Chancellor George Osborne presented a generally positive economic outlook in his 2013 Autumn Statement.
The Chancellor commented that the Government’s austerity measures were working, but emphasized the fact that ‘the job is not yet done’.
Measures were announced that affect both businesses and individuals, including some key announcements on business rates, conformation of a new transferable tax allowance for married couples and civil partners, and an abolition of employer national insurance contributions for employees aged under 21.
If you think any of the measures announced in yesterday’s Autumn Statement may affect you, or if you require assistance with any other aspects of tax and financial planning, please contact us for further assistance.
NICs for under-21s
‘We are going to abolish the jobs tax on young people under the age of 21,’ said George Osborne in his Autumn Statement. The Government estimates that this will have a beneficial effect on 1.5m jobs, saving £500 where the employee earns £12,000 pa and £1,000 where they earn £16,000 pa.
Speaking optimistically, the Chancellor forecast that overall unemployment would fall to 5.6% by 2015, from the current 7.6%. But John Philpott, director of the Jobs Economist consultancy, said the move ‘may create a disincentive to hire young people aged between 21 and 24’.
Lizzie Crowley, head of youth unemployment programmes at think-tank The Work Foundation, said, ‘Tackling failures in our system of careers advice and guidance would have a much greater impact than scrapping employer NICs for under-21s. This policy is unlikely to encourage a significant number of employers to take on more young people’.
Director General of the British Chambers of Commerce, John Longworth, found it more encouraging, commenting, ‘This measure will encourage many businesses to take on young people, as it will help reduce risk and cover the costs of the additional training that under-21s so often require in the workplace’. But he also expressed concerns about keeping young people in employment after they cross the age limit.
With experts on both sides of the fence, the actual impact of this measure may only be known when it comes into force in 2015.
The business reaction
‘After years of deficit, we have a Chancellor who is finally talking about a budget surplus,’ said Graeme Leach, Chief Economist at the Institute of Directors (IoD), in response to the 2013 Autumn Statement. His was one of many optimistic voices to speak out today about the proposed changes.
Director General of the Confederation of British Industry (CBI), John Cridland, observed that ‘the 2% cap on business rates and discount for very small businesses are positive. Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment’.
John Allan, National Chairman of the Federation of Small Businesses (FSB), agreed, saying ‘Action on business rates was the top priority for our members, and the Chancellor has addressed some of their concerns. Capping business rates is a welcome measure’.
He did add, however, state ‘what remains outstanding is a fundamental reform of business rates, which we will continue to press for’. Concluding on the matter of apprenticeships, Allan said, ‘the commitment to expand these will help more and more young people think about this as a route into a career’.
Responding to the Chancellor’s comments on energy, British Chambers of Commerce (BCC) Director General John Longworth was positive. ‘Energy security remains a huge priority for British businesses,’ he said. ‘We welcome new tax allowances that will help kick-start the exploration of onshore oil and gas, including shale gas’.
Cautious about promises made, Longworth continued, ‘the Government’s commitment to improving the UK’s outdated infrastructure can only be properly judged when projects are being built, rather than by the number of aspirational strategies produced’.
The Autumn Statement has clearly touched upon issues that business groups have been concerned about for a long time. From their perspective, at least, this is a period of careful hope and thoughts of the future.
‘Economic plan is working’ says Osborne
The economic outlook for Britain was more upbeat in today’s Autumn Statement than at the Budget earlier this year, with Chancellor George Osborne starting his speech with the announcement that ‘Britain’s economic plan is working.’
Addressing MPs in the House of Commons, Osborne revealed that the Office for Budget Responsibility (OBR) had more than doubled its UK growth estimate for 2013, from 0.6% to 1.4%. The OBR also upgraded its growth forecasts for 2014 from 1.8% to 2.4%.
Meanwhile, revised figures from the Office for National Statistics show that the decline in GDP between 2008 and 2009 was 7.2%, compared to the previous estimate of 6.3%. Osborne said this had cost the economy £112bn, reminding us of the ‘economic calamity that befell Britain.’
