AUTUMN STATEMENT SPECIAL EDITION
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Keep calm and carry on
1
Business
2 AUTUMN STATEMENT THURSDAY DECEMBER 4 2014 WESTERN DAILY PRESS
Chancellor: ‘End what we started’ BY JAMES TAPSFIELD news@westerndailypress.co.uk George Osborne appealed for voters to let him “finish the job” of overhauling the economy yesterday as he admitted the deficit was not falling as fast as hoped. Delivering his last Autumn Statement before the general election, the Chancellor said forecasts showed Britain was the fastest growing advanced economy in the world and hundreds of thousands of jobs were being generated. But he confirmed that borrowing was estimated to be £91.3 billion this year – rather than the £86.4 billion the Office for Budget Responsibility previously expected. The chancellor revealed he would miss his annual borrowing target by £5 billion but said the public finances would be less badly hit than expected by disappointing income tax receipts. Mr Osborne also said forecasts for future years had been revised up, meaning that public finances were “in a marginally stronger position” than expected at the Budget in March. “Now Britain faces a choice,” Mr Osborne told the Commons. “Do we squander the economic security we have gained, go back to the disastrous decisions on spending and borrowing and welfare that got us into this mess? “Or do we finish the job – and go on building the secure economy that works for everyone. I say: we stay the course. We stay on course to prosperity.” Mr Osborne said the OBR growth estimates for this year revised upwards from 2.7 per cent to 3 per cent – showed the coalition’s pace of fiscal consolidation was right. “Now there are those who say we should cut even faster, and those who say we should cut more slowly. “But we’ve got the pace right – as clearly demonstrated by the fact that our economy is growing faster than almost any other. “And because of careful management, we can afford to put part of that underspend money into our National Health Service to cope with the pressures it faces.” He said 500,000 jobs
had been created over the past year, and inflation and the deficit was falling. Mr Osborne dismissed suggestions that many of the posts created were part time, insisting 85 per cent were full time. They are also being generated fastest in Scotland and the North of England. Mr Osborne insisted the UK’s budget deficit had been halved since 2010 and was still forecast to fall in every year. By 2018-19 the government is due to record a surplus of £4 billion. The OBR also anticipates above-inflation wage rises for the next four years – although Mr Osborne said the 1 per cent cap on public sector rises would be maintained. Mr Osborne said the fiscal position was helped because the welfare bill and debt interest repayments had been reduced. But he conceded that “substantial savings” in public spending will still be required in the next parliament. The Chancellor also unveiled: Inheritance tax exemptions for aid workers who go to help with the Ebola crisis, a crackdown on tax avoidance including a 25 per cent levy on
£5bn
How much the annual borrowing target has been missed by
3%
The OBR growth estimates for this year
1%
The 1 per cent cap on public sector rises will be maintained
100%
The amount of business rate relief from small businesses
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firms that shift profits overseas, and £1.2 billion revenue from bank foreign exchange trading fines to go to GP practices. Here is an snapshot of other key areas discussed in yesterday’s statement:
MOTORISTS
Drivers’ hopes that the current freeze on fuel duty is set to last appear to have been dashed. Mr Osborne confirmed yesterday that the already-announced freeze for April 2015 would go ahead. But yesterday’s report by the Office for Budget Responsibility (OBR) spoke of a duty rise in September 2015 and April rises in line with RPI inflation in each of the years from 2016 to 2019. BUSINESS RATES
The Chancellor cheered British industry by announcing a review of business rates under moves to boost the economy and create jobs. He said the terms of reference of the review will be published next week, reporting back by the time of the Budget in 2016. CHARITIES
Hospice charities have long been subject to “unfair” rules that force them to pay VAT when the NHS does not, so they will be in line for a refund, the Chancellor said. From April next year, UK search and rescue and air ambulance charities will be able to claim refunds on VAT on goods and services for their non-business activities, under the plans announced yesterday. WAGES
An extra £3 million is to be spent enforcing the national minimum wage, the Chancellor announced. HM Revenue and Customs will have a budget of £12.2 million in 2015/ 16 to make sure firms pay the statutory rate.
