Following the Chancellor’s Budget announcement this afternoon, Jane Parry, PM+M’s managing partner has provided her thoughts on what this could mean for businesses and individuals.
The Chancellor was hugely positive in his Budget Speech but actually this Budget threw up no real surprises which was mainly due to the numerous ‘leaks’ that some may cynically argue was an attempt to steer the media narrative in advance of today. There was lots of great news around boosting spending across the public sector. However, the Chancellor is very clearly pushing the burden for paying for that onto business, with the National Living Wage Increase and scheduled corporation tax rate increases adding a significant burden to business. He seems to be banking on this plus the benefits of economic growth increasing the overall tax take to fund us out of Covid.
From April next year, firms employing people on the National Living Wage will be facing more than an 8% increase in the cost of employing people when you combine the rise in the National Living Wage and the introduction of the Health and Social Care Levy. The limited tax reductions announced today, such as the reforms to business rates and the cancellation of the planned increase in the multiplier, won’t do much to allay their impact on the industries that have been hit the hardest including those employing the lowest paid workers. These are the very sectors that have already been pushed to breaking point over the past 18 months and are still facing chronic people shortages and rising energy costs. Despite these pledges, they will have the unenviable, and potentially critical decision, of whether they absorb or pass on these costs to their customers simply in order to survive.
Whilst the extension of the enhanced annual investment allowance for capital expenditure is welcomed, it will affect relatively few businesses. The planned 2023 increase in Corporation Tax from 19% to 25% will add significantly to the tax burden faced by companies of all sizes.
The next phases of Making Tax Digital and basis period reform for unincorporated business will add to the tax compliance burden faced by business owners, heaping even more financial pressure on the UK’s already strained SME sector. Whilst a move to real time tax reporting can’t be argued against, the Government needs to be careful to minimise the impact on businesses.
When you combine all these factors, there’s no question the next few years will be tough, and the government needs to acknowledge that and do more.
The announcements around innovation investment and modernising the UK’s R&D tax reliefs sound good in principle, but more detail is needed so a true assessment of their long-term value and impact can be made.
The Levelling Up agenda is another area that needs further work and thought as it appears the government’s view is that levelling up the North West stops at the boundaries of Greater Manchester. The news that Greater Manchester will be given £1 billion to transform its public transport system is fantastic, but what about the rest of the region? Transport infrastructure in Lancashire, Cheshire, Cumbria and Merseyside still falls well behind their Mancunian neighbours. The ability to move easily, reliably, and cheaply between the region’s other hubs like Blackburn, Preston, Burnley, Bolton, Blackpool, Liverpool, Chester and Carlisle is still woeful. Only when this glaring discrepancy is addressed will levelling up here in the North West truly be a thing that can be taken seriously.
