LONDON (Reuters) - British finance minister Philip Hammond delivered his first detailed statement to parliament on budget policy since taking office in July following Britain’s vote to leave the European Union.
For the main story on the Autumn Statement, please click on
Here are some of the main announcements:
Hammond announced the independent Office for Budget Responsibility (OBR) had cut its official forecasts for economic growth for the next two years.
The OBR said gross domestic product would grow by 1.4 percent in 2017, down from an estimate of 2.2 percent made in March, before voters decided to leave the EU.
Hammond also said the OBR now saw growth in 2018 at 1.7 percent compared with March’s forecast of 2.1 percent.
The growth forecasts for the following years were 2.1 percent for 2019 and 2020, unchanged from the March forecasts.
The government will need to borrow 122 billion pounds more over the next five years than it expected to before the Brexit vote, under the forecasts announced by Hammond.
Britain is expected to run a budget deficit of nearly 22 billion pounds in the 2019/20 financial year which until recently had been the target date for a first budget surplus, Hammond said, citing forecasts from the OBR.
Hammond’s predecessor as finance minister, George Osborne, had been aiming for a surplus of 10.4 billion pounds in 2019/20.
The OBR forecasts that in cash terms, borrowing is set to be higher than all its March forecasts - 68.2 billion pounds this year; falling to 59 billion pounds next year; 46.5 billion pounds in 2018/19; then 21.9 billion pounds; 20.7 billion pounds, and finally 17.2 billion pounds in 2021/22.
Overall public sector net borrowing as a percentage of GDP will fall to 3.5 percent this year, and will continue to fall, reaching 0.7 percent in 2021/22.
Hammond said the government would aim to cut the UK’s budget deficit, excluding investment spending and taking swings in the economic cycle into account, to below 2 percent of gross domestic product by 2020.
Hammond said the government would cancel a planned fuel duty rise for the seventh successive year. Fuel duty is paid on petrol, diesel and other fuels used in vehicles and for heating.
Hammond said he would launch a fund to invest 23 billion pounds in rail, telecoms and housing infrastructure over the next five years.
Hammond said the government would invest between 1 and 1.2 percent of gross domestic product on economic infrastructure from 2020, compared with 0.8 percent currently.
Hammond said the threshold from which people have to pay income tax would be raised to 12,500 pounds and the threshold for the higher rate to 50,000 pounds, by 2020, in line with previous plans. Once 12,500 pounds has been reached, the personal allowance will rise automatically during the 2020s in line with inflation, rather than the National Minimum Wage as previously planned.
Britain will raise insurance premium tax by two percentage points to 12 percent from June 2017, Hammond said.
The move represents a doubling in the tax rate on home and motor insurance premiums within the past two years.
Hammond announced 390 million pounds of funding to boost the development of low emission vehicles and autonomous vehicles, and support for electric vehicle infrastructure.
Hammond also announced a 100 percent first-year capital allowance for the installation of electric vehicle charging infrastructure.
A system of guaranteed annual pension increases for retired citizens will remain in place for now but the government will review its public spending priorities for 2020 onwards, Hammond said.
Since June 2010, Britain’s state pension has risen by whichever is higher out of Consumer Price Index inflation, average earnings growth or 2.5 percent - a so-called ‘triple-lock’.
NEW RESTRICTION ON TAX RELIEF FOR CORPORATE INTEREST EXPENSES
Hammond said there was understandable public concern about large multinational groups using cross-border structures to manage their tax liabilities.
He said the government would implement a new restriction on tax relief for corporate interest expenses, and reform the way that relief is provided for historic losses.
“These measures, scored at Budget 2016, will help to ensure large businesses will always pay tax in years where they make substantial profits,” Hammond said.
“They will also mean that businesses cannot avoid tax by borrowing excessively in the UK to fund their overseas activities. They take effect in April, and raise over £5bn from the largest businesses in the UK.”
Reporting by Estelle Shirbon; Editing by William Schomberg and Kate Holton