GOOGLE TAX
From April, the Treasury will introduce a 25 per cent tax on profits generated by multinationals from economic activity in the UK which they then artificially shift out of the country. The tax avoidance loophole has been nicknamed the ”Google tax” because the arrangement – involving payments between different parts of a company to shift profits from higher-tax countries to those with lower taxes – is widely used by technology firms.
Businesses cheer for rates system overhaul
TRANSPORT
Families flying off on holiday will benefit from the Chancellor’s decision to scrap the Air Passenger Duty (APD) airport departure tax for children under 12 years of age from May 1 2015. And the Chancellor has gone further by also announcing that APD will be abolished for children under 16 from 2016. Mr Osborne also announced that airlines were going to be required to list on tickets just how much of the cost had gone on fuel surcharges.
Prime Minister David Cameron ahead of the Autumn Statement being given to MPs
The outdated business rates tax system will finally be overhauled after a pledge from the Chancellor in the Autumn Statement. Business rates is a tax paid by the occupier of a building such as a shop, office or warehouse based on its value back in 2008, before the recession, but rising with inflation. Yesterday George Osborne said the government recognised the impact of business rates on many businesses and announced a full review of the future structure of business rates to report by the Budget in
2016. The Chancellor also pledged an extension of the doubling of Small Business Rate Relief to April 2016; a two per cent cap on the inflation increase in the rates multiplier; and raising the £1,000 business rates discount for shops, pubs, cafes and restaurants with a rateable value of £50,000 or below to £1,500 in 2015-16. The review has been welcomed by the business community. James Durie, executive director of the Bristol Chamber, said it was a “major coup”. “This iniquitous tax is sapping good companies'
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WESTERN DAILY PRESS THURSDAY DECEMBER 4 2014 AUTUMN STATEMENT 3
Stamp duty reform gives buyers relief
strength year after year, long before they make a single penny in profits,” he said. “In the last week we have seen this evident in the extremes of Black Friday and Cyber Monday, illustrating the competition we see between the high street and online retailers. “The business rates system has meant that this hasn’t been a fair fight, with one arm of high street retailers held back by this vindictive tax. “This is a step in the right direction and this review must deliver fundamental change and not get bogged down by short-term political thinking.” Paul Matthews, head of the Bristol office of commercial property experts Bruton Knowles, said: “This is a victory for common sense.
Reform of the archaic business rates system is long overdue and it’s good to see the Government finally acknowledging and responding to the need for change in order to make the system fairer for business.” Perran Jervis, partner and head of retail and consumer goods at Bristol law firm TLT, based in Victoria Street, said: “Many retailers regard business rates as a charge that has little to do with their own profitability and more to do with the financial needs of the local authority. “It's good to see the Government making some efforts to tackle this longstanding bug bear for retailers.” Mark Owen, regional chairman of the Federation of Small Businesses in Gloucestershire and West of England said the
review should be sooner “We are disappointed with the timing,” he said. “We would have preferred this to have happened sooner rather than later because it feels as though we have been treading water on this issue for five years now. We needed a firmer commitment now to reform as this could have been a real boost to help revive our high streets for example.” And Mark Rigby, chief executive at rates appeals specialist CVS, added a note of caution. “We need to understand the scope and boundaries of this review. For as long as the Chancellor remains wedded to fiscally neutral reform and a ‘zero sum game’ in business rates, there are a limited range of options for change.”
