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.”
Ed Rimmer, Chief Executive Officer of Time Finance
“The Government has undoubtedly had some tough decisions to steady the economy in this Autumn budget, and whilst measures are very much necessary, Hunt’s announcements today will no doubt plant a worry seed for businesses – many of whom will take the brunt of rising taxes and reduced consumer spend.
“Following today’s budget, billions in tax rises over the next half-decade, will see the public’s take-home pay packets reduced even further, bringing some understandable tightening of the consumer purse strings. For these steps to be effective, they must be accompanied by measures to support and stimulate consumer spend. The health of businesses, and the economy, depend on it.
“UK SMEs will warmly welcome the news of tax increases reaching the bigger global firms; it’s vital at this stage that businesses of all sizes play their part. But with these tax hikes not coming into play for some time, the economy will not reap these benefits right now. Businesses now vitally need immediate support to help steady consumer spending and allow businesses the legroom to invest in operations and continue to contribute to the rumblings of the economy.
“This Autumn budget sees billions in spending cuts, which will no doubt be felt by many businesses already struggling to stay afloat and following rapidly soaring energy bills. While cuts will be necessary today, we need to learn from previous rounds of austerity; these measures alone don’t create conditions for growth.
“However, Hunt’s measures lack direct and targeted support for businesses. Whilst spending cuts feel a vital move for a country in financial woe, the back pockets of businesses will certainly feel the strain, particularly as the energy price caps raise from £2.5k to £3k further worsening the load.
“This fiscal plan serves, with the one hand tax increases for all, but with the other the Government so desperately needs to help spark and stimulate consumer spending – either through special initiatives or properly financed support schemes.”
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.”
Dan Norris, West of England Metro Mayor
“This Autumn Statement was a chance for the Chancellor to take real action to support working families through the cost-of-living crisis – like delivering support to the 25,000 families in the West of England about to be hit with mega-high mortgage costs and spreading the burden by scrapping unfair tax loopholes like non-dom status. He fluffed his opportunity.
“I am pleased the Chancellor listened to my calls for an energy efficiency programme to complement our retrofitting programme here in the West, though the devil will always be in the detail. But why wasn’t this done sooner? We’ve needed a proper plan over the last decade, made more urgent as soon as Putin began his illegal war in Ukraine.
“I also welcome the additional cash to protect West of England consumers of heating oil who’ve really struggled this year – again something I’ve long called for – and the steps towards improved existing devolution details. Again, I await further details. Centring investment zones around the research excellence of our university sector could make sense, and could be a boon for our world-leading universities here in the West. But given the last iteration of investment zones lasted about 10 minutes, ministers can understand my heavy dose of caution in relation to this. Introducing a higher windfall tax is the right thing to do too: where Labour leads, the Conservatives inevitably follow.
“But the truth is this Autumn statement hammered home one really important point: the West of England literally cannot afford any more of this Conservative government. We have so much potential – we have the drive and imagination to do incredible things. But we have a government weighing down our great region – one that is out of ideas and out of excuses. We need a General Election, and a Labour Government, to give our region the greener, fairer future it deserves.”
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.”
Amy Norman, Senior Researcher at think tank Social Market Foundation (SMF)
“It is welcome news that the Energy Price Guarantee will remain in place for the millions of households who would have otherwise faced much greater hardship. However, the choice to retain a universal system simply highlights the fact that our system of delivering support is both inadequate and inefficient.
“In all, the Chancellor’s plans mean low-income households who are outside the benefits system will see their average energy bill rise from April. Meanwhile, higher-income pensioners will receive additional cash support from taxpayers. This is not just a political choice but an administrative one – the social security system is the only real means we have for providing targeted support with energy, but that system isn’t able to identify all the millions of people who are in need of help with energy bills.
“This raises obvious questions about fairness and the responsible use of public money. As bills are expected to remain above pre-crisis levels for the rest of the decade, a sustainable policy for energy bills needs a more accurate and less wasteful way of delivering help.”
Aveek Bhattacharya, Research Director at SMF
“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.”
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