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.
Buy to let landlords suffered another blow with the introduction of a 3% stamp duty supplement for purchases of buy-to-let and second homes, showing the Chancellor’s continued determination to take some of the heat out of the South East residential property market, regardless of the impact across the rest of the UK. The introduction from 2019 of payments on account of capital gains tax within 30 days of selling a residential property is also aimed at buy to let landlords, particularly overseas ones who are now within the UK CGT net.
Apprenticeships have been central to the government’s agenda for years and the announcement that 3 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% levy on all businesses with £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.