Top: Chancellor of the Exchequer George Osborne and Treasury Chief Secretary Danny Alexander leaving the Treasury; Below: James Durie from the Bristol Chamber
George Osborne unveiled a dramatic root and branch reform of stamp duty yesterday, promising to save homebuyers thousands of pounds. Delivering a nakedly political pre-election Autumn Statement, the Chancellor branded the existing levy a “tax on aspiration” and said he would scrap the ‘cliff edges’ which distort the property market. The surprise shake-up emerged after Mr Osborne was forced to admit that weak tax revenues mean the deficit is not falling as fast as hoped and will be over £90 billion this year. He pointed to forecasts of surging 3 per cent growth and appealed for voters to let him “finish the job” of overhauling the economy. Labour seized on the missed deficit targets. But the attack was blunted by the surprise final flourish of Mr Osborne’s package, which effectively ditched the long-standing stamp duty structure. The Chancellor declared that the ‘slab’ system – which sees buyers charged a percentage of the full purchase price as soon as the value hits thresholds – was being abandoned. Instead, from midnight tonight different percentage rates will be charged to each portion of the price. Mr Osborne said the reform represented a tax cut of £800 million per year. Only homes that cost over £937,000 will see their bill go up. A £5 million pound house will see its stamp duty rise from £350,000 to £514,000. Outlining the shift, which will be seen as an effort to outflank Labour’s policy of introducing a ‘mansion tax’, Mr Osborne told the Commons: “There has been a debate in this country about taxing houses. “The system I introduce today replaces a badly designed system that has distorted our housing market for decades. It reduces the stamp taxes for 98 per cent of people who pay them in this country. It increases the taxes on the most expensive 2 per cent of homes, but only asks people to pay that tax when they buy the house and they have the money. And it does not involve a revaluation of hundreds of
thousands of homes in this country.” The Chancellor said Office for Budget Responsibility (OBR) forecasts showed Britain would be the fastest growing advanced economy in the world this year and hundreds of thousands of jobs were being generated. But growth is expected to slip back below 2.5 per cent in subsequent years. And he confirmed that borrowing was estimated be £91.3 billion this year – rather than the £86.4 billion previously expected. “Now Britain faces a choice,” Mr Osborne told MPs. “Do we squander the economic security we have gained, go back to the disastrous decisions on spending and borrowing and welfare that got us into this mess? “Or do we finish the job – and go on building the secure economy that works for everyone. “I say: we stay the course. We stay on course to prosperity.” The Chancellor insisted the UK’s budget deficit had been halved since 2010 and was still forecast to fall in every year. By 2018-19 the government is due to record a surplus of £4 billion. The OBR also anticipates above inflation wage rises for the next four years. Mr Osborne said the fiscal position was helped because the welfare bill and debt interest repayments had been reduced, meaning extra cash could be diverted to the NHS. But he conceded that “substantial savings” in public spending will still be required in the next parliament. On personal taxation, he said the higher rate threshold would go up in line with inflation to just under £42,385. Declaring that the case for ’English Votes for English Laws’ was “unanswerable”, he signalled that powers over corporation tax would be devolved to Northern Ireland. However, shadow chancellor Ed Balls said Mr Osborne had questions to answer about living standards, wages and tax receipts, adding: “There is a cost of living crisis.” And taunting the Chancellor’s missed target on the deficit, Mr Balls told MPs: “He is going to carry on missing his deficit targets for year after year.”
4 AUTUMN STATEMENT THURSDAY DECEMBER 4 2014 WESTERN DAILY PRESS
The UK budget revealed for the next few months BY MARCUS DENBY business@westerndailypress.co.uk The main points of the Chancellor’s Autumn Statement are detailed here: TAX
Reform of residential property stamp duty so that rates fall only to that part of the property price that falls within each band – 0 per cent in first ÂŁ125,000 then 2 per cent on the portion up to ÂŁ250,000 then 5 per cent up to ÂŁ925,000, then 10 per cent up to ÂŁ1.5 million, then 12 per cent on anything above that, saving ÂŁ4,500 on average priced home. UK’s net payments to European Union to fall by about ÂŁ1 billion this year and next year and decline in real terms over the next five years. Inheritance tax exemption extended to cover aid workers who die dealing with humanitarian emergencies. Hospice charities, search and rescue and air ambulance to be granted VAT refunds. New 25 per cent diverted profits tax on multi-national profits generated in the UK and “artificiallyâ€? moved out of the country. Changes to rules on bank profit offsets to raise almost ÂŁ4 billion. Clampdown on aggressive tax avoidance to raise ÂŁ2.8 billion. Charge for non-dom tax status to rise to ÂŁ60,000 a year for those resident for 12 of the last 14 years and ÂŁ90,000 for those in the country for 17 of 20 years. Annual charge on properties “envelopedâ€? to avoid stamp duty to rise by 50 per cent above inflation on properties over ÂŁ2 million. Immediate reduction in oil industry supplementary charge from 32 per cent to 30 per cent. Air passenger duty for children under 12 abolished in May 2015 and for under 16s in 2016. Government to legislate to devolve corporation tax to Northern Ireland if the Northern Ireland executive shows it can manage the financial implications. People who die under 75 to be enabled to pass on annuities tax free. Limit on saving in New Isas to rise to ÂŁ15,240 and Isas to be inherited tax free. National Insurance on young apprentices to be abolished. Income tax free personal allowance to rise to ÂŁ10,600 rather than the planned ÂŁ10,500 next year, giving wage boost of ÂŁ825 a
