Autumn Statement & Spending Review
Chancellor George Osborne has set out the state of the economy in the Autumn Statement and spending plans for the next four years in the Spending Review.
But what does it mean for businesses in the South West? BLM asks senior business figures in the region, to find the answer.
Allister Weir, Tax Partner at Grant Thornton South West, comments:
“This is the most comprehensive and detailed Statement I can recall. The devil is going to be in the detail and there is going to be a lot of detail to sift through.
“The key will be the extent to which this Statement will help create a vibrant economy, one where dynamic businesses and other entities can grow and where we can create the right environment in which those entities and our people can thrive.
“The fundamental point though is that Statement relies on low interest rates being sustained over the life of this Parliament AND the achievement of forecasted growth – something on which there is not a strong track record.”
Malcolm Emery, Partner at Thrings and a dual-qualified chartered tax adviser and solicitor, comments:
“Mr Osborne still appears to be in austerity mode, and with a large black hole to fill it is arguably with good reason.
“The economy is predicted to grow at approximately 2.3% each year over the next five years, with debt levels as measured against national income expected to fall from 82.5% to 71.3% by 2020-21 and the cost of borrowing due to fall to £4.6bn in 2018-19.
“He is also sticking with his forecast that by 2019-20 there will be a surplus of just over £10bn in the Government coffers, a far cry from his first Spending Review which followed the assertion from his predecessor that “there’s no money left.
“Many businesses will welcome the abolition of uniform business rates, the setting aside of £12bn for a Local Growth Fund and the creation of 26 new or extended Enterprise Zones.
“Meanwhile the introduction of an apprenticeship levy – set at 0.5% of the employer’s wage bill – will aim to deliver three million apprenticeship starts by 2020, with each employer receiving a £15,000 allowance to offset against their levy payment.
“Little was offered by the Chancellor on further tax cuts, although this is perhaps not surprising as many are still working through the reforms he proposed in his summer Budget to non-domiciled individuals living in the UK and the taxation of dividend income.”
James Durie, chief executive of the Bristol Chamber of Commerce Initiative, comments:
“Once again the ‘builder’ Chancellor has used the tools at his disposal to create a Statement that the majority of businesses will applaud.
“The statement, widely predicted as being gloomy, was surprisingly upbeat in business terms as he started by citing the South West as a well performing region with the lowest unemployment rate in the country.
“There were also several announcements to spark local interest. He delivered an extension of the Bristol Temple Meads and Bath and Somer Valley Enterprise Zones which we, along with the West of England LEP, have been calling for. This will stimulate growth in the region whilst also boosting the investment stream from retained business rates.
“Increased funding for much needed infrastructure, including funding for low emission vehicles, was another step in the right direction.
“Businesses can only operate as well as the environment they are in, and the announcement that capital funding for transport projects will rise by 50%, to a total of £61 billion, will be applauded.
“The Chancellor then turned to ‘raising the skills of the nation’, which is a priority in the West of England. High youth unemployment and business skills gaps are a cause for embarrassment and a package of reform for education, along with details of the Apprenticeship Levy will be welcomed by businesses. Although there are reservations as to how this will work in practice.
“It was also good to see as much political emphasis put on fixing the housing crisis, as our region suffers from increasingly high housing costs compared to other areas in the country.
“The doubling of the housing budget was welcome news, but the overwhelming emphasis on home ownership may be a mixed blessing.
“On the one hand, higher skilled workers are likely to want to own their own home, so making this easier should make them more likely to stay in our region. However the lack of lower cost rented options may start to hit the lower part of our labour market.
“It is also worrying to see that the Office of Budget Responsibility is still predicting that house price rises will continue to outstrip earnings.”
Ben Batchelor-Wylam, from Colliers International’s South West and South Wales Business Rates team, comments: “The Chancellor’s Autumn Statement is in line with Colliers expectations. Regrettably, expectations were low.
“Currently Business Rates are redistributed nationally, therefore areas requiring subsidy benefit from areas which could be considered better off. This ‘Robin Hood’ redistribution may mean that geographically wealthy areas remain robust whilst those less well-off may remain perilously at risk, especially in light of funding cuts.”
“Business rates will remain ‘fiscally neutral’, so says George, in other words they won’t go down, or up (except with inflation).
“But being a property tax, which typically increases in line with inflation, the real issue remains – too many rate payers are paying too much because 255,000 rating appeals remain outstanding. There are too many barriers stopping incorrect Rateable Values from being correctly assessed.”
Paul Stevens, of Lambert Smith Hampton in Bristol, comments:
“As expected, the small business rate relief scheme that exempts certain rate payers from paying any business rates and reduces the amount paid by others (around 400,000 pay no business rates at all) has been extended to 31 March 2017, the final year of the current 2010 business rates revaluation period.
It was almost inconceivable that the Chancellor would not extend this additional relief for small businesses and it will be welcomed by all who currently benefit from it. Most would not have budgeted for a rates bill in 2016-17 or a higher rate bill if this relief had not been continued with.
“The Chancellor also reminded us that from 2020 onwards councils will be able to keep all the business rates they collect, while the current nationally set business rates multiplier/UBR will be abolished and will be set by each local council.
“Where there are elected mayors they will have the power to raise extra business rates provided this is spent on infrastructure projects. There is still little detail available on this game changing proposal that was unexpectedly announced recently.
“Many have commented that they can see a return to wide variations in business rate payments across the regions and uncertainty for businesses trying to budget this significant outgoing.”
Housing & property
Jeremy Richards, head of JLL’s Bristol office, comments: “The chancellor’s support for 400,000 new affordable homes is welcome at a time when there is a dire need to expand housing construction right across the country.
“This Government’s narrow focus on home ownership is a serious concern however. Support for the private rented sector and social housing is vital to protect the financial stability of millions of households, for whom ownership is beyond reach.
“We welcome the Chancellor’s announcement to give local authorities more powers over their budgets. The proposed changes demonstrate a radical shift and will deliver a more sustainable form of local government financing.
“Enabling councils to raise money for infrastructure projects through business rates should give a boost to some of the bigger projects in our region.
“Allowing local authorities to have more control over business rates could also incentivise them to be more business-focused.”