How will your business be affected by recent government reforms?
In reaction to the Autumn Budget & Spending Review, Phil Foster, MD at business energy comparison website Love Energy Savings, has provided the following analysis on what the proposals will mean for SMEs.
The ‘Devolution Revolution’
There was much talk of economic security and a re-building of Britain during this budget. Headline statistics looked promising, with the UK leading the G7 with our economic growth.
Regionally, the Midlands has seen the creation of three-times more jobs than in London and the Northern Powerhouse is still chugging along nicely, growing faster than the South.
Promises of a £400m investment fund and £13bn infrastructure investment show that growth in the North is not set to slow and for a Northern business like ours, this shores up our faith that the Northern Powerhouse is still a key pillar of economic policy.
It was great to hear that Osborne’s ‘economic devolution revolution’ will now grow to incorporate our Northern neighbours, Liverpool, Sheffield, and the North East with a further £12bn set to be invested in local growth, helping to create 26 enterprise zones.
The Business Rate Review
The devolution plans do not just stop at investment. Long awaited news on the proposed Business Rate Review did not disappoint, as Osborne confirmed his plans to devolve business rates to local councils.
This announcement marks a great change of power distribution in the UK, giving elected mayors the opportunity to alter local business rates however they see fit, with agreement from the local business community of course!
The business rate setting powers are meant to encourage local councils to nurture business but combined with Osborne’s plans to phase out the national grant, it will be interesting to see if this will result in higher business rates for those councils that preside over more residential-dominated areas. With greater power comes greater responsibility and it will be the responsibility of local businesses, as much as the local councils, to make this work.
For the smallest UK businesses, this may be a time of transition and only time will tell if the year-long extension of small business rate relief will be enough to support the change.
Beyond business rates, Osborne spoke of a digital evolution, proclaiming that by 2017 all small businesses will have their own digital identity and by 2020 those same businesses will be able to manage their tax accounts online.
This will ideally reduce admin time and costs, helping small businesses keep on top of their finances. It is a much needed development as we stride forward into the digital age, but there is a possibility that those who are less tech-savvy may not be ready for such a change.
The beauty of digitisation is that it supposedly makes processes quicker and easier, but if those who need to use it remain uninformed, that is where the idealistic policy may fall down.
At Love Energy Savings, we are aware that some of our customers prefer to talk about their finances with a call centre operative over the phone, while others love the fact that we have a slick online engine that takes out the need to pick up the phone. These preferences should be reflected by policy.
Action on Apprenticeships
Another reform on the agenda concerned the Apprenticeship Levy. The debate surrounding how this will affect SMEs has raged and while some believe it will help close the skills gap, many small businesses are sceptical.
The new levy of 0.5% is set to raise £3bn a year to help fund three million apprenticeships, but many have claimed that it is less like a ‘levy’ and more like a ‘Payroll tax’.
The announcement has left the business community with more questions than answers over what counts as a ‘large’ employer and how it will be monitored. The government has claimed that those committed to apprenticeships will get more out of the levy than they put in, being able to reclaim costs via an e-voucher which can be used to fund apprenticeship training.
However, business leaders are not so sure, expressing fears that it may restrict business growth as employers will be reticent to becoming larger if they will then be subjected to additional charges.
An Update on Energy
The Autumn Budget did not shy away from the subject of renewables, despite opposition criticism surrounding subsidy cuts. Osborne promised a doubling of low-carbon and renewables funding, and vowed to increase funding by 50% at the Paris talks. The Renewable Heat Incentive will continue to run (but it will be reformed to save £700m) and he proudly announced that 24 million homes would be helped to ‘go green’ while keeping energy bills low, saving domestic homes £30 a year on average.
However, despite waving the green flag, Osborne also announced a doubling of funding into small nuclear reactor research and spoke of a community shale wealth fund of up to £1bn to continue exploration of fracking opportunities, which environmental campaigners may not be best pleased about.
Furthermore, heavy industry will now be permanently exempt from environmental tariffs in order to keep running costs low and keep industry in the UK. While this may not be ideal, the more pressing issue of steel industry decline makes this a necessity.
Green campaigners will also not be best pleased at the cuts announced for department funding. The Environment department will see day-to-day spending cuts of 15% & the Department of Energy & Climate Change will see day-to-day cuts of 22%. However, this comes with cuts to departments across the board, so it should not be exaggerated.
It is promising that energy is now a more substantial part of the agenda and the Paris talks will only ever increase the debates around our green responsibilities.