Hammond unveils Budget for a nation of shopkeepers, drinkers and drivers

Forget Fiscal Phil, we now have Shopping Phil: some might say, Spending Phil.

For this was a budget for shopping: for shop-keepers, shoppers, drinkers and drivers alike. In an astonishing break with ten years of Conservative austerity, the Chancellor surprised everybody with a raft of high-level spending plans which broke all the rules of fiscal conservatism.

As well as pumping £1.5bn of new money into helping revive the country’s dying High Streets, Philip Hammond confirmed that £25.5bn of extra money will go to our ‘precious NHS’ over the next five years, there will be more money for a new Mental Health service, more cash to support the new Universal Credit scheme, more money on defence and extra funds for everything from lavatories to mending the potholes.

If you were a cynic, you might think there is an election on the horizon, or perhaps even a leadership challenge in the offing.

The betting odds on the Chancellor being the next Prime Minister hadn’t changed by the end of the hour-long Budget. But what we did see was a sunnier side to the Chancellor who sounded and looked like he is doing the job that he came into politics to do: inject dynamism and stimulate the right bits of the British economy to reinvigorate growth. As Hammond himself put it, to deliver a Budget that puts a clear dividing line between the Conservatives and the opposition.

Which it sort of did, but not in the way that many of the more radical, tax-reforming Tories would like to see. What is for sure is that it will be a difficult Budget for Labour to fight because the thrust of the measures were unashamedly aimed at the so-called ‘hard-working’ working class, now more likely to vote Tory than Labour. (Message to Conservatives: please stop calling people hard-working, it’s patronising.)

For small business owners and shop-keepers, the most attractive decision was to invest £650m in a new fund to help transform – and adapt – our town centres and slash business rates for companies with a rateable value of £51,000 or less by a third over two years. This will help 90% of all independent companies – and cut their rates bill by a total of £900m. At the same time, local authorities will be encouraged to relax planning laws so that empty shops can be more easily converted into new homes. The logic is this: you breath life into town centres and get housing up. It works too: all the analysis shows that town centres that have people who live near where they work are more dynamic.

But Hammond missed a trick. Instead of tinkering with the tax system, he should have been bold enough to have gone the full Monty and chopped business rates altogether. There are many alternatives – replacing business rates with a land tax is one which would reduce bureaucracy and incentivise property owners to invest in their properties.

There were other incentives for business: halving the apprenticeship levy to 5% for small companies and increasing the annual investment allowance to £1m for two years were both sensible measures.

And on first glance, so was his decision for the UK to go it alone and force tech giants like Facebook and Google to pay a new Digital Services Tax on UK revenues was a master-stroke. He says that new rules will be introduced for tech companies to pay 2% tax with global sales of more than £500m which is estimated to raise up to £400m in new taxes.

However, he was clever enough to give himself a get -out clause from the UK breaking ranks and going solo.  If attempts at reaching international agreement on taxing tech platforms are finally reached with the OECE and the G20, then the UK will go along with them.

Yet Sam Dumitriu, Research Director of The Entrepreneurs Network reckons the Chancellor will regret making the tax systems ever more complex. He said: “Corporation Tax needs updating, but any reform should focus on fixing the general rules, rather than papering over the cracks in the status quo.”

Indeed, Dumitriu reckons singling out ‘tech giants’ may lead to UK SMEs paying more to advertise through social media, and because the tax is levied on revenue not profits, could unfairly disadvantage firms who are still raising money through equity finance.

The Entrepreneurs Network is also critical of the temporary increase in investment allowance, arguing it should be agreed for longer to give companies more stability.

There’s also a chunky £1.6bn of R&D money going to the Industrial Strategy Challenge Fund which is being used to take a punt on the future of quantum technologies, nuclear fusion, AI and blockchain technologies as well as funds going into the Digital Catapult.

These are all worthy causes but the devil is in the detail: who is distributing the money, who is judging how it is spent and on what? We need to know: the government is not always the best arbiter.

Outlawing the much hated PFI schemes for infrastructure projects was another smart move. Instead, there will be new ‘centres of excellence’ to manage the contracts in the taxpayers interests-starting in the health sector.

Spending up to £30bn on new roads and repairs and freezing fuel duty will help thousands of small businesses and save them millions of pounds a year on fuel costs. Garage-owners might not be so pleased though as £420m of new money to plug up the country’s pot-holes will cut down vehicles needing repairs. Hey, ho.