However, the Chancellor warned against complacency, commenting that the Government’s aim was to ‘secure the economy for the long term’ and that despite the upturn, ‘the job is not done’.
The political reaction
‘The job is not yet done,’ was the key message from Chancellor George Osborne today when he delivered his Autumn Statement.
Asserting that the UK requires ‘a government that lives within its means’, he emphasised the importance of continuing with measures already in place, and warned that ‘the job is not yet done’.
Shadow Chancellor Ed Balls, responding to the speech, said that the government has done nothing to address what he referred to as the ‘cost of living crisis’. He warned that the Chancellor is in ‘complete denial’, adding that wages will fall in the coming years.
Liberal Democrat MP for Berwick-upon-Tweed, Sir Alan Beith, felt that the Autumn Statement showed how the two parties can work together in the national interest.
Speaking for the Public and Commercial Services union, Mark Serwotka said the ‘ludicrous claim that austerity is working will be news to those whose living standards are continuing to fall’. He added ‘it’s austerity for austerity’s sake’.
Meanwhile, chief economist Jonathan Loynes for the think-tank Capital Economics warned that ‘the UK’s fiscal consolidation still has a long way to go,’ adding that the Chancellor ‘has played Scrooge rather than Santa’.
Key measures for business
Chancellor George Osborne’s 2013 Autumn Statement contained a number of measures aimed at helping businesses. The measures include a new cap on future increases in business rates, an extension of the Small Business Rate Relief scheme for another year, and help for smaller high street businesses.
The Chancellor announced that business rates increases will be capped at 2%, rather than next year’s expected increase of 3.2%, cutting the tax bill for business owners by around £900m.
Commenting on the news, John Allan, National Chairman for the Federation of Small Businesses (FSB) said that action on business rates was the FSB’s top priority and ‘extending the doubling of small business rates relief will be welcomed by many’.
The Chancellor also announced that businesses with properties worth up to £50,000 will receive a discount in their business rates, resulting in a saving of £1,000 per business.
Other measures announced include the abolishment of employer national insurance contributions for employees under the age of 21, and new tax reliefs for the shale gas and creative industries.
John Longworth, Director General of the British Chambers of Commerce, said that although the measures implemented in the Autumn Statement were positive for business, they were ‘not strong enough to boost companies’ cash flow and investment’, and that the Chancellor ‘should have been bolder, freezing business rates entirely’.
Austerity is working ‘but the job is not yet done’
Chancellor George Osborne presented his 2013 Autumn Statement to the House of Commons in relatively buoyant form. However, while the Chancellor announced that economic growth forecasts for this year have more than doubled from 0.6% to 1.4%, he was keen to emphasise the importance of achieving a ‘responsible recovery’ by sticking to the austerity plan.
Despite borrowing also seeing significant downward revisions, with the underlying deficit revised down to 6.8%, the Chancellor warned that ‘difficult decisions remain’ and confirmed that an increase in the state pension age to 68 will take place earlier than previously planned. Whitehall budgets will be cut by around £1bn next year, and overall spending on welfare will be subject to a new cap in future years.
There was some better news for business, with the Chancellor offering relief in the form of a new 2% cap on business rates increases in England, together with an extension of Small Business Rate Relief for a further year. In addition, a new reoccupation relief will be available to local retail businesses, and a £1,000 rates discount will be applied to some small shops and pubs.
Another key announcement for businesses was the scrapping of employer national insurance contributions for the under-21s. Meanwhile, April 2015 will see the application of capital gains tax to gains made by non-residents who sell residential property in the UK.
Meanwhile, the Chancellor unveiled a number of measures aimed at supporting families, confirming plans to introduce a new transferable tax allowance for married couples and civil partners, as well as introducing an average £50 saving on energy bills, which will be achieved through a rolling back of green levies.
Other headline-grabbing measures announced by the Chancellor include a scrapping of next year’s planned 2p per litre fuel duty rise, free school meals for infants, a scrapping of above inflation increases to rail fares, and the demise of car tax discs which will be replaced by an electronic system for vehicle excise duty from October 2014.