My Lords, just under two weeks ago the Chancellor of the Exchequer set out the autumn Budget to show the British people that their hard work is paying off: eight straight years of economic growth, with more than 3.3 million more people in work, wages growing at their fastest pace in almost a decade and debt beginning to fall—an economy that is back on its feet again and fit for the future. This Budget signals that austerity is coming to an end but maintains fiscal discipline. This Budget rewards the British people and their cherished public services but reminds us that financial discipline must still prevail.
Let me first set out the forecast contained in the Office for Budget Responsibility’s Economic and Fiscal Outlook. The UK’s economic outlook continues to exceed expectations, and the OBR expects growth to be resilient across the forecast period, improving next year from the 1.3% forecast at the Spring Statement to 1.6%, then 1.4% in 2020 and 2021, 1.5% in 2022 and 1.6% in 2023. The Budget forecast, taking into account all announcements made since the Spring Statement, shows the deficit down from almost 10% before 2010 to less than 1.4% next year under this Government and falling to just 0.8% by 2023-24. Borrowing this year will be £11.6 billion lower than forecast at the Spring Statement—just 1.2% of GDP—and is then set to fall from £31.8 billion in 2019-20 to £26.7 billion in 2020-21, £23.8 billion in 2021-22, £20.8 billion in 2022-23 and £19.8 billion in 2023-24, its lowest level in over 20 years.
So we meet our structural borrowing target three years early and deliver borrowing of just 1.3% of GDP in 2020-21, maintaining £15.4 billion headroom against our 2% fiscal rules target. We are no longer borrowing at all to finance current spending, and the OBR confirms that our national debt peaked in 2016-17 at 85.2% of GDP, and then falls in every year of the forecast period from 83.7% this year to 74.1% in 2023-24.
Due to the hard work of the British people and this Government’s prudent public finances, we can provide additional support for public services in the spending review. The Prime Minister announced the single largest cash commitment to our public services ever made in peacetime by the Government—an £8.4 billion five-year deal for our precious National Health Service. As the Chancellor made clear, we are delivering this historic £20.5 billion real-terms increase for the NHS in full over the next five years.
As we have been remembering this past weekend, the bedrock of this nation’s security is a strong defence. Our Armed Forces are a vital pillar of the UK’s past, present, and future. This is why the Budget commits an additional £1 billion to the Ministry of Defence to cover the remainder of this year.
The Budget also made provision for £400 million in-year capital payment to schools.
Along with investing in our vital public services, this year’s Budget includes a record set of spending commitments focused on boosting industry and our world-breaking technologies: with £1.6 billion of new investment to support our modern industrial strategy, ranging from nuclear fusion to quantum computing; £150 million for fellowships to attract the brightest talent to these shores from around the world so that our scientific research can continue to lead the world; and our commitment to infrastructure, including expanding the national productivity investment fund once again to more than £38 billion by 2023-24, so that over the next five years, total public investment will grow by 30% to its highest sustained level in 40 years.
As we finalise our departure from the EU and deliver a deal that secures Britain’s future trade, we must unleash the investment that will drive our future prosperity. So the Budget increases the annual investment allowance from £200,000 to £1 million for two years, delivering on a long-standing ask of the British Chambers of Commerce. Other initiatives also boost this country’s businesses, such as targeted relief for the cost of acquiring intellectual property-rich businesses, and a permanent tax relief for new non-residential structures and buildings.
Backing business means backing every type of business: large and small; online and offline. But we must also recognise that there is one part of our economy that is currently confronting that challenge in spades: our high streets. The Budget provides £675 million of co-funding to create a future high streets fund to support councils to draw up formal plans for the transformation of their high streets. The fund will invest in the improvements they need and facilitate redevelopment of underused retail and commercial areas into residential purposes.
We will consult on how modernisation of the use classes order and compulsory purchase order regime can help to facilitate the transformation of the high street. We went further by committing to ease the burden of business rates. At the next revaluation, in 2021, rateable values will adjust to reflect changes in rental values, but I want to help retail businesses now. So for the next two years, up to that revaluation, for all retailers in England with a rateable value of £51,000 or less, business rates will be cut by a third. That is an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafés.
We are increasing the transforming cities fund to £2.4 billion and providing an additional £90 million to trial new models of smart transport. We are funding 10 university enterprise zones. There is £115 million for digital catapults in the north-east, Northern Ireland and the south-east and for the medicines discovery catapult in Alderley, £70 million to develop the Defence and National Rehabilitation Centre near Loughborough, £37 million of additional development funding for the northern powerhouse rail project, and £10 million for a new pilot in Manchester to support the self-employed to acquire new skills. Here, in our capital, we are supporting the delivery of a further 19,000 homes by improving the Docklands Light Railway with housing infrastructure fund money.
