Autumn Statement
Autumn Statement - Review 1
COULD DO BETTER MR HAMMOND says Chris Coopey, Partner at Carpenter Box
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hilip Hammond’s first Autumn Statement was always going to be a juggling trick that was likely to please no one. That’s not to be unkind, but the reality was always going to be around what he could possibly give that wouldn’t rock the fiscal boat too much, ahead of the uncertainty of a post Brexit Britain. The latest forecasts from the Office for Budget Responsibility (OBR) confirmed an increase in borrowing, now expected to reach £68.2bn this year. Economic growth is expected to slow over the next two years, initially rising marginally to 2.1% for 2016, then reducing to 1.4% in 2017. Overall, the ‘Brexit effect’ is expected to impact on economic growth to the tune of 2.4%. The statement did confirm a number of previous proposals including the reduction in corporation tax from 20% to 17% from 2020. This plays into the government’s aim to make the UK an attractive global destination in which to do business giving us as it does, the lowest rate of Corporation Tax amongst the G20 group of countries. For the employed the proposed increase in the threshold of Personal Allowance, of which people pay no tax, from £11,000 to £11,500 was also confirmed. There were however no big giveaways and no mention of a reduction in VAT, which some had said would contribute to helping growth in the economy. One welcome tactic was the announcement of further investment into research and development in the UK in a bid to boost overall productivity. This it is hoped will help us to keep up with our European counterparts, and is most definitely welcome. £2 billion extra per year by 2020/21 should further some of the great R&D work that UK businesses, often in partnerships with universities, undertake. Progress around
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monetising Artificial Intelligence and Biotech should certainly benefit.
KEY POINTS: Business • Corporation tax (currently 20%) will fall to 17% by 2020 • £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms (“to tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies”)
“There is disappointment around losing yet another opportunity to reward investment and promote growth” • Rural rate relief will increase from 50% to 100%, giving businesses in rural areas a boost • There will be an additional £4.7bn in R&D funding by 2021, including an increase in grant funding to Innovate UK
Taxation/pay • Income tax threshold to be raised from £11,000 to £11,500 in April, with the government still committed to taking the allowance up to £12,500 by 2020 • Higher rate income tax threshold to rise to £50,000 by the end of the Parliament • Tax savings on salary sacrifice and benefits in kind to be stopped, with exceptions for ultra-low emission cars, pensions, childcare and cycling • National Living Wage to rise from £7.20 an hour to £7.50 from April next year • Employee and employer National Insurance
thresholds to be equalised at £157 per week from April 2017
Other • Ban on upfront fees charged by letting agents in England “as soon as possible” • Additional £1.4bn to provide 40,000 new affordable homes, with a further £1.7bn to be used to acceleration the construction of new homes on public sector land • New penalty for any person who has enabled another person/business to use a tax avoidance arrangement that is later defeated by HMRC
IN SUMMARY Marking a major change to policy-making processes, the Chancellor announced that his first Autumn Statement would also be his last. 2017 will see the final Spring Budget, as from that point, the main Budget will be held in the Autumn. The OBR will produce a Spring forecast from 2018, with the Chancellor responding in a new Spring Statement. From a business perspective, the date of the statement and budget are far less important than the content, and this time around there is disappointment around losing yet another opportunity to reward investment (for instance on general Capital Expenditure) and promote growth, particularly in the SME sector. Could do better Mr Hammond.