CHRIS BELL, senior investment manager at WHIreland International Wealth in the Isle of Man, has commented on the UK Budget for Isle of Man Newspapers.

The Chancellor tried his best to target younger voters, who became so disillusioned earlier this year, with a raft of housing market focused initiatives in this Budget.

The £44 billion committed over the next five years should see the highest level of annual building since the 1970s.

Ironically the stamp duty abolishment for first-time buyers could simply drive certain house prices higher! The forthcoming commission on ‘land hoarding’ by large housebuilders could also have real teeth.

From a local perspective there was little direct interest other than further measures on tax evasion.

The 18-point plan includes charging more tax on royalties relating to UK sales, when these are then paid to a low tax jurisdiction. A time limit for assessing the compliance of new offshore tax schemes will also be extended so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance, with a consultation due on this in spring 2018.

There was also recognition for the troubles that small businesses are facing and business rates will now be linked to CPI rather than RPI, estimated to save £2.3 billion.

The Isle of Man Health Service is struggling with budgets and is looking to save £10m in the current year and the same is very much the case in the UK.

An additional £2.8 billion will be provided in the UK over the next three years.

Other measures that were announced, including support of the digital economy, investments in artificial intelligence and training and transition relief for Universal Credit claimants, are real and welcome.

In many senses it was a ‘Brexit Budget’, with the Government being prepared to countenance significant support for the UK economy as departure nears. The run-up to Brexit could see real changes to the numbers and type of EU migrants coming to the UK, with a shift towards higher-paid skilled workers who will contribute more taxes and place fewer demands on public services. The net cost to public services, estimated as high as £30 billion, will begin to fall.

It was depressing to see the Office of Budgetary Responsibility (OBR) capitulating in the face of persistently feeble UK productivity growth with a ‘significant’ downgrade to the long-term economic growth rate. It is the first time in modern history that the official UK GDP growth rate is below 2% in every single year of the forecast horizon.

The impact of such a downgrade is likely to be devastating to the Government’s finances. On the not-unreasonable assumption that the productivity growth forecast going forward will be 1% p.a. then a study by the Institute of Fiscal Studies (IFS) suggests that borrowing would be a cumulative £58bn higher out to 2021-22 and nearly £25bn in that last year alone.

Even assuming a lower unemployment rate (more hours worked) and a better starting position for the Budget thus far, the £26bn cushion the Chancellor created for himself only eight months ago to guard against Brexit headwinds will have largely evaporated.