been reduced by three quarters from a post-war high of 9.9% of GDP in 2009-10 to 2.3% in 2016-17, its lowest level since before the fnancial crisis.

The governments fscal rules take a balanced approach to government spending, getting debt falling but also investing in our key public services like the NHS, and keeping taxes low.

Compared to the Spring Budget 2017 forecast, borrowing is signifcantly lower in the near term. However, over the medium term the impact of a weaker economic outlook and the measures taken at the Budget see borrowing higher than previously forecast. The OBR expects the government will meet its 2% structural defcit rule for 2020-21 two years before target, in 2018-19, and with 14.8 billion of headroom in the target year. Debt is forecast to peak at 86.5% of GDP in 2017-18, and is forecast to fall in every year thereafter to 79.1% of GDP in 2022-23.

Building an economy ft for the future The Budget sets out a long term vision for an economy that is ft for the future one that gives the next generation more opportunities. It is an economy driven by innovation that will see the UK becoming a world leader in new and emerging technologies, creating better paid and highly skilled jobs.

To achieve this vision, the government has already set in train a plan to boost UK productivity over the long term. A key part of this is the NPIF, launched last year to provide additional investment in housing, infrastructure, and research and development (R&D). The Budget goes further, increasing the size of the NPIF from 23 billion to 31 billion. This investment will underpin the governments modern Industrial Strategy and help raise wages and living standards. It means public investment as a proportion of GDP will reach its highest level in 30 years by 2020-21, excluding the exceptional years following the fnancial crisis. F urther details of the governments plan will be set out in the Industrial Strategy.

Government action at this Budget to boost productivity includes:

Transport: A 1.7 billion new transforming cities fund through the NPIF to improve connectivity and support jobs across Englands great city regions

Research and Development: The largest boost to R&D support for 40 years with a further 2.3 billion investment from the NPIF in 2021-22

Long Term Investment: Unlocking over 20 billion of patient capital, over the next 10 years so that innovative high-growth frms can achieve their full potential

Emerging Tech: Leading the world in developing standards and ethics for the use of data and AI, and creating the most advanced regulatory framework for driverless cars in the world

Skills: Creating a new partnership with industry and trade unions to deliver a National Retraining Scheme, giving people the skills they need throughout life to get a well-paid job, and equipping young people with the science, technology, engineering, and maths (STEM) skills to become innovators of the future

3

Building the homes our country needs The government is determined to fx the dysfunctional housing market, and restore the dream of home ownership for a new generation. The only sustainable way to make housing more affordable over the long term is to build more homes in the right places. Government action has already increased housing supply to 217,000 in 2016-17. The Budget goes further and announces a comprehensive package which will raise housing supply by the end of this Parliament to its highest level since 1970s, on track to reach 300,000 per year, through:

making available 15.3 billion of new fnancial support for housing over the next fve years, bringing total support for housing to at least 44 billion over this period

introducing planning reforms that will ensure more land is available for housing, and that maximises the potential in cities and towns for new homes while protecting the Green Belt

The Budget also announces further support for those struggling to get on the housing ladder now. The government will permanently exempt frst time buyers from stamp duty for properties up to 300,000, with purchasers benefting on ho