The Chancellor’s Autumn Statement marked the halfway point in the Government’s 10-year austerity programme.
We’re all interested to know how his latest proposals will impact on our daily lives and our businesses.
Tim Mallon, head of tax at Wynyard-based Evolution, sheds some light on what we heard…
The impact on the region’s entrepreneurs
Evolution acts for hundreds of growing businesses across the North East and, as we advise them on their strategies for growth, we consistently hear about the importance of having a long-term economic plan.
Our role in providing accounting, taxation and financial consultancy means that we regularly see the impact of swings in Government policy on the results of our clients. Without exception, they want us to help them grow their business and we all need some stability in terms of taxation policy and a credible economic plan with the necessary improvements in infrastructure to assist in that growth.
This time around it seems that some stability has been achieved. There were various predictions that the economy was not performing as well as predicted back in the summer but the Chancellor’s statistics suggest that the opposite is the case. Tax receipts are higher than expected and the projected cuts appear to be taking pace at a slower pace across the life of the Parliament. Slower cuts means consumer demand will not diminish as much as expected which will be good for businesses. Added to this, there is increased expenditure on infrastructure and confirmation of the Northern Powerhouse Investment Fund which will assist funding for smaller business.
For once, taxation policy has remained relatively unchanged although a number of measures previously announced are yet to take effect.
The impact on employees and individuals
For many, the big announcement was the U-turn on Tax Credits indicating that the Chancellor has bowed to the will of the House of Lords and has ruled out the proposed cuts altogether. The reform of the welfare system continues with the merging of six benefits into one called Universal Credit. This will gather pace over the next year, so it may take some time to fully understand the impact on working families and whether they will be better or worse off in the long run.
Mr Osborne also announced confirmation of the extension of free childcare for three and four years olds for those families whose income is less than £100k per year and the protection of the current free school meals policy.
Some may also be able to take advantage of the spending plans on housing which look to increase the provision of affordable homes to buy.
More widely, the Government has confirmed its commitment to apprentices with the creation of an apprenticeship levy which will apply to those employers with payroll costs in excess of £3m.
In terms of tax, there are few changes this time around although those who work via “service companies” or “employer intermediaries” may be affected by changes to employment status. There will also be consultation on the taxation of certain benefits in kind. It seems that the Government is concerned about the use of salary sacrifice arrangements to save tax and these are to be kept under close review.
On the horizon though are further changes to pensions with consultation on tax relief concluded before the next budget in March. My take on this is that we will see tax relief on all contributions heavily restricted, or perhaps abolished altogether. Those employees approaching retirement may have only a limited period of time to make the most of the tax relief available.
So good news by the looks of things in the short-term but the medium term may be less bright.
The impact on the region
The Northern Powerhouse Investment Fund has been confirmed which potentially makes available up to £400m to smaller businesses but the geographical scope of this fund remains unclear. Mr Osborne also announced one new Enterprise Zone in the region and the extension of the existing Enterprise Zone in the Tees Valley.
Measures announced for the Northern Powerhouse included:
- £150m to support delivery of smart and integrated ticketing and £50m for transport for the north
- £13bn overall investment in transport
- Opportunities for South Yorkshire and the North West through £250m small modular reactor development and nuclear research programme
- Support for Hull City of Culture and Manchester Museum’s South Asia Gallery
- £50m for two new agricultural technology centres, both headquartered in York
- £22m for Northern Powerhouse trade missions and a new investment task force
- £20m for Great Exhibition of the North and legacy fund
Forgive me for thinking that this betrays the Government’s geographic definition of the Northern Powerhouse.
On a lighter note
We all witnessed the Speaker issuing his usual ticking off to those who were shouting during the speech telling one Corbynista to “get a grip man” as well as telling another to take up yoga, which has to be a first. Those expecting the Chancellor to talk about “difficult decisions” and about us “all being in it together” as well as “fixing the roof when the sun is shining” wouldn’t have been disappointed.
Head of Tax