Some wins from the budget – but more could still be done
WITH a General Election coming up later this year, it was no surprise to see the Chancellor use the limited fiscal headroom at his disposal to prioritise headline-grabbing tax cuts in his Spring Budget.
Several of the announcements made by Jeremy Hunt last Wednesday will be cautiously welcomed – including National Insurance contributions being reduced from 10 per cent to 8 per cent (or 2p in the pound) for employees and the self-employed.
The changes to the High Income Child Benefit Charge moving to a household-based system and thresholds rising will also be helpful to many. Additionally, extending the terms of the loan recovery scheme will be welcomed by businesses still grappling with debts accumulated during the pandemic.
In a further win, of sorts, for smaller businesses, the threshold at which they must register to pay VAT was increased £90,000 from £85,000.
Meanwhile, here in the West Midlands, it was reassuring to learn that money will be made available for the West Midlands Combined Authority for culture projects, especially in the context of funding cuts we’ve seen announced by Birmingham City Council which are devastating for the city’s arts offering. Yet, there is a feeling among the business community that the government could have done more to alleviate the huge cost pressures firms continue to face on a daily basis.
There is no doubt the Chancellor missed an opportunity to turn the dial in key areas impacting business.
Greater Birmingham Chambers of
Commerce – in line with the British Chambers of Commerce – had called for the reintroduction of the tax-free shopping policy. We were disappointed to see this was not addressed by Mr Hunt.
Likewise, the Budget contained no meaningful reform of the business rates system.
Despite the UK falling into a technical recession, the last few months have brought a degree of relief with inflation falling faster than anticipated and the energy cost cap expected to drop significantly from April.
Wages are holding up, there is a better outlook for interest rates and the housing market looks to be turning a corner.
Yet, every silver lining has a cloud and issues that have the potential to affect the nation’s mood over the next few months include the impact on inflation of the increase national living wage, ongoing labour market issues (low productivity and high inactivity) and a rise in corporate insolvencies.
And while National Insurance reductions are welcome, the lack of changes in personal tax thresholds will not necessarily leave everybody better off.
The prospect of a May General Election now seems unlikely after last week’s announcements – meaning we could see another fiscal statement from the Chancellor in the Autumn.
At the Chamber, we would urge the Government to prioritise the long-term growth of the economy over the next few coming months in order to provide businesses with much-craved stability that would allow them to plan effectively and move forward with investment plans.
In an interim report published last month, our Business Commission West Midlands – a powerful group representing the private sector, convened by the GBCC alongside the Black Country and Coventry & Warwickshire Chambers of Commerce – identified five levers for growth across the region.
Those levers are International Trade, Net Zero, Innovation, Foreign Direct & Inward Investment and Artificial Intelligence & Digital Transformation.
We’ll soon be releasing the full report, with the findings utilised to directly influence local, regional and national stakeholders.
Sluggish economic growth presents a critical challenge to our society, including the funding of key public services.
That’s why we need a fundamental reset of our understanding of what firms needed to fulfil their growth potential. With more change on the horizon in the form of national and regional elections, it’s vital we present a strong, clear voice from the business community.