Hammond’s Budget tackles STP and social care funding
Chancellor’s Statement discusses technical qualifications, takes aim at self-employment incorporation regimes and holds back digital tax requirements for businesses with turnover below VAT registration threshold
Chancellor Philip Hammond's last Spring Budget has promised more funding for local government to deal with health and social care, and for the NHS to develop sustainability and transformation plans (STPs), with £325m in up front funding for the strongest plans.
He also took aim at ‘self-employed’ incorporations, offered a year’s delay for some businesses over quarterly tax reporting and announced a small delay in digital tax adoption requirements.
Health and Social Care
On STPs, Hammond said, “We recognise the progress the NHS is making in developing Sustainability and Transformation Plans. And we recognise, too, that in addition to the funding already committed, some of those plans will require further capital investment.
“So the Treasury will work closely with the Department of Health over the course of the summer as the STPs are progressed and prioritised. And at the Autumn Budget I will announce a multi-year capital programme to support implementation of approved high quality STPs.”
Hammond indicated that health secretary Jeremy Hunt expected that “a small number of the strongest STPs” may be ready ahead of the Autumn Budget, prompting the Chancellor to allocate an additional £325m to allow the first selected plans to proceed.
On social care, Hammond said he was committing additional grant funding of £2bn to social care in England over the next 3 years, with £1bn available in 17-18 to allow local authorities to act now to commission new care packages. Hammond said the government will set out its thinking on the options for the future financing of Social Care in a Green Paper later this year.
GlobalData senior analyst Neharika Ralhan said, "The Chancellor made social care a pillar of his first and last spring budget with a £10bn increase in annual funding by 2020 and £4bn earmarked for this year alone. The funding is aimed to address closer collaboration between local authorities and the NHS and alleviate stress put on the NHS through the joining up of systems and sustainable care. What this means in real terms over a longer period will be set out in a social care green paper set to be released later in 2017.
"Sustainability and Transformation Plans are gathering steam (albeit slowly) with the Chancellor allocating £325m funding for advanced footprint areas. This funding will be spread across a handful or more of STPs with funding be put towards capital investments including technological advancement. It is important to note this will be a slow burn with technology lower down the order after more pressing operational issues, including precarious financial situations within the STPs are addressed."
On digital tax, Hammond said, “In a digital age, it is right that we develop a digital tax system. But in response to concerns about the timetable expressed by business organisations, and….by the Chairman of the Treasury Select Committee. I have decided that for businesses with turnover below the VAT registration threshold I will delay by one year the introduction of quarterly reporting at a cost to the Exchequer of £280m.”
Discussing the self-employed and tax, Hammond said, “Alongside the gap between employees and the self-employed there is a parallel unfairness in the treatment of those working through their own companies.
“Britain has the most competitive corporate tax regime in the G7, and we are determined to make Britain the most attractive place to start and grow a business.
“But to do that, we must ensure that our corporate tax regime does not encourage people across the economy to form companies simply to reduce tax liabilities, pushing the burden of financing our public services onto others.
Hammond said HM Revenue & Customs (HMRC) estimates that existing incorporations cost the public finances over £6bn a year with the Office for Budget Responsibility forecasting an additional annual cost to the Exchequer from those choosing to incorporate of £3.5bn a year by 2021-22.
On education, Hammond pledged investment of £216m in the condition of existing schools, while committing to establish an additional 110 free schools. This builds on a previous commitment by the government to establish 500 free schools.
“This will include new specialist maths schools to build on the clear success of Exeter Mathematics School and King’s College London Maths School,” he said.
An upcoming Schools White Paper to be published by the government is expected to garner sponsorship for these new institutions from universities and private schools.
Hammond also announced £270m to keep the UK at the forefront of disruptive technologies like biotech, robotic systems and driverless vehicles, with £16m for a new 5G mobile technology hub and £200m for local projects to leverage private sector investment in full-fibre broadband networks. The 5G funding coincided with the launch of a Department for Culture, Media and Sport (DCMS) 5G strategy.
Education, Skills and Apprenticeships
Noting that the Budget was being delivered during National Apprenticeship Week, Hammond announced plans to introduce ‘T-Level’ qualifications.
Devised following a review conducted by Lord Sainsbury and Baroness Wolf that called for a clearer system of qualifications to be recognised by employers, the Chancellor set out aims to overhaul technical skills development.
“We will increase by over 50% the number of hours training for 16-19 year old technical students, including a high-quality three month work placement for every student, so when they qualify, they are genuinely ‘work-ready’, “ Hammond said.
“Once this programme is fully rolled out, we will be investing an additional £500m a year in our 16-19 year olds. And to encourage and support the best of them to go on to advanced technical study, we will offer maintenance loans for those undertaking higher level technical qualifications at the new Institutes of Technology and National Colleges.”
The launch of the Apprenticeship Levy in April is intended to support three million apprenticeships by 2020.
Responding to the Budget, opposition leader Jeremy Corbyn questioned the commitments to provide £2bn in additional grant funding to English authorities up to 2020, claiming they were insufficient to cover both the current and longer-term pressures on care.
“The budget did not provide the funding necessary now for the crisis in our NHS, which the British Medical Association reckons needs an extra £10bn. It didn’t provide the funding necessary to end the state of emergency in social care, which needs £2bn a year just to plug the gaps, according to the King’s Fund,” he said. “That is not met by £2bn over three years, the money is needed now.”
From a technology perspective, Shadow Digital Economy Minister Louise Haigh accused the Chancellor of failing to meet the ambitions of consumers and the digital sector in the Budget, especially in areas such as connectivity.
"Many will raise a wry smile that the government are looking towards a limited roll-out of fibre broadband, which they are now announcing for the fifth time and benefitting a precious few, when the protracted patchy roll-out of both 4G and superfast rumbles on without an end in sight," she said.
“The Chancellor pledged to prepare Britain for the future, but with 400,000 small businesses unable to access superfast broadband; swathes of our road and rail networks with no access to data, voice or text, our sclerotic digital infrastructure got nothing like the boost it needs and the government pointedly chose to make no commitments on recommendations made by the Independent Infrastructure Commission on boosting road & rail coverage.”
Haigh noted that the government had accepted that other nations were expect to have an inbuilt advantage in developing 5G technologies.
“That advantage has only been caused because a lack of vision from our Government has left our digital infrastructure in the slow-lane. It will require serious ambition for us to catch-up and today’s budget doesn’t even come close," she argued.
(Neil Merrett also contributed to this article)