Just a few weeks on from September’s controversial mini-budget, the new Chancellor Jeremy Hunt yesterday (Thursday 17th November) announced his Autumn Statement. During the speech he outlined his aims to restore stability to the economy, protect high-quality public services and build long-term prosperity for the United Kingdom.
Key points included:
- Tackling inflation is top of the priority list to stop it eating into paycheques and savings, and disrupting business growth plans.
- A package of targeted support to help with business rates costs worth £13.6 billion over the next five years
- To protect the most vulnerable the Chancellor unveiled £26 billion of support for the cost of living including continued energy support, as well as 10.1% rises in benefits and the State Pension and the largest ever cash increase in the National Living Wage
- Tax changes will raise around £25 billion, including an increase in the Energy Profits Levy and a new tax on the extraordinary profits of electricity generators
- Decisions on spending set to save £30 billion whilst NHS and Social Care get access to £8 billion and schools get an additional £2.3 billion reflecting people’s priorities
- To deliver prosperity, the Chancellor has also committed to infrastructure projects including Sizewell C and Northern Powerhouse Rail, along with protecting the £20 billion R&D budget.
A selection of local and national business leaders give us their thoughts…
Matt Griffith, Director of Policy at Business West
“This was a difficult budget for difficult times. Although there was less immediate pain than expected, the Chancellor set out rising taxes and pressure on public spending in the medium term, often by freezing many thresholds below record inflation, meaning the growth path for businesses and the UK may be long, rocky, and protracted.
“The statement brings us back from the brink of the sharp rises in interest rates and damage to confidence we saw from the mini-budget. The sombre tone of both the Chancellor and the backbenches reflected this.
“There were also small glimmers of light in slightly better projections for growth from the OBR compared to the Bank of England. This, and a change to the government’s fiscal rules, means that the government avoids what would have been a damaging return to budget consolidation in the middle of a recession. However, many of the hard choices were postponed, not avoided.
“Looking specifically at taxes and spending that directly affects businesses, the research and development scheme for smaller businesses has been cut which will impact many firms in investing in new innovation at a time where stability is needed.
“Revaluation of properties for business rates will proceed next year as scheduled, with some support to prevent big jumps in bills.
“Employers’ National Insurance levels will remain unchanged, but the national minimum and living wage rates are increasing by just under 10% from April 2023 based on record inflation.
“Reflecting what is in effect a new government, much of the detail of our future economic and business plan has been pushed back into reviews and future statements. There were some announcements of new small forms of devolution and some saving of previously planned infrastructure spending.
“Disappointingly, there was almost no mention of our region in plans for specifically targeted boosts to local growth.
“However, after several years of political turbulence and changing government business and economic strategies, there is now a need for a return to seriousness and stability in how government plans and delivers its economic plan. We cannot afford optimism of a future return to growth to be forfeited by more lost opportunities to deliver the changes and confidence business needs.”
Martin Gurney, Tax Partner at Haines Watts Swindon & Cirencester
“This Government has consistently delivered the same message [barring the obvious recent exception] that you cannot reasonably expect to borrow and spend your way out of an economic crisis. The pandemic threw the Government’s plans off course, and now they are seeking to steady the ship.
“The overall plan is to increase revenue (via taxes) and reduce spending, with the goal of reducing Government borrowings – this appears to be sound commercial strategy.
“The difficulty is that, with the UK and global economies struggling, inflation escalating, and confidence waning, the Chancellor needs to put measures in place that do not further destabilise the economy. As a result, tax increases cannot be so significant to deter economic activity, and spending cuts cannot be so severe as to penalise those most in need.
“Learning from recent mistakes, most of what was announced today was neither a shock nor excessively onerous or generous. Principally high earners will pay more tax (the threshold at which 45% tax starts has been reduced from £150k to £125k) and personal tax allowances have been frozen so that, over time, their value is diminished and everyone will pay a bit more tax.
“Taking into account the increase in Corporation Tax rates that were previously announced, the tax benefits of Research & Development relief for all sizes of company have been reduced, and individuals paying Capital Gains Tax will pay more tax.
“Overall, a relatively neutral ‘Budget’ designed to start to redress funding deficits without destabilising the economy, with the Government keeping its powder dry in terms of more controversial and wide-ranging tax changes.”
Rashik Parmar MBE, Group Chief Executive of BCS
“We welcome the Government’s ambition to build on our global strengths in science, technology and innovation, transforming the UK into the next Silicon Valley. In delivering on this, we have an opportunity to embed ethics, professionalism and standards to ‘move fast and make things, not move fast and break things.”
“As we face immense economic challenges, it is essential the UK Government continues to drive strategic investment in digital skills to futureproof and ‘level up’ our economy, public services and industries.
“With over 60,000 vacancies in the IT sector (ONS data) alone, any disinvestment in budgets for digital technology and skills will act as a brake on growth and ambitions. Our sector needs many more competent professionals from diverse backgrounds to drive the next wave of digitisation.
“The UK Government’s Innovation Strategy made it clear that the benefits of a digital Britain must be enjoyed equally by citizens across every UK nation and region. Regional investment will help areas of the UK to ‘level up’ and close the digital divide – everyone deserves to have the essential digital skills to make sure they are not left behind in the digital age.
