Autumn Budget: reaction mixed as growth slows and NLW rises

Reaction to this week’s autumn budget was mixed as the Chancellor Philip Hammond announced that growth predictions had been cut as a result of the Brexit vote in June. The UK’s deficit would not be cleared by 2020 either, Hammond said, as he adjusted his predecessor George Osborne’s target.

“In view of the uncertainty facing the economy, and in the face of slower growth forecasts, we no longer seek to deliver a surplus in 2019/20,” Hammond explained in his first budget speech. “But the Prime Minister and I remain firmly committed to seeing the public finances return to balance as soon as practicable, while leaving enough flexibility to support the economy in the near-term.”

As expected, the Chancellor announced a rise in the national living wage from £7.20 to £7.50 an hour from April 2017. However, this is below the £7.60 figure that the Office for Budget Responsibility had recommended in order to keep the country on course to meet the £9 hourly rate by 2020.

Surprisingly, the British Hospitality Association chose not to mention the NLW in its statement. Instead it focused on the Chancellor’s refusal to cut VAT on tourism. The government has “missed a wonderful opportunity to bolster hospitality and tourism” said chief executive Ufi Ibrahim.

“The UK’s hospitality and tourism businesses are already experiencing increased costs as a consequence of the fall in the value of sterling with the price of building materials, cotton and imported food and beverages climbing,” she explained. “This is a worrying trend.”

Indeed, there were warnings this week from experts at Rabobank that the UK’s reliance on imported food combined with the low value of sterling will result in higher food prices next year.

Food manufacturers were more upbeat following the budget speech. Food & Drink Federation director general Ian Wright welcomed the move to double export finance to support trade. The £23 billion national productivity investment fund is also “the right commitment at the right time”, he said.

Hammond also announced plans to retrieve around £2bn that is lost to the exchequer through tax avoidance schemes. “The government is committed to tackling tax evasion, avoidance and aggressive tax planning … but we must constantly be alert to new threats to our tax base, and be willing to move swiftly to counter them,” he said.

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