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Treasury Update

Treasury written statement – made on 31st October 2019.

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Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

The fundamentals of the UK economy are strong, and the public finances have been repaired. Government action has supported the British people with the cost of living. Poverty and inequality have been reduced – ensuring everyone can benefit from the UK’s economic success. Investment has increased – promoting productivity, creating job opportunities and driving growth in the economy.

Since 2010, the hard work of the British people has: reduced the deficit by four fifths; created 1,000 new jobs a day to reach near-record employment; and overseen nine consecutive years of growth. The Government’s Brexit deal will give people and businesses the certainty they need to invest.

ECONOMY AND PUBLIC FINANCES:

  • The economy has grown 18.9% since 2010. The IMF’s latest World Economic Outlook forecasts the UK to grow as fast as France, and faster than Germany, Italy and Japan in 2019 - and faster than all four in 2020.
  • The inflation rate is stable and low at 1.7%, below the Bank of England’s target of 2%.
  • Borrowing has been cut by over four fifths as a share of GDP since 2010, from a post-war high of 10.2% in 2009-10 to 1.9% in 2018-19 (the lowest level since 2001-02).
  • There are 3.6 million more people in work, and the employment rate is at a near record high.
  • Unemployment has fallen by 1.2 million. The unemployment rate is near its lowest level for over four decades.
  • The proportion of low paid jobs is at its lowest since records began in 1997.
  • The number of unemployed 16-24 year olds has fallen by 47% since 2010, and over 80% of 16-24 year olds are in work or full time education.
  • The gender pay gap (hourly pay, excluding overtime) is at a record low (17.3%). For full-time employees, the gap is 8.9%, near the record low.
  • Over 60% of the growth in employment since 2010 has been outside of London and the South East.
  • The Government has committed more than £2.7 billion towards City and Growth Deals for all parts of Scotland, Wales and Northern Ireland.
  • This UK Government investment is creating jobs and driving regional economic growth across Scotland, Wales and Northern Ireland.

SUPPORTING THE COST OF LIVING:

  • The Government has cut income tax for 32 million people since 2015/16 – saving the typical basic rate taxpayer £380 and taking 1.74 million out of income tax altogether.
  • Supported by the National Living Wage (NLW), the lowest paid saw their wages grow by 8% above inflation between April 2015 and April 2018. The NLW increased by 4.9% on 1 April to £8.21, increasing a full-time minimum wage worker’s annual pay by over £2,750 since its introduction.
  • Fuel duty has been frozen for nine consecutive years, so the average driver will have saved a cumulative £1,000 compared to pre-2010 plans.
  • The introduction of a new temporary energy price cap on default Standard Variable Tariffs this year has protected 11 million customers from poor value energy bills.
  • The doubling of free childcare for eligible working parents of 3 and 4 year-olds which will save parents who take up full entitlement up to £5,000 a year per child.

POVERTY AND INEQUALITY HAVE BEEN REDUCED:

  • Real household disposable income per person is above its pre-crisis peak, and it is 11.2% higher than at the start of 2010 – meaning people have more money to spend than they did in 2010.

  • Income inequality is lower now than it was in 2010.

  • The top 1% of income taxpayers pay over 29% of income tax – higher than at any time since 1999.

  • Since 2010 there are (before housing costs)

    • 400,000 fewer people in absolute low income.

    • 100,000 fewer pensioners in absolute low income.

    • 300,000 fewer working-age adults in absolute low income.

  • The percentage of people in absolute poverty (after housing costs) is around its record low.

  • Since 2010 there are over 1 million fewer workless households, and the number of children living in workless households is down by 730,000 – both record lows.

BOOSTING PRODUCTIVITY:

  • Since 2010 the Government has:

    • Provided over half a trillion pounds in capital investment, investment in skills, and reduced taxes for businesses.

    • Established the National Productivity Investment Fund (NPIF) to deliver additional capital spending for areas critical for improving productivity across all parts of the UK. The NPIF is now set to deliver £37bn of high-value investment to 2023/24 in economic infrastructure, R&D, and housing.

    • Improved technical education by reforming Apprenticeships and developing new T-levels for delivery from September 2020.

  • The Government has supported business and enterprise with lower taxes:

    • The UK has the most competitive corporation tax rate in the G20 at 19%.

    • Since Budget 2016, the government has announced reductions to business rates worth more than £13bn over the next five years.

FUNDING PUBLIC SERVICES

  • Spending Round 2019 (SR19) saw the fastest planned increase in departmental day to day spending for 15 years. Resource spending is now set to rise by 4.1% in real terms from 2019-20 to 2020-21.

  • SR19 was the first SR since 2002 where no department will face a cut in its resource Budget.

  • SR19 funded:

    • An extra £750 million investment in policing in 2020-21 to begin delivering the government’s commitment to recruit 20,000 additional officers by 2023 (up to 6,000 officers will be in place by the end of 20-21);

    • Further health investment, building on the extra funding provided last year of £33.9 billion a year by 2023-24 in cash terms (compared to 2018-19) – the largest cash increase in public services since the Second World War.

    • A cash increase in schools spending of £2.6 billion in 2020-21, rising to £7.1 billion in 2022-23, compared to 2019-20.

    • £400m extra to train and teach 16 to 19 year olds to get the skills they need for well-paid jobs in the modern economy.

  • To fund public services, the Government has taken unprecedented action to make sure people pay their fair share of tax. The Government has introduced over 100 measures to tackle tax avoidance, evasion and other forms of non-compliance since 2010 which, alongside HMRC’s compliance work, have secured and protected an additional £200 billion in tax revenue which would otherwise have gone unpaid.

This statement has also been made in the House of Lords: HLWS67