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year. Higher rate income tax threshold to rise to ÂŁ42,385 next year. EMPLOYMENT, BUSINESS AND EDUCATION
Half a million new jobs created over the last year, with numbers claiming unemployment benefit falling by 23 per cent and young people on longterm jobless benefit almost halving.Unemployment forecast at 5.4 per cent next year before settling at 5.3 per cent. Regular earnings growth is now faster than inflation, at 4 per cent for those in full-time work for over a year. OBR predicts wage growth above inflation for the next five years. Expansion of British Business Bank, extension for a further year in the Funding for Lending scheme for smaller firms and new tax break for orchestras and children’s television tax credit. R&D tax credit increased for small and medium companies to 230 per cent and for large firms to 11 per cent, while small business rate relief is doubled for another year. Inflation-linked increase in business rates capped at 2 per cent and discount for shops, pubs and cafes increased by 50 per cent to £1,500. Government-backed loans of up to £10,000 made available for all students undertaking post-graduate masters degrees. INVESTMENT
Mr Osborne confirmed additional ÂŁ2 billion every year for the frontline of the NHS and a ÂŁ1.2 billion investment in GP services paid for from foreign exchange fines. Employment Allowance of ÂŁ2,000 to be extended to carers. Tendering for new franchises for Northern Rail and Trans-Pennine Express to replace pacer carriages with modern trains. Investment of ÂŁ250 million in new advanced material science institute in Manchester with branches in Leeds, Sheffield and Liverpool. New sovereign wealth fund to invest proceeds from shale gas resources in the north, in the north of England. PENSIONS AND EFFICIENCIES
Top: Chancellor George Osborne outside 11 Downing Street; Below: Mr Osborne (left) and Treasury Chief Secretary Danny Alexander
Public sector pay restraint in the next Parliament to deliver savings “commensurateâ€? with the ÂŁ12 billion achieved over the past four years. Commitment to complete public service pension reforms, saving ÂŁ1.3 billion a year. Plan published for a further ÂŁ10 billion of efficiencies in Whitehall, and Chancellor commits to raising at least ÂŁ5 billion by cracking down on tax avoidance and evasion. Universal Credit work allowances to be frozen for a further year, tax credits to be cut when overpayments are certain and unemployment benefit to be ended for migrants with no prospect of work. Total welfare spending set to be ÂŁ1 billion lower than Budget forecast and to continue falling as share of GDP.
AUTUMN STATEMENT: HIGHLIGHTS
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WESTERN DAILY PRESS THURSDAY DECEMBER 4 2014 AUTUMN STATEMENT 5
AUTUMN STATEMENT DIGEST
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Here are a few insights into what happened yesterday as the statement was announced and what it means.
Minister told off for budget question Speaker John Bercow has ticked off a Tory MP for being a “cheeky little boy�. Former shadow minister Bill Wiggin asked a question to Chancellor George Osborne despite leaving the Commons for a period of time during the Autumn Statement, an approach not in keeping with parliamentary convention. Mr Bercow initially denied the North Herefordshire MP a reply from Mr Osborne. But the Chancellor volunteered to answer, insisting Mr Wiggin had asked a good question about stamp duty. Following the reply from Mr Osborne, the Speaker told Mr Wiggin: “I’m glad you have got your answer but to toddle out of the chamber and then beetle back in and expect to take part in defiance of conventions of the House renders you a cheeky little boy.� Mr Wiggin replied: “There’s nothing little about me, Mr Speaker.� Mr Bercow added: “I use the term with some poetic licence, it has to be admitted.�
Liberal Democrats speak on out cuts Liberal Democrat Cabinet minister Vince Cable has told his officials not to engage with Treasury work on cuts for the next parliament. The Business Secretary has also asked the independent Office for Budget Responsibility to set out the difference between Tory and Lib Dem economic plans after the general election. Mr Cable said the Autumn Statement delivered by George Osborne today was a coalition effort, but there are major divisions between the two governing parties about how to proceed with the deficit reduction effort after 2015/16. Lib Dem leader and Deputy Prime Minister Nick Clegg, who was absent from the Commons for the Autumn Statement as he was on a regional visit to Cornwall, has described Tory plans to balance the books by cutting spending, including on welfare, without raising taxes on the wealthy as “complete and utter nonsense�.
