Against a backdrop of low economic growth and poor productivity, Mr Hammond delivered his second Budget of 2017 to Parliament, outlining Britain’s investment plans for the years ahead. One of the key themes of this Budget was solving the housing crisis, and, here, the Chancellor announced his plans to build 300,000 new homes a year by the middle of the next decade together with a “comprehensive package of new policy”. Mr Hammond also delivered the headline-grabbing cut to Stamp Duty to help first-time buyers.
“We send a message to the next generation that getting on the housing ladder is not just a dream of your parents’ past, but a reality for your future,” he said.
However, in spite of scrapping Stamp Duty for first-time buyer homes under £300,000 and the government’s £44bn commitment to “fix the broken housing market” over the next five years, grim forecasts for UK productivity and GDP growth cast a long shadow on these Budget’s giveaways.
Here are some of the key announcements made by Mr Hammond, and how the construction, technology, recruitment and transportation sectors will be affected.
The Chancellor’s £44bn investment in housing, the biggest stimulus package yet, has been well received by the industry. The investment package, consisting of capital funding, loans and guarantees, aims to create the financial incentives necessary to help meet the target of building 300,000 new homes a year by the mid-2020s. The package includes £15.3bn of fresh funding alongside support for planning reform to avoid delays.
Other key announcements by the Chancellor included: more money for the Home Builders Fund, which provides loans to SME house-builders; doubling the Housing Infrastructure Fund to £2.7bn to provide local authorities with crucial funds for strategic infrastructure projects; and £630m for the Small Sites Fund for remediation and infrastructure works on small and stalled sites.
Mr Hammond also announced an additional £400m loan fund for estates generation programmes across the UK as well as £1.1bn to unlock strategic sites, including urban regeneration schemes.
He also stated that borrowing restrictions on local authorities would be eased by raising the Housing Revenue Account (HRA) borrowing cap. As of now, councils in high-demand areas would have the funds to invest in new homes, which will unlock a significant amount of spending.
An additional £34m was pledged to develop construction skills across the country.
The Chancellor also announced that the government will replace European investment funding, where needed. Inward investment and projects that have previously relied on the European Investment Bank have been particularly affected by the uncertainty caused by Brexit. “And we stand ready to step in to replace European Investment Fund lending if needed,” he said.
As the building of new homes will not become a reality for a number of years, it’s expected that the headline-grabbing Stamp Duty cut to help first-time buyers will initially cause house prices to increase and lead to the property market overheating.
During his statement, Mr Hammond outlined plans to invest in new technologies, pledging more funds for R&D and made plans to boost digital skills across the country. The Budget’s technology focus was welcomed by the industry.
Seen by this government as “the backbone of the global economy of the future”, the tech sector is set to receive £500m for technological initiatives, such as Artificial Intelligence (AI), 5G connectivity and full figure broadband.
Mr Hammond said: “And regrettably our productivity performance continues to disappoint. The Office for Budget Responsibility (OBR) has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2% a year, but it has remained stubbornly flat.”
The government has pledged major investment in the infrastructure that supports the digital economy to address the UK’s low productivity levels as well as put the UK in a position to challenge other technology hubs.
The Chancellor also announced plans for new tech ventures to open twice as fast – every half an hour instead of every hour – and to facilitate this, he pledged £20bn to knowledge-intensive businesses to help the growth of tech start-ups.
Mr Hammond delivered £20m towards supporting businesses developing AI technologies, with £45m directed towards increasing the number of AI PhD students. A total of £9m will be used to fund an AI advisory body to help govern AI development. Investment in AI is seen as not only benefiting the sector but also securing the UK’s position at the forefront of the global economy.
Mr Hammond also announced plans for major investment to encourage the manufacture of electric cars that drive themselves. “There is perhaps no technology as symbolic of the revolution gathering pace around us as driverless vehicles,” he said.
He added that future vehicles would be driverless, but that they would be electric first, leading to an announcement that an investment of £400m in a new charging infrastructure fund, an extra £100m on the Plug-in-Car Grants and £40m for research into charging.
Fuel duty will remain frozen for the seventh consecutive year for both petrol and diesel, Hammond confirmed. This means that fuel duty has been frozen at 57.95p since 2010, the longest freeze in 40 years.
Mr Hammond said: “Since 2010, we will have saved the average car driver £850, and the average van driver over £2,100. Fuel duty has now been frozen for the longest period in 40 years, at a total cost to the Exchequer of £46 billion since 2010.”
However, the Road Haulage Association (RHA) expressed its disappointment with the Budget announcement, stating that the Chancellor could have gone further to help the transportation and logistics sector as The UK has the highest fuel duty in Europe, which is almost 50% higher than the European average. The trade body stressed that the rate freeze would make the production and distribution of UK goods less competitive. “This has a negative effect on everything we buy and makes all UK goods more expensive to transport,” commented Richard Burnett, RHA Chief Executive.
However, in the longer term, Hammond’s pledge to ensure driverless vehicles on Britain’s roads by 2021, will have a detrimental impact on one million British workers, who will have to retrain when driverless vehicles “revolutionise” the workplace and people’s lives.
“The challenge for us is making sure that the million-odd people in the UK who drive for a living, over the next 10, 20 years or so, as driverless vehicles come in, are able to retrain and re-skill so they can take up the many, many new jobs that this economy will be throwing up,” the Chancellor recently told the BBC.
Although some commentators have described driverless cars as a “fantasy world”, in Phoenix, Arizona, this month, Waymo, formerly the Google self-driving car project, launched tests of fully driverless taxis. Residents of Phoenix are expected to be able to hail them via an app in the upcoming months. In the meantime, Jaguar Land Rover has revealed it has been testing self-driving vehicles in Coventry, albeit with a driver in the front seat. These are the first UK-built cars to run autonomously.It would appear that driverless cars are less of a fantasy and more or a reality.
To address low productivity and the skills shortage in the UK workforce, Mr Hammond announced that £40m would be allocated to train maths teachers as “knowledge of maths is key to the high-tech, cutting-edge jobs in our digital economy”. He also stated plans to triple the number of computer science teachers from 4,000 to 12,000 to ensure that every secondary school pupil can study computing, which is also at the heart of the digital economy.
Mr Hammond revealed plans to launch a new National Retraining Scheme to boost digital skills. He also announced that £30m would be invested in the development of digital skills distance learning courses, “so people can learn wherever they are whenever they want”. These measures are viewed as vital by recruiters to get productivity back on track.
These pledges showed Mr Hammond’s commitment to encouraging more young people to study maths and computer science to build a future pipeline of talent aimed at maintaining the UK’s position at the forefront of the world’s technical revolution.
Mr Hammond also announced a 4.4% rise in the National Living Wage from £7.50 to £7.83 as of April 2018. This pledge delivers a pay rise to over 2m minimum wage workers of all ages across the country. Additionally, the early confirmation of the new rate ensures employers have sufficient time to plan for wage increases.
In terms of GDP growth, The OBR predicted that the economy would grow by 1.5% this year, down from the 2% estimate it made in March. Growth, it says, will drop to 1.3% by 2020 and then rise to 1.5% in 2021, lower in every year than was predicted in March. These new growth forecasts indicate that the economy is expected to grow at below its long-term trend growth until well into the next decade.
For the recruitment sector, a low rate of economic growth is grim reading as it can frequently cause higher unemployment. As the demand in the economy is only growing by 1.5% this year, this would mean that supply is increasing faster than demand. Recruitment firms, therefore, may have to make workers redundant as a result of insufficient demand.