“Investment in digital skills will benefit all sectors of the economy and improve the UK’s global competitiveness; strategic investment is essential to creating a culture of responsible computing and innovation.”
Michael Blaken, Accounts Director at Optimum Professional Services (Swindon)
“Cuts to dividend tax won’t have a huge effect on those who are basic rate tax payers. However, decisions will have to be made by those company owners who plan to stay within the basic rate band, because they will be feeling the pinch with the cost of goods and services increasing.
“The increase in company car rates had also been hinted at in the run up to the Autumn Statement. News of business rates re-evaluation, carrying with it the promise that two thirds will be no worse off, was also expected. Employers are struggling to fill roles, in the face of historically low unemployment, so the measures announced to encourage people back into the workforce are positive.
“I welcome news that the recent Stamp Duty Land Tax cuts will remain in place, helping to keep momentum in the housing marketing.
“However, those who invest in second homes have been targeted, with the marked reduction in Capital Gains Tax allowances, so they may also be reviewing their investment strategies going forwards.”
Rob Chedzoy, Tax Partner at Milsted Langdon
“The decision to freeze and reduce personal tax reliefs, thresholds and allowances in the Autumn Statement will have a significant impact on many taxpayers.
“Having reviewed the Government’s new fiscal policies, while it has the potential to steady national finances, it will come at a cost.
“The Chancellor was keen to point out that his latest measures avoided increases to tax rates, but the reality of his speech means that tax bills for many business owners and workers will increase over the next few years.
“A big element of this increase was his decision to extend the freeze on personal allowances, such as the Nil-Rate Band for Inheritance Tax and the Personal Allowance for Income Tax, until 2028.
“These allowances were already frozen until 2026, but the decision to further delay increases means that inflation is likely to drag more taxpayers into higher tax bands as their wages rise.
“To many observers, the Autumn Statement may have seemed quite fair and balanced, but there are certain groups – particularly high earners – who will need to think carefully about how these measures affect them.
“Alongside the freeze to allowances, the Chancellor also announced reductions to thresholds and exemptions for Dividend Tax and Capital Gains Tax in the next two tax years, and a cut to the Additional Rate Income Tax threshold from £150,000 to £125,140 in April 2023.
“The impact of these changes and the inflationary pressure on wages means that while the rate at which most taxes are paid hasn’t gone up, many more people will still be paying more tax.
“When it comes to the finances of businesses, the £13.6 billion of support to help with the transition to a new business rates system over the next five years was welcomed and would help those hit hardest in recent years, including bars, restaurants and retailers on the High Street.
“However, further changes to the SME R&D tax system would be less welcome, especially the reduction to the SME scheme additional tax deduction, which will fall from 130% to 86% for expenditure on or after 1 April 2023.
“The Government has been concerned about abuse in this tax system for some time, but it seems somewhat unfair to penalise those who have acted within the existing rules.
“However, the real impact of this change may not be as great as feared due to the rise in Corporation Tax from April, which may mean that the amount of relief businesses receive won’t change as significantly – especially for those paying the top 25 per cent rate of tax.”
Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed)
“The government’s decision to slash the dividend allowance at the Autumn Statement will be a further blow to the UK’s smallest businesses.
“After the financial damage of the pandemic, exclusion from support, the changes to IR35 taxation, the recent tax hike on dividends and the impending corporation tax hike, this latest attack is further salt in the wound for anyone working through their own company.
“The government is making it harder and harder for those who work for themselves. Of course, we need to raise tax to pay for vital public services, but time and again it seems our very smallest businesses are the first targets. We’ve already seen the number of self-employed fall dramatically since the pandemic – the government seems intent on reducing that number further. By slashing the dividend allowance, the government has once again demonstrated that it does not support small business.”
Andrew Kilpatrick of Kilpatrick & Co (Swindon)
“Whilst a freeze in the rates multiplier is welcome, a tax rate of 50% remains unacceptable and in my view it is somewhat disingenuous of the Government to suggest the freezing of an already excessive tax rate amounts to “a tax cut worth £9.3 billion over the next five years”, which is clearly inaccurate when the Revaluation has a three year lifespan and since when does not increasing a tax amount to a tax cut?
“The abolition of downwards transition is good news and may help retailers struggling to survive in todays High Streets and encourage them to keep shops open. However, the upwards transition, whilst looking good in principle, will have significant impact on large warehouses and industrials, where rents have increased significantly since 2015 and who will be facing rates increases of 30% from next April.”
Aveek Bhattacharya, Research Director at Social Market Foundation
“This Budget was intended to reassert the Government’s fiscal credibility, but by introducing the 19thand 20th fiscal rules since 2010, it also served to highlight the fragility of our fiscal regime. That inconsistency demonstrates politicians’ tendency to chop and change its targets at will, largely driven by political considerations. This endless carousel of fiscal rules has done little to help the UK economy, and may well have done harm.
“What is needed is an independent fiscal watchdog that can properly hold the government to account, ensuring that fiscal policy responds to objective economic circumstances rather than politicians own moving targets.”
Image at top of page: [credit: Pixabay]