The first and last Spring Budget by chancellor Phillip Hammond (before the government moves to a new system of Autumn Budget and Spring Statement) came with positive macro data and some key changes for savers, though distinctly lacked the thrills of those made by his predecessor George Osborne.
While there were no surprises and little in the way of landmark announcements, the chancellor delivered a Budget that was cautiously optimistic ahead of the impending start to Brexit negotiations this month.
Sue Noffke, fund manager of UK equities at Schroders, said: “It was pleasing to see the chancellor stick to his ‘no surprises’ mantra and stress the importance of avoiding complacency in what was the UK’s final Spring Budget.
“Ahead of Theresa May activating Article 50 and what could potentially be a tricky two years of negotiations with the European Union, it is crucial that the UK is on as sound a fiscal footing as possible, and is not distracted by any unnecessary Budget gimmicks.”
However, there were still some topics to get market commentators interested and below FE Trustnet rounds up some of its major themes.
Economic growth
The headline figure of the Budget came in the form of the UK’s growth forecast, which saw this year’s expected growth revised up to 2 per cent from the 1.4 per cent previously predicted.
“The OBR forecast the level of GDP in 2021 to be broadly the same as at Autumn Statement. However, the path by which we get there has changed,” Hammond said.
“Reflecting the recent strength in the economy, the OBR has upgraded its forecast for growth this year from 1.4 per cent to 2 per cent. In 2018 growth is forecast to slow to 1.6 per cent, before picking up to 1.7 per cent, then 1.9 per cent, and back to 2 per cent in 2021.
Source: OBR
While the short-term figure is positive, this represents a 0.7 per cent cumulative downgrade over the period.
Ed Smith, asset allocation strategist at Rathbones, said: “The growth rate in 2021 remained unchanged at 2 per cent, which is still above our own estimation of the sustainable growth rate of economy over the long term, which we now put at between 1.5 and 1.75 per cent, unless productivity growth comes back in a major way.”
Close Brothers Asset Management chief investment officer Nancy Curtin added: “The economy has grown far faster than almost anyone expected in the aftermath of the referendum, and the brighter outlook for 2017 has made life somewhat easier for the chancellor.
“The boost this growth has given to the public purse has taken the pressure off austerity, with tax receipts climbing without additional growth-threatening taxes.”
However, Anna Stupnytska, global economist at Fidelity International, warns that this may have to be revised down nearer the end of the year.
“UK growth last year was largely driven by consumption, and as higher inflation forces consumers to tighten their belts, growth could actually falter in 2017,” she said.
Deficit
The follow up to improving growth in 2017 was the news that the budget deficit would be lower than expected, with the OBR revising down its short-term forecast of public sector net borrowing.
The chancellor said: “The OBR attributes this change to a number of one-off factors that they do not expect to lead to a structural improvement over the forecast period.
“Combining these factors with the higher short-term forecast for growth, and taking into account the measures I shall announce today the OBR now forecasts borrowing in 2016-17, to be £16.4bn lower than forecast in the autumn, at £51.7bn.
“Then £58.3bn in 2017-18; £40.8bn in 2018-19; then £21.4bn; £20.6bn; and finally £16.8bnin 2021-22 - all lower than forecast at Autumn Statement.”
Source: OBR
Adam Chester, head of economics, commercial banking at Lloyds Bank, said: “The upward revision to this year’s economic growth forecast, and the absence of any major budget giveaways, means public sector borrowing is now projected to be £23.5bn lower over the next five years than in December’s Autumn Statement.
“This is clearly good news, although it should be viewed in context: the UK is still expected to run a deficit of close to £60bn this year, with national debt around £1.7tn.”
However, Rathbones’ Smith noted this was “largely due to a significant improvement in receipts this year; borrowing in final years of the forecast period was left unchanged since the Autumn Statement.
“But this isn’t really a budget for the fiscal hawks: the projections still have a £16bn deficit existing halfway through the next parliament; the deficit was meant to be eliminated at the end of the previous parliament!”
NS&I bond
The main area for investors to keep an eye on was the announcement that the new NS&I bond announced at the Autumn Statement will be available from April and will pay 2.2 per cent on deposits up to £3,000.
While the chancellor (pictured) called this “a welcome break for hard-pressed savers”, many investment professionals remain unconvinced.
Les Cameron, head of technical at Prudential, said: “Although a ‘no-risk’ investment, consumers should be able to generate two or three times that return by taking on a little exposure to investment risk.
“There are many lower risk solutions out there that could make you savings work a little bit harder for you.”
Meanwhile, Architas investment director Adrian Lowcock, said: “The NS&I investment bond is amongst the best cash products in the market and will appeal to the many savers who like the security of a government backed savings account. 
“But the fact is, even though the NS&I investment bond has one of the most competitive interest rates out there inflation is still expected to rise faster. This is a stark reminder that savers continue to suffer and interest rates on cash have not kept up with inflation.
“As such many savers will need to look to other, riskier, investments to potentially secure a higher return.”
Dividend allowance
Another area for investors to make a note of is the dividend allowance, which the chancellor slashed from £5,000 to £2,000 in April 2018.
“The dividend allowance has increased the tax advantage of incorporation. It allows each director/shareholder to take £5,000 of dividends out of their company tax free, over and above the personal allowance,” Hammond said.
“It is also an extremely generous tax break for investors with substantial share portfolios. I have decided, therefore, to address the unfairness around director/shareholders’ tax advantage, and at the same time raise some much needed-revenue.”
Cameron said: “Today’s announcement of a reduction of this allowance to £2,000 will slash the size of the portfolio that can be held tax efficiently by over 50 per cent.
“As a result we expect to see an increase in the use of tax-efficient wrappers such as ISAs, pensions and investment bonds as investors seek to mitigate their increased tax exposure.”
Gary Smith, financial planner at Tilney, added: “Indeed, for non-ISA or pension wrapped investments, then assuming a yield of 3 per cent, any investor with more that £66,000 in equity based investments, will incur income tax on the dividends in excess of £2,000.”
However, Hargreaves Lansdown senior analyst Laith Khalaf noted: “The good news is that with the new higher ISA allowance, investors can actually offset a lot of the £3,000 reduction to the allowance.
“By using up their ISA allowance between now and 2018, investors can keep £55,240 out of the clutches of the taxman, which would mean £2,210 of dividends sheltered from tax on a typical income portfolio yielding 4 per cent.”