The decisions announced in this Budget mean, in 2020-21, an additional £950 million for the Scottish Government, £550 million for the Welsh Government and £320 million for a Northern Ireland Executive.
As well as backing all parts of the United Kingdom to invest and grow, we will make sure that British workers are equipped with the skills that they need to thrive and prosper. We have introduced a new system of T-level vocational training, we have put the first £100 million into a new national retraining scheme, and through the apprenticeship levy we are delivering 3 million high-quality apprenticeships. That system is paid for by employers, and it has to work for employers. The Budget recognises this and announces that, for smaller firms taking on apprentices, we will halve the amount that they must contribute from 10% to 5%. In total, this is a £695 million package to support apprenticeships.
As our economy evolves in the digital age, so must our tax system, to ensure that it remains fair and robust against abuse, and raises the revenues that we need to fund our public services. That is why we are proposing in the Budget a ground-breaking digital services tax to ensure that large digital firms pay their fair share of tax to support our public services. The employment allowance was introduced to incentivise businesses to take on employees, but at a flat rate of £3,000 per employer, it does not provide any real incentive for larger employers. So from April 2020, we will target it at small and medium businesses with an employer’s national insurance bill of less than £100,000 a year.
We cannot resolve the productivity challenge or deliver the high standards of living that the British people deserve without fixing our housing market. The Budget extends first-time buyers relief to all first-time buyers of shared ownership properties valued up to £500,000. It also makes this relief retrospective, so that any first-time buyer who has made such a purchase since the previous Budget will benefit. The focus on £500 million of investment for the housing infrastructure fund will unlock a further 650,000 homes; the next wave of strategic partnerships with nine housing associations will deliver 13,000 homes across England; and up to £1 billion of British Business Bank guarantees will support the revival of SME housebuilders.
The Government are continuing to roll out universal credit, which delivers long-overdue reforms to the welfare system. However, the Government recognise the genuine concerns raised in many places, including in your Lordships’ House, about the programme. This particularly focuses on the implementation and delivery of universal credit. It is an enormous undertaking, and we have been clear that we want the migration process to be as smooth as possible. This is why the Budget introduced a package of measures, worth £1 billion over the next five years, to aid the transition. We have listened to the concerns about the rates and allowances within the design of the system. In response, work allowances in universal credit are being increased by £1,000 per annum, at a cost of £1.7 billion annually once rollout is complete. That will benefit 2.4 million working families with children, and people with disabilities, by £630 per year. Universal credit is here to stay, and we are putting in place the funding it needs to make sure it is a success, because we ardently believe that work should always pay.
Under this Government, the poorest 20% have seen their real incomes grow faster than the richest 20%, and the proportion of jobs that are low paid is at its lowest level for 20 years, thanks to the national living wage introduced by a Conservative Government in 2016. From April, this will rise again, by 4.9%, from £7.83 to £8.21 per hour, handing a full-time worker a further £690 annual pay increase and taking his or her total pay rise since the introduction of the national living wage to more than £2,750 a year. We accept the Low Pay Commission’s recommendations on national minimum wage rates and will support young people and apprentices with further above-inflation increases. The Low Pay Commission’s current remit is for the national living wage to reach 60% of median earnings by 2020, subject to sustained economic growth. Next year, we will give the Low Pay Commission a new remit, beyond 2020. We will want it to be ambitious, with the ultimate objective of ending low pay in the UK. We will also want to be careful, protecting employment for lower-paid workers, so we will engage responsibly with employers, the TUC and the Low Pay Commission itself over the coming months, gathering evidence and listening to their views to ensure that we get it right.
As well as making work pay, we want working people to keep more of the money that they earn. When we came into office, the personal allowance was £6,475 and the higher rate threshold was at £43,875. In April, the Chancellor raised this figure to £11,850 and the higher rate threshold to £46,350, as steps towards our manifesto commitments of £12,500 and £50,000 respectively by 2020. The Budget met our manifesto commitment a year early, and it committed to raising the personal allowance to £12,500 and the higher rate threshold to £50,000, before indexing both in line with inflation from 2021 to 2022. That is a tax cut for 32 million people: £130 in the pocket of a typical basic rate taxpayer, meaning that, since 2015, we have taken 1.7 million people out of tax altogether and nearly 1 million people out of higher rate tax.
How successful our future is depends on how successfully our country comes together and faces the challenges and opportunities that lie in wait. More than ever, it has shown the British people that their hard work has resulted in better living standards, a stronger economy and better and more sustained funding for our great public services. As we prepare to leave the European Union, this Budget lays the foundation for an economy that is fit for the future, and I commend the Statement to the House.