The Budget 2017 – A Graduate’s View
We asked recent graduate Lauren to give us her view of The Autumn Budget to offer an insight into what effect the policies will have on the day-to-day life of a millennial. After studying Philosophy at the University of Reading, Lauren moved to London to start a career in the Civil Service and has since been juggling job applications, temporary work and researching for HelloGrads.
Published: 28th November 2017
For a brief moment, I must admit, I was caught up in the headlines of this year’s budget. From stamp duty to raising minimum wage, the outlook for students, graduates and young professionals was an optimistic one. Yet with that said, the budget appears short sighted with few long term plans. The best way to read policies and political statements is not to focus on what is said, but what is not said. Once I started looking beyond the catchy headlines, and gimmicks, my short-term satisfaction turned into sighs and frustration.
What is the budget?
Simply, an annual budget explaining where the government is going to spend its money and raise its money. Phillip Hammond (Chancellor of the Exchequer) released this year’s budget on Wednesday 22nd of November. The budget will set out any changes to income tax, VAT, duties and National Insurance.
How does this affect you?
Housing: Stamp Duty
Housing has been one of the most popular themes in this year’s budget. For first-time buyers this is great news! Those of you buying homes worth up to £300,000 will not pay stamp duty. Homes costing up to £500,000 will not pay stamp duty on the first £300,000. This is mainly to benefit those of us living in London, with the hope of getting on the property ladder. While this affects Northern Ireland, England and Wales (until April 2018 where it could be subject to change), Scotland has independence on this issue and will have to release their own statement.
Do not be fooled. Though abolishing stamp duty for the first £300,000 for first-time buyers is great, it is predicted that house prices will rise in turn. Since people believe they are saving money due to stamp duty, which in the grand scheme is a minimal cost, people in turn will spend more money on their houses. Therefore, little if any savings will be made overall. The average house price in London is said to be £481,556 (1). The issue for Londoners is not the stamp duty; it is the deposit needed to secure a house since the average deposit in London is £90,000; 3x more than the national average (4). For a real difference to be made in regard to housing, down payments and renting costs should have been addressed.
Also on the agenda is the £44bn to build 300,000 new homes annually in England until 2020. This includes £1.2bn to buy land and £2.7bn for supportive infrastructure (5).
Perfect news…wait a minute? Housing comes down to one fundamental issue – supply and demand. To keep up with the growing population we need to be adding 250,000 new homes annually according to the Barker Review of Housing Supply (7). This new figure is hitting the nail on the head, until you realise Labour back in 2007 promised 240,000 annually and we haven’t even come close. 2020 is just over two years away! Are we going to see 600,000 new homes?
It must not be forgotten, the fundamental issues in this country is infrastructure. How can we plan on building houses across the country when they are not planned strategically? Building new houses also means building new schools, improved roads and public transport to cope with the additional population. They have set aside a sum to add infrastructure to support the houses, but what does that really mean? Does that figure cover the cost of hospitals, schools, sports centres, parks and roads?
There is a hope that by April 2019 HMRC and The Student Loans Company will regularly save data. The purpose is to save students from overpaying their loan (6). Overpaying usually happens when the loan is repaid during the financial year.
Currently graduates from 2012 in England and Wales are not due to pay back their student loans until they are earning over £21,000. As announced in October, this is being raised to £25,000 (8). Every penny counts, guys!
There is also the availability of loans for postgraduate students!
We all love the 16-25 railcard! Well…I do. The thought of turning 25 and paying full price is not a welcome thought, especially with the difficulty of getting on our feet. From Spring 2018 a 26-30 railcard will be welcome news. (Another helpful hint: you can combine your 16-25 railcard with your oyster card for even more discounts!)
The railcard has been labeled gimmicky, a sleight of hand which is hiding larger issues. I must agree. Offering a railcard for this age group is not a cost to the government, so an argument could be made that more could and should be done. On a personal level, the 26-30 railcard will have a huge effect on my finances. With the railcard I will gain from the savings and my monthly budget will be positively impacted.
£3 billion set aside for Brexit (Becket, 2017). The contingency plans are in place! Reading outside the lines may elude you to this £3bn actually being the first of many instalments. Many critics already disagree with Brexit spending and this is just more money into an abyss of wasted cash, money that could potentially help in other sectors.
Regarding Brexit, we needed more clarity on where the money will be spent and how it will benefit us. We should be striving for clarity; not only for individuals but also for businesses, so they can invest in their infrastructure, in staff and development. Currently with such uncertainty, investment within companies is very low. A possible reason may be that businesses are holding out from making decisions until the government has reached a decision, or they will use the money to move offices overseas. For our generation this is a concern, as we need to stay hopeful for more job opportunities and vacancies in the UK. We need to keep the confidence of our graduates, young professionals and businesses.
Personal allowance is rising from £11,500 (2017/18) to £11,850 (2018-19). This is simply the amount of income on which you do not pay tax. Any news of more money not being taxed is positive, especially for us graduates! That said, it is not as generous when you realise this figure is simply in line with inflation (3).
The national minimum wage is set to rise from £7.50 — £7.83 per hour. This 4.4% raise is set to take action in April of 2018.
Moreover, none of these announcements are new. Heading back a few years we should have been expecting these exact figures around this time of year. I guess there is a reason his nickname is Spreadsheet Phil!
Any investment in technological advancements is always a positive, although this may be yet another contingency plan for Brexit. The EU is one of the main contributors to science and technology. With EU funding unknown and our potential future unknown, it would be wise for the UK government to change many existing EU policies into UK ones.
Within the budget is an additional £2.8bn for the NHS until 2019/20 (2). The funding ultimately falls short of the figures demanded by health unions and the chief executive of the NHS. It is unclear whether this money will help improve waiting times, doctor surgeries and availability of appointments.
There is promise within the budget, and I feel content that some of the major concerns highlighted pre-budget have been acknowledged; although the overall plan to deal with these in the medium to long term still lacks detail and clarity. Having said that, hopefully many of us will benefit, however little, from the extension of the young persons’ railcards, the higher threshold for paying back student loans and increases to the minimum wage.
(1) Gov.uk. (2017). UK House Price Index (HPI) for June 2017
(2) Ft.com. (2017). Budget 2017: NHS to receive additional £2.8bn over 3 years
(3) Edward Malnick (2017),The Telegraph. Budget 2017: Personal tax allowance and higher rate threshold to increase next year
(4) Bloomfield, R. (2017). Homes and Property. Londoners now need an average deposit of £90k to get on the property ladder. But we reveal where you can buy with less….
(5) Gov.uk. (2017). Autumn Budget 2017: 25 things you need to know
(6) Peck, T. (2017). The Independent. Government to take action to stop graduates routinely overpaying student loans
(7) BBC News. (2017). Why can’t the UK build 240,000 houses a year?
(8) Adams, R. and Mason, R. (2017). The Guardian. Tuition fee repayment earnings threshold to rise to £25,000