Spending set for minimum wage An extra ÂŁ3 million is to be spent enforcing the national minimum wage, the Chancellor announced. HM Revenue and Customs will have a budget of ÂŁ12.2 million in 2015/ 16 to make sure firms pay the statutory rate. Ministers said
the extra funding will increase HMRC’s capacity to take enforcement action against employers found to be paying less than the minimum. Last year revenue inspectors found ÂŁ4.65 million in wages owed to 22,500 workers, while 55 companies have been named and shamed. Business minister Jo Swinson said: “Paying less than the minimum wage is wrong and illegal. Employers need to know that they will face tough consequences if they break the law.â€?
Relief for children’s TV tax welcomed Tax relief for live-action children’s TV programmes has been welcomed as a boost for both audiences and broadcasters. The measure, announced by the Chancellor and due to come into force in April, comes in addition to similar breaks for high-quality programmes, animation and video games as well as a scheme for the film industry. In a further boost for the creative sector, the Government is also to launch a formal consultation next year about tax relief for orchestras – beginning in 2016 – to recognise their “cultural value and artistic importance�. Anna Home, who chairs the Children’s Media Foundation, said the relief for children’s shows would bring a “much-needed boost�.
New science research is a vision spearhead A new ÂŁ200 million research facility in Manchester will spearhead Chancellor George Osborne’s vision for British science which he declared to be a “personal priorityâ€?. In his Autumn Statement Mr Osborne also pledged to “revolu-
tioniseâ€? support for future generations of scientists by offering the first Governmentbacked student loans – worth up to ÂŁ10,000 each – to postgraduates seeking masters degrees. And he announced that the UK had been awarded the “lead roleâ€? in the next major mission to explore the planet Mars. The ÂŁ235 million Sir Henry Royce Institute for Advanced Materials Research and Innovation in Manchester is central to Government plans for a “northern powerhouseâ€? to fuel the economy.
Benefit freeze is a concern for charities Charities expressed concern that the Chancellor has decided to freeze Universal Credit work allowances as part of a raft of welfare announcements. George Osborne said the allowance will be maintained at its current rate for a year from April 17 in addition to the three years already announced, to offset increased childcare support for those on the benefit. In addition, if a claimant leaves Universal Credit and returns within six months, they will be able to keep their existing assessment period. Barnardo’s chief executive Javed Khan said: “Barnardo’s is deeply concerned that Government plans to further freeze working benefits leave poor children out in the cold. Struggling families are already telling us they are having to choose between heating and eating, as cuts have left them unable to pay electricity bills. The harsh reality is that the downturn isn’t yet over for thousands of parents. For the 3.7 million poor children living in households that struggle daily with income cuts and soaring living costs, the welfare system is a vital safety net protecting themselves and their families from destitution.�
“Non-doms� to face higher charges
Further cuts are announced in the Autumn Statement
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The extra amount to be spent on enforcing the minimum wage
So-called “non-domsâ€? who have lived in Britain for 12 years or more will face higher charges, Chancellor George Osborne has announced. Individuals who are “nondomiciledâ€? in the UK – because they have their permanent home elsewhere – can opt only to pay tax on income that is brought into the country. However, they currently have to pay a ÂŁ30,000 annual levy after they have lived in Britain for seven of the past nine years, and ÂŁ50,000 when they have been here for 12 of the past 14 years. Under the changes unveiled in the Autumn Statement, the latter fee will increase to ÂŁ60,000.
