Autumn Statement 2015: Lancashire's firms react
Chancellor George Osborne has delivered his first Autumn Statement as part of a Conservative government where he scrapped the business rates regime.In his spending review, he also revealed that the UK is the fastest growing economy, alongside the US, since 2010, with growth of 2.4 per cent this year alone. Osborne outlined his intention for Britain to become the most prosperous country of all the major nations of the world and stated the Government's job is no longer to 'rescue Britain', but to 'rebuild Britain'.
The headline announcements affecting businesses were:
- Planned £4.4bn in tax credit cuts to be abandoned, with taper and threshold rates for working tax credits and child tax credits remaining the same
- Business department funding to be cut by 17 per cent
- 26 new enterprise zones to be created including one in Thornton-Cleveleys
- Uniform business rates to be abolished, with elected mayors allowed to raise rates under certain conditions
- Apprenticeship levy set at 0.5 per cent of employer wage bill, with £15,000 allowance for all firms taking part
- Department of Work and Pensions budget to be cut by 14 per cent
- Local government to keep revenue from business rates by the end of the Parliament
- State pension to rise by £3.35 a week to £119.30 next year
- Every individual and small business to have their own digital tax account by the end of the decade
Jason Street, senior consultant, Taylor Patterson
The Chancellor announces we are the builders! Building homes that support the working people as part of a five point plan.Stamp duty is going to be increased by an extra 3 per cent for those individuals who buy their second home or a buy to let property from April 1 2016. The government will use some of the tax raised from this to help first time buyers buy property through affordable housing. Commercial property development is not affected.
Auto-enrolment increases have been pushed back to April 2018. The Chancellor announced that rate rises would change and be introduced at the end of the tax years to help businesses. This delays the proposed initial rise in Employer contributions levels from 1 per cent to 2 per cent, from October 2017 to April 2018.But it seems like good news for pensioners. The State Pension will increase by £3.35pw to £119.30pw, from April 2016. This is the biggest real term increase in 50 years! The new single tier pension for new pensioners, starting April 2016 will be £155.65pw.
The UK economy has grown faster than any other G7 country, with forecast growth in 2015 and 2016 of 2.4 per cent pa. These forecasts would make it faster than any advanced economy in the world. If economic growth remains a bumpy ride, at least we now have a permanent pot-hole fund!
Alan Frew, managing director, Community Life Choices
Mental health care is one of the biggest unmet needs of our time and it’s promising to see the chancellor pledge a further £600m in funding. What he failed to address is how we’re expected to raise standards when local authorities in England spend just one per cent of their annual health budget on tackling these issues.Personalised home care support for just one individual saves the taxpayer around £90,000 a year compared to residential stay costs. Yet ministers can do more to increase these savings even further.
In order to achieve this, individuals with chronic health needs require better support in managing their own health budgets and integrating them back into the community. However, this requires the Government to address the lack of knowledge and experience amongst its healthcare commissioners. Providing these individuals with fundamental skills will give those with mental health conditions greater choice and control, reduce their reliance on funding and ultimately improve standards.
Steve Warren, North West regional director, EEF
The Chancellor’s enthusiasm for an industrial strategy for Britain is hugely welcome, as is his promise to continue to support Catapult centres, the successful incubators of new business ideas and product development. By moving to protect science and research spending, he will give industry confidence and encourage many innovative companies to push ahead with the next generation of business ideas.Moving to an exemption of energy intensive sectors from the costs of renewables is enormously welcome and demonstrates that government is dedicated to finding a long term solution to this problem.
The apprenticeship levy is a blunt instrument, and the Government must work hard to ensure employers are not disadvantaged and that many smaller and medium sized businesses are exempted. What really matters is creating high quality, well trained apprentices who can look forward to successful careers in industry. This cannot be a simple numbers game where businesses are clobbered to pay for apprenticeships. The Government’s approach to this requires a lot more sophistication than we’ve seen so far.
Jane Parry, managing partner, PM+M
The biggest not-so-big surprise was the chancellor’s u-turn on tax credits. In theory, it is positive news for employers as their lower paid employees will not be financially worse off. However – in the medium to long term - businesses will be hit by increases in the cost of employing these people when the National Living Wage is phased in.There were several welcome announcements that I think will help the North West economy including the news that the Government Digital Service will receive an additional £450m and that every individual and small business will have their own digital tax account by the end of the decade. Anything that reduces bureaucracy and drives efficiency is a good thing – especially for SMEs.
