The Chancellor included a surprise move to abolish stamp duty for most first-time buyers as part of efforts to tackle the UK’s housing crisis in a Budget speech delivered today amid mounting gloom about the nation’s economy.
Philip Hammond announced that the tax would no longer apply for first-time buyers on properties up to £300,000 in a move that means 95 per cent will see a cut in the amount they pay.
But his claim in his first Autumn Budget that the UK economy had managed to “confound those who seek to talk it down” was undermined by Britain’s fiscal watchdog, which revised down its growth predictions and forecast stubbornly flat productivity in the next four years.
In its independent forecasts, the Office for Budget Responsibility (OBR) downgraded gross domestic product forecasts (GDP) from two per cent to 1.5 per cent for this year.
Institute for Fiscal Studies director Paul Johnson said the 1.4 per cent average annual growth forecast by the OBR over the next five years was “much worse than we have had over the last 60 or 70 years”.
Meanwhile, the Chancellor’s promise to back the Northern Powerhouse project with a £1.7bn Transforming Cities Fund to boost local transport projects came in for criticism.
The investments I have announced back Yorkshire and the Humber with a significant cash boost.Philip Hammond
He was accused of “behaving like Santa Claus with special prizes for well-behaved cities” after revealing that half the fund would go to areas with metro mayors, meaning Yorkshire cities will have to compete for the remaining money in the absence of a devolution deal for the region.
Some £30m will be spent on trials to improve mobile and digital connectivity on the TransPennine route between Manchester and Yorkshire, while £337 million is to be invested in the replacement of the 40-year-old rolling stock on the Tyne and Wear Metro.
But there was no mention of Northern Powerhouse Rail, the proposed high speed line connecting Liverpool and Manchester with Leeds, Sheffield and Hull, prompting an MP in the 2017 UK City of Culture to describe the speech as a “blank page” in its history.
Barnsley MP (Lab) Dan Jarvis said: “Once again the Government has delivered a Budget that leaves Yorkshire out in the cold.
“Philip Hammond’s decision to award half of the £1.7bn ‘transforming cities fund’ only to the six areas with elected metro mayors, proves beyond doubt the need for Yorkshire devolution.
“A Yorkshire mayoralty will not only give us a seat at the table but will ensure that in future the people of Yorkshire get the fair share they deserve and need.”
The Budget also contained a £14m boost to spending on flood defences in Yorkshire, building on the £85 million Leeds Flood Alleviation Scheme that began in January 2015. And Leeds will get a share of a £5m fund to celebrate its historic connections with the Women’s Suffrage movement.
Mr Hammond said: “The Budget sets out how we will build an economy fit for the future through driving innovation, creating better paid jobs and building the homes this country needs.
“The investments I have announced back Yorkshire and the Humber with a significant cash boost.”
The announcement comes amid widespread criticism of the disparity in funding between the North and the capital.
Chris Hearld, North region chair for KPMG, said: “Investment in infrastructure has long been the foundation upon which the growth of our regional cities, and improvements in our productivity, will be built.
“That half of the new Transforming Cities Fund is to be shared amongst those cities with metro mayors is good news for the two thirds of the Northern Powerhouse that has secured devolution deals.
“Indeed, it’s particularly pleasing to see the massive strides that are taking place in the North East which will be no doubt buoyed by pledges of investment in the Tyne & Wear Metro and the Redcar steelworks.
“However, once again the people of Yorkshire are left counting the cost of their region not being able to get its devolution act together. Being left to compete for its share of investment against the rest of the UK must surely increase the risk of it becoming a straggler in the race for economic growth.”
Mark Goldstone of the West & North Yorkshire Chamber of Commerce said the transport fund announcement “must serve as a wake-up call for the region’s business and civic leaders to come together and hammer out a devolution deal”.
The biggest surprise of Mr Hammond’s speech, the move to abolish stamp duty for many first time buyers, will come into force immediately, as Mr Hammond set out plans to build 300,000 extra new homes a year by the mid 2020s.
Around a million first-time buyers are expected to benefit over five years. “This is our plan to deliver on the pledge we have made to the next generation that the dream of home ownership will become a reality in this country once again,” Mr Hammond said.
But within minutes, the OBR said the main beneficiaries would be those who already own a home and that the move could actually increase house prices.