6 AUTUMN STATEMENT THURSDAY DECEMBER 4 2014 WESTERN DAILY PRESS
Balls rages at ‘broken promises’ BY JEFF WELLS news@westerndailypress.co.uk Working people are still facing a cost-of-living crisis despite the economic news and policies announced in Chancellor George Osborne’s Autumn Statement yesterday, Ed Balls has said. The shadow chancellor said the Office for Budget Responsibility’s new figures announced yesterday show again that wage growth is weaker than expected, which is in turn hitting tax revenues. Mr Balls said wages have not kept up with prices in every month but one over the last four and a half years, leading to a squeeze on living standards. In his response to the Chancellor’s statement, the Labour frontbencher said: “On living standards, wages have not kept pace with prices for 52 of the last 53 months. Today’s forecast from the OBR confirms that wage growth is once again weaker than expected. Working people are now £1,600 a year worse off than they were in 2010. Someone in full-time work is now £2,000 a year worse off. For working people there is a cost-of-living crisis and that squeeze on living standards is not only hitting family budgets – it has also led to a shortfall in tax revenues.” Mr Balls said the Chancellor had missed his targets on eradicating the deficit by 2015 and to bring the national debt down, but had not told MPs by how much. The shadow chancellor also asked “how much worse” things had got for Government borrowing since March’s Budget. He said: “The result of that shortfall in tax revenues is that, once again, I believe the Chancellor has had to revise up his forecasts for Government borrowing. You have told the House today that the deficit for this fiscal year is now expected to be £91.3 billion. But you did not set out in detail how much worse things are since the Budget. “So, in your answer can you tell the House how much has borrowing this year been revised up compared to your Budget forecast? Back in 2010 the Chancellor and the Prime Minister pledged to balance the budget by the end of this Parliament and see the national debt falling this year. “The Prime Minister said in 2010 that in five years’ time we will have balanced the books. Today the Chancellor has, I believe, announced the deficit next year is forecast to be £75.9 billion. “Can you confirm that number and the fact that national debt next year is fore-
cast not to fall but to rise? And let me ask you – because, while you have clearly missed your targets, you didn’t give us the scale of how much you’ve missed them by – how much more will you have borrowed in this Parliament than you planned back in 2010?” Mr Balls said he shared the Chancellor’s concerns about the eurozone and said a plan was needed for stronger growth in Germany and across the continent. But he insisted the weakness of the eurozone could not explain why – despite the notable successes of a number of British companies – the UK’s export performance had been so poor and so much worse than other eurozone countries. He told MPs that since 2010 the UK’s export performance had been 16th in the G20 and 22nd out of 28 countries in the EU. The shadow chancellor also criticised the falling number of apprenticeships for young people this year and the fact that house building was at its lowest level since the 1920s. And he branded Mr Osborne’s infrastructure plans “preheated re-announcements”. Barely a fifth of projects
72%
Proportion of the public who are feeling ‘no recovery whatsoever’ according to a survey were in construction, Mr Balls told the House, and since 2010, infrastructure output was down over 11 per cent. He said Labour would support what the Chancellor was proposing on air passenger duty, but asked – following the Smith Commission proposal to devolve APD to Scotland – whether he would urgently lead work on a mechanism to ensure English airports particularly in the north of England are not disadvantaged. He also welcomed the review of business rates, but asked why the Chancellor could not take immediate action to adopt Labour’s plan to cut the levy for small companies and increase free childcare for working people. And he urged him to “properly capitalise” the business investment bank and raise as a proportion of earnings the national minimum wage. Mr Balls also claimed that growth had been revised down in 2016, 2017 and 2018. He said: “The OBR figures... if our economy grew by just half a per cent a year faster than forecast, government borrowing would come in over £32
