Autumn Statement
Autumn Statement - Review 2
GOOD NEWS FOR BUSINESS, BAD NEWS FOR BORROWING By Bryan Elkins, Senior Tax Partner, Kreston Reeves
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hort on flourishes it might have been, but the Autumn Statement did offer some significant promise for corporate enterprise of all kinds. Not least was the commitment to spend £23 billion over the next five years on innovation and infrastructure, £2 billion on research and development generally, and to provide 5G broadband speeds where they will most help. The focus from Philip Hammond, the Chancellor, is clearly on improving productivity and the environment for business against the uncertain backdrop of Brexit. But it also laid the groundwork for a much more competitive future, particularly in digital technologies. The boost for technology represents a 20% rise in Government Research and Development funding. And there is also the promise of £400 million in venture capital funding to firms making technological advances. There was a polite nod to the fiscal probity that defined his predecessor, but not much of a commitment to stay acquainted. Instead, Mr Hammond promised to “chart a new future” and turn Government into an un-locker of pent-up enterprise, whether in the tech sector (to keep new firms in the UK) or as an enabler of new housing (to start to ease problems of supply), whilst borrowing grandly to do so.
Taxing times Businesses will have been pleased by the firm promise to keep the planned reduction in Corporation Tax to 17%. The pledge to raise the higher rate tax threshold to £50,000 will also be welcomed. Somewhat less happy might be the millions of people who take part in salary sacrifice schemes, which essentially give them a range of perks, such as mobile phones and gym membership, at little cost to them or their employer. Not for much longer.
Owner managed corporate businesses were also significant losers in the Autumn Statement. They face a potential big rise in taxes following a review designed to level the tax playing field between the employed and self-employed. This will be a blow to the many people who felt encouraged to incorporate their selfemployment in recent years, typically quite modest enterprises, to save tax and national insurance. Following consultation, it is likely to mean that they face significant rises in tax/ National Insurance contributions.
“There was a polite nod to the fiscal probity that defined his predecessor, but not much of a commitment to stay acquainted” The South-East may also benefit from changes to the way Government funds affordable housing, and developers might indeed follow leads given by the Government’s promise of heavy investment in infrastructure, such as road and rail improvements. We must also hope that the detail will mean relief for the region’s many congested routes, particularly the A27 through Sussex and the promise of the Lower Thames Crossing. The Statement contained a few crowdpleasing measures, particularly aimed at the so-called ‘Jams’, people who are said to be ‘just about managing’, including a freeze on fuel duty, a ban on uncontrolled tenancy fees in the rented property sector, and a rise in the National Living Wage to £7.50 from next April. The latter however will further increase costs for businesses in certain sectors employing large numbers of lower paid staff. But these
seemed almost incidental to something bigger being cautiously moved towards: a fundamental change to our economy.
Choice cuts The big question will be whether Project Spend also produces Project Growth. That is the gamble that underlines the measures Mr Hammond outlined; and it will cost an extra £122 billion in Government borrowing by 2020-21 to find out. Meanwhile, the Office for Budget Responsibility estimates that growth will be 2.4 per cent lower in 2021 than it would otherwise have been before the Brexit vote exactly five months ago. The road for which the British economy is being prepared, clearly looks much rougher to the Chancellor than the many others which his infrastructure spending aims to improve.
bryan.elkins@krestonreeves.com www.krestonreeves.com
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