Also, I was pleased to hear that local governments will now have the power to cut rates for businesses and to also keep all the revenues they collect. The ability to invest these monies in order to make their areas more attractive for investment makes common sense and should be based on local knowledge and needs.Other positives included: the 26 new or extended Enterprise Zones, including Hillhouse Chemicals and Energy in Lancashire, the funding for Innovate UK being maintained; the extension of the Small Business Rate Relief Scheme for another year and the rise in capital transport spending as both HS2 and Trans Pennine Express will directly benefit.
Housing was a key area, but much of the announcements seemed like meddling and micro-managing as he’s simply tweaked various existing schemes and added a few more variations on the theme. I certainly hope that he delivers the 400,000 new homes by the end of the decade which will be both a great boost to the construction sector and a major improvement to the housing market.Apprenticeships have been central to the government’s agenda for years and the announcement that three million will be created by 2020 has got to be welcomed as has increased funding and a new business led body to set standards. However, the new 0.5 per cent levy on all businesses with more than £3m payroll costs is a stealth tax that makes the system even more complicated. Just like Auto Enrolment, it’s putting the burden on employers. The one surprise was that there was no mention of IR35 as that’s been in consultation for a while.
All in all, the Autumn Statement was the Chancellor’s chance to show that there has been an improvement in public finances. Some of it was good for business, but the real test will be whether the private sector continues to grow over the coming years as much of it will be dictated by what’s going on in the Eurozone and further afield.
Jayne O’Boyle, tax manager, Haworths Chartered Accountants
The Chancellor’s U-turn decision to abandon tax credit cuts altogether rather than ease their impact, I think is a positive outcome of the Autumn Statement today.As he delivered what he called, 'A big spending review from a government that does big things’, George Osbourne had been expected to squeeze other budgets to cover the £4.4bn tax credits cost. Yet after his nose I expect was somewhat bloodied in a vote by the House of Lords, he’s now said this isn’t needed because of higher tax receipts.
Surprisingly, the hype surrounding proposed IR35 changes which could have had a massive impact on contractors across the UK was not mentioned, yet proposals to raise £5bn in a fresh crackdown on tax avoidance was announced. And I expect the talk of further restrictions on pension tax relief will come in the next Budget announcement in March 2016.
John Lyon, managing director, ICS
George Osborne kept his cards close to his chest in the Autumn Statement ahead of expected reforms to taxation of temporary workers.Following tax hikes on dividends announced in the Summer Budget, which will harm freelancers, contractors and small business owners, the government looks to restrict relief from travel and subsistence expenses and close the net on ‘disguised employees’ working through umbrella and personal service companies. From 6 April, those caught by IR35 will no longer be able to claim the aforementioned expenses against their income.”
Pensioners and those receiving tax credits emerged as the big winners in the Autumn Statement, with a dramatic U-turn on tax credit cuts, while the basic pension will rise to £119.30 per week.To balance the books, the chancellor has looked to landlords who will suffer higher rates of stamp duty, which compounds the pain delivered in the summer budget with mortgage interest relief being restricted for higher rate taxpayers. There will also be a continued attack of those engaged in tax avoidance schemes, with increased resources available to HMRC and further penalties.
Being self-employed doesn’t just mean contributing to a flexible workforce, which is what the government wants, but there is also potential entrepreneurship in setting up a Limited Company. If somebody goes down this route, then further down the line they might grow and take a couple of people on – that’s the start of the growth cycle that leads to an SME. So in part, this is also about moving forward and encouraging enterprise and entrepreneurship.The next 18 months are going to be interesting, and will provide opportunities. Of course it is a challenging time, but it has been challenging for years. Whatever happens, we need to roll up our sleeves and get on with it. Changes in legislation are part and parcel of this industry and we can move between the icebergs, we just need to have the attitude to embrace change and adapt.
Carolyn Fairbairn, director-general, CBI
Businesses will be pleased to see the Chancellor staying the course on deficit reduction, his commitment to an industrial strategy, and the emphasis on nurturing a vibrant business community.Standouts include maintaining spending on infrastructure; ramping up housebuilding; support for energy-intensive sectors and for advanced manufacturing.
Business recognises there are tough choices to be made in balancing the books, but many are reaching a tipping point, where the cumulative burden of the living wage, apprenticeship levy and business rates risk hurting competitiveness.The Apprenticeship Levy, set at 0.5 per cent, is a significant extra payroll tax on business and by widening the net it will now catch more smaller firms. We welcome the creation of a levy board to give business a voice on how the money is spent and will work with the Government to ensure a focus on quality.
