Autumn Statement 2016
Philip Hammond stood up today to give his first major statement as the Chancellor and has announced that this will be his first and last Autumn Statement and that in the spring he will give his first and last Spring Budget. This is not perhaps a politician who is unsure about his future role or an indication of an early election, but instead a major change to an Autumn Budget and Spring Statement. So there are two Budgets in 2017 to excite those of us who look forward to such things. The good news is that the Spring Statement is only to be a response to the OBR report and not an opportunity to tinker with the fiscal policy, unless absolutely necessary!
Other than this major change to the political calendar, the Chancellor has announced a series of changes and commitments that appear to be good for business. These include the reduction of the rate of Corporation Tax to 17% by 2020, increasing thresholds for Income Tax by 2020, business rates reductions and improved marginal relief on business rates. In addition for innovative companies there is the prospect of improved research and development reliefs and patent box reliefs, whilst for exporting companies the doubling of the export finance scheme. Of course, fuel duty being frozen will find favour with many too.
The Chancellor also announced a series of incentives to close the productivity gap and cited the fact that a German worker produces in 4 days what a British worker produces in 5 days. Many will argue that the announced changes to infrastructure will address this issue, but time will tell.
Current economic uncertainties have perhaps led to British companies investing in employees to meet short term needs rather than significant capex to meet medium and long term needs. However, a clear long term view with capex investment now can put a business in a strong position to maximise their returns once confidence improves. A clear Government strategy to support long term investment is therefore sought by many commentators.
The Chancellor announced plans to look at levelling the playing field between unincorporated businesses and incorporated ones. The message here is that as corporation tax is reduced that more businesses will incorporate and there will be a tax loss to the exchequer. The Government will therefore consult on how this issue can be addressed and this may lead to a reduced incentive to incorporate.
In balancing the books, Hammond announced a series of changes including changes to Employers National Insurance, restriction of salary sacrifice arrangements, increased National Living Wage and the abolition of the Employee Share Scheme.
There is additional stimulus for tech businesses and funding for Local Enterprise Partnership’s but as always the decision as to whether this is a business friendly budget can only be judged when the fine detail is laid bare. Some might say what he has given with one hand, he has taken with the other.