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billion lower in the next parliament. Don’t you see those down grades to growth are bad news? Without decisive action to sustain growth, get living standards rising, a recovery for the many, not the few, you are going to carry on missing your deficit targets year after year after year.” On net migration, Mr Balls asked: “Can you tell the House what is the OBR estimate for net migration over the next 12 months that underpins the growth and public finance forecast? It seems highly unlikely it is going to be anywhere near the Prime Minister’s forecast for the tens of thousands. Is it going to be over 100,000 next year, over 150,000, over 200,000? And this time could the Chancellor remember to tell the Prime Minister what the facts were?” Mr Balls said welfare spending in the current Parliament would be more than £20 billion higher than forecast, casting doubt on the Chancellor’s claim to make further cuts of £10 billion in the next Parliament. He said a £3 billion realterms cut on tax credits would hit three million working people on middle and lower incomes, adding: “Once again (Mr Osborne is) hitting women harder than men.” Mr Balls went on: “I have got to say the Prime Minister let the cat out of the bag earlier when he referred to masosadism. As I understand it, masosadism is someone who enjoys having pain inflicted upon and enjoys inflicting pain on other people. “We know the Chancellor’s views on the first – it rather seems from the way he smiled when he announced the tax credits cuts he’s rather enjoying the second as well. How can it be fair to hit working people with a £3 billion cut to their tax credits when he’s spent £3 billion giving a tax cut to people earning over £150,000? How can it be fair?” “I’ve got to say, for all his strutting, for all his preening, for all his claims to have fixed the economy, he promised to make people better off, working people are worse off. “He promised we were all in this together and he cut taxes for millionaires. “He promised to balance the books in this Parliament and that commitment is now in tatters. Every target missed, every test failed, every promise broken.” In reply to Mr Balls, Mr Osborne said: ‘‘With that performance we have seen why he’s totally unfit in six months to be put in charge of the nation’s finances.” He said Mr Balls had repeatedly predicted the deficit would increase but insisted independent forecasts show it is falling and debt is lower in every future year. Mr Osborne said to Mr Balls: “It’s hardly surprising your party has such low economic credibility when you repeatedly make predictions about the British economy that turn out to be completely wrong.” He added: “People say there is a split in the leadership of Labour Party – they are quite right. It’s between people who get the deficit figures completely wrong and people who forget about the deficit all together.”
The devil (and the likely Josephine Bush tax partner at EY in the South West provided this analysis of the Autumn Statement for the Daily Press Extension of the FLS scheme The combination of GDP growth and low interest rates means that the appetite for investment and lending is picking up. The Government guarantee for bank lending, extending the FLS and focusing it on SMEs, is a positive step in the right direction. The announcement will see banks being able to draw £5 of cheap credit for every £1 that they lend to smaller firms in the coming year, which should go some way in realigning the dynamic between risk and profitability for banks as they look to lend to smaller SMEs.
Shadow chancellor Ed Balls said his counterpart George Osborne had ‘failed every test’. He told MPs that since 2010 the UK’s export performance had been 16th in the G20 and 22nd out of 28 countries in the EU
One step forward but how many steps back on R&D tax relief Whilst the Chancellor focused on the good news story of the £40 million increase in the
headline rates for both the SME and Large business R&D tax credit, the changes to what qualifies for the credit represents a significant turnaround. The industry has worked hard with the UK government to ensure that the regime delivers a real incentive and today’s change threatens to undermine confidence in the process. However, it is very disappointing that the Government has decided to do a U-turn in relation to consumable items incorporated in products that are sold. Many claimants will recall that the government widened the ‘production guidelines’ in August 2011 to include consumables as qualifying even if they were incorporated in a product that was subsequently sold. Although the net effect of this reversal and the increase in rate is a £20 million net increase in the incentive, the impact of the U-turn may well have the biggest impact.
