6 key takeaways from the Spring budget
The 8th March saw Chancellor Phillip Hammond present the last Spring Budget, following changes announced at the end of last year.
The speech was met with a pretty disappointed reaction, with many claiming it lacked any substance and failed to tackle the major issues currently facing our economy.
However, there were certain policies and announcements that do have the potential for a significant impact on small businesses across the UK.
The Spring Budget saw Hammond remain adamant that business rates must continue in order to fund local government.
However, to soften the blow, three new measures were announced to aid those businesses most vulnerable to rises.
1) Business rates for small businesses leaving the relief scheme will benefit from a cap on rate rises, limiting it to £50 a month
2) Public houses will receive a £1,000 discount if their rateable value falls below £100,000, which 90% of pubs do
3) A £300m discretionary relief fund will be made available to local councils, to distribute to those businesses in their area when required.
In total, the chancellor claimed that this would result in a £435m cut in business rates across England which should hopefully aid SMEs while also supporting the local public body activities.
One of the most controversial policies in this Budget was the increase of National Insurance payments for the self-employed from 9% to 10%, then to 11% in April 2019. The Chancellor defended the policy saying it was only fair to the 85% of workers who were not self-employed, bringing tax payments in line with the majority of the population.
Previously, tax was lower due to differences in pension and benefit entitlement, but with disparity being substantially reduced in recent years, it is only fair that gaps in tax payments are also closed. While some argued that this violated the promises made by the Conservative manifesto; that VAT, National Insurance and income tax wouldn’t rise, Hammond argued that this only corresponded to employees, not the self-employed.
In addition, Hammond promised that he would be working to find a way to more accurately tax the digital economy, stating that the government will “set out its preferred approach in due course”.
On a lighter note, there was some good news for working parents, as a tax-free childcare policy was introduced, due to begin next month. From September, parents will have access to 30 hours a week of free childcare, allowing families to get back to work, further eased by a £5m fund allocated to help people back into work after a career break.
All in all, a mixed bag for businesses and workers, but one which should keep the boat steady as we sail into the turbulent seas of Brexit.
While the UK economy has continued to show robust growth, in contrast to analyst expectations, the long-term view is looking less certain.
Last year, the UK economy grew faster than any other major economy (except Germany). While on the surface, this seems like good news, it’s the productivity gap which is causing problems.
Unemployment remains at a very low level, but if growth is to continue, it will require more than a strong labour market.
Growth forecasts were revised down in this Budget, with the Office for Budget Responsibility (OBR) now falling more in line with the Bank of England predictions, suggesting that the next few years will be ones of uncertainty. Having said that, borrowing was also revised down, showing that the economy does seem resilient in the face of drastic global-economic change.
Business leaders have praised this Budget for its “keep calm and carry on” aesthetic, while opposing political parties continue to criticise Hammond for his lacklustre and seemingly platonic policies. However, it may be just what the UK economy needs in order to stay buoyant as the future remains unclear.
The flagship of the last Conservative government’s agenda, the Northern Powerhouse, has now been joined by a strategy for the Midlands Engine, a strategy that was promised by Theresa May back when she took office in July.
The report, released the day after Hammond’s speech, outlined plans to invest £392m into the Midlands through a local growth fund, aiding development of skills and support for local initiatives. A further £4m will be provided to support the Midlands Engine Partnership, set up to bring Local Enterprise Partnerships (LEPs) together and drive their growth.
Finally, the report pledges to keep regional interests in mind when negotiating an exit from the European Union.
Devolutionary activities will also continue later this year with May seeing the elections of six new regional mayors taking place, cementing the vision of a more regionally-led economy, diversifying power away from London.
Investment in skills
Across the UK, skills and education are suffering, which is having a direct impact on businesses. A lack of technical skills continues to hold the UK back in comparison to other major economies with productivity lagging 18% behind the G7 average.
As we prepare for our EU exit, we need to ensure that the UK is an attractive place to invest and work and this requires a major investment in training and infrastructure.
The Spring Budget outlined plans for 110 new free schools, adding to the 500 that are already up and running, with a specialist focus on maths schools in order to boost STEM skills.
A further £216m will be invested in schools over the next three years, and there will be increased loan support for undergraduates and PhD students. For those who choose to pursue a technical qualification, there will be a 50% increase in hours allocated to training for 16-19 year olds in the hope that it will aid employability, ensuring that these young people are even more prepared when the time comes for them to enter the workplace.
For businesses, this is certainly a positive. By having a greater pool of higher quality talent, productivity should increase, therefore making the economy more resilient to change and better prepared as we move into the next few years. By nurturing and employing the best talent, a company can be assured that they will be investing in a more stable future.
At love Energy Savings, we are always looking for the brightest and best talent to join our award-winning team. You can check out our latest job vacancies here.
Greater transparency for business energy
Last, but certainly not least, the Budget outlined plans to reform carbon taxation; replacing the cost control framework for renewables. The current levy framework will be replaced by new cost controls set to be laid out in full later this year.
The new controls have been designed to give businesses greater transparency when it comes to knowing how much tax they will pay on carbon emissions.
The chancellor also confirmed that a discussion around greater powers given to the Competition and Market’s Authority (CMA) will be on the agenda, allowing them to issue fines to energy companies who fail to abide by consumer law.
Previous investigations into the energy market and consumer rights by the CMA have been constantly criticised for lacking any means of enforcement, hopefully this will now be remedied.
At Love Energy Savings, we are committed to fairness and transparency when it comes to business energy. We’ve even written a comprehensive whitepaper campaigning for transparency in the energy industry; informing businesses about what they should be looking for when seeking to secure cheaper prices along with the benefits of working with a reputable third party intermediary (TPI).
For us, while this part of Hammond’s budget wasn’t one that hit the headlines, it is of vital importance for businesses. With supply margins worryingly tight and energy security uncertain, securing cheaper energy prices now and locking them in will allow business to rest assured that while change may be occurring all around them, their energy prices will remain affordable and consistent.
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