Many firms will be disappointed to have been kept hanging on for a much-needed review of business rates until next year’s Budget.Firms will be reassured by the protection of the science budget, but the shift from grants to loans for Innovate UK could dampen bold and game changing innovation, particularly amongst smaller businesses.
Colin Tice, tax partner, Cassons
Buy to let landlords are hit again in the Autumn Statement. Following the restriction on tax relief for interest payments, from April 2016 Stamp Duty on purchases of residential investment properties or second homes over £40,000 will be charged an extra 3 per cent stamp duty.That means a 3 per cent charge on buying a property between £40,000 and £125,000, rising to 15 per cent for purchases over £1.5m. Detail has yet to be announced, but it may prove difficult to police in some circumstances what is or is not a second home.
Damian Broughton, managing director, Danbro
This move could have a potentially devastating effect on some businesses that rely on freelance workers to provide the skills they need. If they want contractors to come to their site they will have to pay much more – many won’t have the capacity to do that.The Chancellor also heralded the growth we’ve seen in the UK economy over recent years. That growth was fuelled by our flexible workforce and he’s now putting the brakes on this vital sector by stopping them from travelling to where they are needed.
The decision to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company will raise just £265m for the Treasury.However, our research suggests the move could cost each freelancer an average of £200 a week – totalling £16.6bn a year for the UK’s 1.6m contractors.
A survey conducted by the firm also found just 25 per cent of freelancers would take on a contract without tax relief on expenses from April next year.While the Autumn Statement brought good news for contractors in the shape of numerous infrastructure and building projects, this short sighted tax grab will hit the temporary worker sector hard.
The Chancellor repeatedly claimed ‘we are the builders’, but without a strong flexible workforce we won’t be able to build anything.
Richard Evans, senior partner, KPMG
At £13bn over a fifth of the £61bn national spend on transport is earmarked for Transport for the North. This is a seriously large number and as the Chancellor didn’t dally for detail I’m keen to learn how this will be spent.The key infrastructure prize, of electrification of the Trans Pennine Rail link, was pre-announced. It is to be hoped this upgrade will deliver real journey time improvements that genuinely boost the North’s East-West connectivity.
Learning that HS2 is to begin construction is excellent news given the economic boost it will bring Northern cities through improved connectivity. And exploring the role of smart ticketing also promises to help oil the wheels of a more modern, integrated rail network.Entrepreneurialism across the region stands to benefit from a £400m Northern Investment fund, building on the Jeremie Funds.
Then we get into the very welcome more modest giveaways such as funding the North’s Rugby League World Cup Bid. These and a Great North Exhibition give business a boost.It’s a £13bn sized wait and see from me.
Graham Lamont, chief executive, Lamont Pridmore
While there may not be any big moves to support SMEs, the fact that the Chancellor has decided not to make big changes to tax or regulations should be welcomed.Knowing that the next six to seven months will hold fewer surprises will allow business to plan, invest and grow more easily, without the fear of a sudden change to their operations.”
However, Graham points out that the Statement did contain some significant changes, especially for those looking to invest in the property market.The introduction of an additional 3 per cent surcharge on stamp duty land tax for individual’s looking to purchase buy-to-let properties or second homes will be a big disappointment for those seeking to make a strong return on their hard earned money and may shelve many people’s long-term plans.
Individuals should consult a professional if this measure affects their future retirement or investment plans.
Claire Smith, president, Stay Blackpool
Lancashire has some of the largest shale reserves in the country. A shale gas wealth fund is fantastic news for the area. The news that 10 per cent of revenues can be put into the fund will help ensure the development of local reserves benefits the whole community. The fund will mean that shale delivers a real boost to local revenues.
David Evans, director, Bishops Chartered Accountants
The Chancellor’s latest Statement has been pretty quiet compared to the last few that he has delivered and may have surprised many small businesses.While there may not be any big moves to support SMEs, the fact that the Chancellor has decided not to make big changes to tax or regulations should be welcomed.
Knowing that the next six to seven months will hold fewer surprises will allow business to plan, invest and grow more easily, without the fear of a sudden change to their operations.The introduction of an additional 3 per cent surcharge on stamp duty for individual’s looking to purchase buy-to-let properties or second homes will be a big disappointment for those seeking to make a strong return on their hard earned money and may shelve many people’s long-term plans.