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WESTERN DAILY PRESS THURSDAY DECEMBER 4 2014 AUTUMN STATEMENT 7
Rejuvenation or deception? Nation’s split BY JEFF WELLS news@westerndailypress.co.uk Reaction to the Autumn Statement from across the industrial spectrum has been mixed, with business leaders praising announcements on rates and trade unions pointing out that little was being done to tackle low wages. Phil Smith, managing director of Business West said: “The Chancellor has delivered a crowd pleasing Autumn Statement for business. By focusing on key barriers to growth, such as Britain’s broken business rates system and the difficulty of accessing finance for growth, he has shown a commitment to solving problems that hinder the growth aspirations of many firms.� But Paul Kenny, general secretary of the GMB union, said: “The so-called prudent Mr Osborne will borrow more in five years at the Treasury than Labour chancellors he labels as profligate did in 13. Mr Smith said: “Prior to today, businesses asked for help to deal with business rates, infrastructure and apprentices, all of which were addressed in a positive Autumn Statement to close out a year which saw the country finally emerge from a damaging recession.� He added: “This Autumn Statement included many ac-
tions to boost small businesses. Over 99 per cent of the 87,000 plus registered businesses in our region are SMEs and further packages of support, such as the expansion of financial support for first-time exporters, increased rate relief and access to finance under the British Business Bank give these firms cause for celebration. Access to credit still remains stubbornly difficult for many small firms, despite several interventions announced since the credit crunch, so it is too early to say whether the latest steps to encourage further bank lending will succeed. “A major coup for business is that the Chancellor has committed the government to a fundamental review of business rates and doubled small business rates relief for a further year. This iniquitous tax is sapping good companies’ strength year after year, long before they make a single penny in profits. In the last week we have seen this evident in the extremes of Black Friday and Cyber Monday, illustrating the competition we see between the high street and online retailers. The business rates system has meant that this hasn’t been a fair fight, with one arm of high street retailers held back by this vindictive tax. Today is a step in the right direction. “Although the business com-
munity is applauding measures announced today, as we head towards the general election there are still fundamental barriers to growth that need to be addressed. With a very difficult fiscal position for UK plc over the next five years, all parties will need to remain focused on making sure economic growth is central to their New Year manifestos.� Union leader Mr Kenny, said: “The so-called prudent Mr Osborne will borrow more in five years at the Treasury than Labour chancellors he labels as profligate did in 13. “The welcome increase in economic activity is partly linked to population growth as GDP per head is still three per cent below 2007 levels. The real value of take-home pay for workers is 13 per cent below pre-recession levels while many of the new jobs are precarious and badly paid. If this is success, I would not like to think what failure looks like.� John Longworth, director general of the British Chambers of Commerce, said: “The Chancellor has used the last Autumn Statement before the election to demonstrate that he is listening to and supporting British businesses across the entire country. By focusing on key business priorities, such as Britain’s broken business rates system and the difficulty of accessing finance for growth, the Chancellor has demonstrated that he is committed to solving problems that hinder the growth aspirations of many firms.� Len McCluskey, Unite general secretary said: ‘‘The vast majority of people listening to George Osborne talking about an economic recovery will think it’s a figment of his imagination. This is a phoney recovery.� John Allan, chairman of the Federation of Small Businesses, said: “The Chancellor has listened to the needs of business.�
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benefits) are deep in the detail Draining the well of tax avoidance The Chancellor’s Autumn Statement will raise almost ÂŁ9 billion from tackling the so called “tax avoidance, tax planning and fairness,â€? but over a third of this will come from restricting the ability of the banks to utilise the losses suffered during the financial crisis. This will be a concern for many businesses as it breaches a long held principle that companies should get relief for the costs they incur as they accrue.
Foot on the accelerator for UK infrastructure but will financing and the supply chain catch up?
Infrastructure is key to the UK’s economic competitiveness and so the raft of projects announced today is long overdue. It is now essential these projects receive long-term support across the political spectrum through the National Infrastructure Plan and the Armitt Review, which calls for
an independent National Infrastructure Commission. However, there are two major issues that may prove to be stumbling blocks for the government in making this ambition a reality. Firstly, the issue of funding still needs to be addressed and the other major issue is with supply chain. The Government needs to consider how to maximise the economic benefit for the UK. It could end up shooting itself in the foot if these projects are awarded to foreign contractors because the Government perceives that there is insufficient capacity or skills in the UK construction industry to deliver on the scale demanded. There needs to be a renewed focus on supporting all industries in the infrastructure supply chain, from construction to engineering, to ensure the benefits are reaped for the UK plc.
A tax manifesto for manufacturing? The Chancellor’s smorgasbord
of tax measures was difficult to categorise, combining antiavoidance with incentives, and small reductions with fundamental reform. With the EY Attractiveness survey showing that the UK only attracted 12 per cent of Europe’s foreign direct investment (FDI) from manufacturing, compared to 20 per cent for the wider economy, there was clearly a need for action. From a manufacturers’ perspective, the reduction in business rates and the promised structural reform may help encourage investment, while the removal of national insurance for apprentices will help the payroll. However, the positive message from the increases in the rate of the research and development tax credit was tempered by the restrictions as to what qualifies. With the continued lack of any real relief for investment in industrial premises, yesterday’s announcements may help somewhat but the need for reform remains if we are to raise FDI.
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