What does the 2017 Budget mean for working families?
Today, Chancellor Philip Hammond delivered the 2017 Budget announcing the Government’s plans for tax and spending. The Budget is the biggest single event of the year impacting on the finances of people across the UK. The Chancellor promised investment to make Britain “fit for the future” as an “outward looking, free-trading nation” once it leaves the EU in 2019, as well as committing to support hard-pressed families with the cost of living.
This Budget was made in the context of challenging times for working families across the UK, with the recent rise in Bank of England interest rates (the first in more than 10 years), inflation impacting on the cost of living, the ongoing benefits freeze, issues around the delivery of Universal Credit, and weak wage growth. Average earnings are set to fall over the next five to six years, and this is likely to put more pressure on households.
As anticipated, economic growth forecasts have been downgraded, with productivity growth also revised down. However, more people are forecast to be in work by 2022 and it is anticipated that inflation will fall in the course of the coming year.
A summary for working families
So how is today’s Budget likely to impact on you? We’ve summarised some of the highlights below…
- Universal Credit: The Chancellor announced a £1.5 billion package to address operational concerns about the delivery of Universal Credit including:
- Scrapping the initial seven day waiting period for processing of claims, meaning that first payments will typically take five weeks rather than six, from February 2018.
- Ensuring claimants get advance payments within five days of applying, from January 2018.
- Increasing the repayment period for advances from six months to 12 months.
- New Universal Credit claimants who are in receipt of Housing Benefit will continue to receive it for two weeks.
To support these changes the Government will roll out Universal Credit more gradually between February 2018 and April 2018, and roll-out to all job centres will be complete in December 2018. We will await further detail on what this means for claimants living in Northern Ireland.
- Personal Allowance: Personal allowance, the amount you can earn before paying tax, will rise to £11,850 from April 2018. The level at which you begin to pay the Higher Rate of tax will increase from £45,000 to £46,350 also from April 2018.
- Living and Minimum wages: The National Living Wage will increase from April 2018 from £7.50 per hour to £7.83 per hour, in line with the recommendations of the Low Pay Commission. The National Minimum Wage will also increase; for 21-24 year olds it will rise to £7.38 per hour.
- Savings: The Individual Savings Account (ISA) annual subscription limit for 2018-19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 will be uprated to £4,260.
- Owning a car: Fuel duty will be frozen again, however vehicle excise duty for diesel cars that do not meet the latest standards will rise by one band in April 2018. The Government will be investing £540 million in supporting the growth of electric cars, including providing more charging points.
- Stamp Duty Land Tax: Amongst a number of announcements on housing, key was that Stamp Duty is to be abolished immediately for first-time buyers purchasing properties worth up to £300,000. The Chancellor also announced long-term goals for house building in England and the establishment of a new Homelessness Task Force.
- Northern Ireland: The Chancellor has allocated an additional £650 million for the Northern Ireland Executive, stating that this will mean an increase in real terms for Northern Ireland public services over the period 2015 to 2020. Mr Hammond also announced a consultation on a ‘City Deal’ for Belfast. This would allow the city to have powers to create economic growth, help businesses grow and decide how public money should be spent.
- NHS: The Chancellor identified some additional funding for the NHS in England and committed to funding a pay rise for nurses if one is recommended by an independent panel. The situation in Northern Ireland is complicated by the current lack of an Executive.
What was missing?
The Chancellor stated that this was a Budget to help people into work and described the switch to Universal Credit as bringing in a modern welfare system where work always pays. However, for work to pay, parents with dependent children need to have access to affordable, flexible and quality childcare. There was no mention in the Budget of the vital role that childcare plays in supporting parents to access and stay in work.
Additionally, the Chancellor did not address recent research published by the Institute for Fiscal Studies (IFS) which forecast that under current plans for changes to benefits, including the rollout of Universal Credit, absolute child poverty is set to increase from 27% to 31% by 2021.
There are 444,000 children in Northern Ireland and 103,400 of these children live in poverty. The majority (61%) live in households with at least one parent who is working. Cutting Universal Credit waiting times and extending the repayment period for advances are welcome changes, however working families who are on low wages continue to feel the impact of the benefit freeze. Our research highlights that many of these households are unable to access affordable childcare. These issues need to be addressed to ensure that work really does pay.
Get in touch if you have any questions about what you and your family may be entitled to call our free Family Benefits Advice Service on 0800 028 3008.
We can answer questions about all of the forthcoming changes to financial support, as well as carry out personal benefits calculations to ensure that you are claiming all you are entitled to.
Note that, in 2016, the Chancellor announced that the Government would move to a single major fiscal event each year. This means Budgets are now delivered in the Autumn rather than in the Spring. There will, however, be a Spring Statement early in 2018 providing an update on the state of the nation’s finances.