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Did Osborne do the business for business?

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26th Nov 2015
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While the government’s fourth fiscal event in the past 12 months generated headlines for what didn’t happen in the form of tax credits, there was also a raft of tweaks affecting business announced to the Commons.

No rabbits were pulled out of hats, but the news that the Chancellor had found £23bn down the back of the sofa meant that some of the more dire predictions trailed in the run-up to the Autumn Statement did not come to pass. Here are some of the headlines affecting businesses big and small:

Small business rate relief extended

The small business rate relief scheme was extended for another year, helping 600,000 small businesses for another 12 months. The FSB welcomed the extension as “good news” for its members, but new CBI director general Carolyn Fairbairn pointed out that many firms “will be disappointed to have been kept hanging on for a much-needed review of business rates until next year's Budget.”

Commenting on Twitter retail expert Paul Turner-Mitchell said that annual business rates for the average small shop will “breach the £9,000 level for the first time next year.

“The Autumn Statement was terrible for both the retail sector and those who have campaigned long and hard for the meaningful structural reform of the system” he continued. “It's a real kick in the teeth and the government has just simply not listened.”

Local authority devolution

In what George Osborne delighted in calling a ‘devolution revolution’, he outlined the government’s plan to transfer power across the country. The Chancellor announced the creation of 26 new or extended low-tax enterprise zones, 15 of which are in rural areas, at a cost of an additional £12bn.

In a move trailed in his party conference speech the Chancellor also paved the way for 100% business rate retention, giving councils the power to cut business rates to boost growth.

Regions would also be able to raise an infrastructure levy of 2p on business rates, but only if companies agree and those regions have elected mayors in place – only six city regions out of 38 have so far struck these so-called ‘devolution deals’.

It was also revealed that local authorities would be allowed to increase council tax by 2% to pay for social care. Reacting to this move Labour MP Alex Cunningham of Stockton North argued that this was likely to widen the north-south divide: “Authorities like Stockton with low tax bases will lose out as the vast wealth realised by rich councils in the south will no longer be redistributed to provide vital services across the country.”

Northern Powerhouse

The government reiterated its commitment to the Northern Powerhouse flagship policy, which now extends to cities in the north east of England.

Small businesses also stand to profit from a £400m ‘Northern Powerhouse Investment fund’, which will operate from 2016-20 and provide loans and equity finance across much of the north.

Apprentice levies

The closest to a rabbit-hat combo we got was the new apprenticeship levy. The tax is set to generate £3bn a year, and will be set at 0.5% of the payroll bill. A £15,000 allowance means that 98% of employers will not pay.

Osborne said the levy was a “huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy.”

However, no sooner was it announced then it was under fire from a number of quarters. John Cullinane, tax policy director of the CIOT, said the levy was “basically a new payroll tax”, and said it would mean a “hefty additional cost for some businesses”.

The CBI’s Carolyn Fairbairn called the levy a “sting in the tail” for business, while IoD director general Simon Walker said the group was “very concerned by the government's assumption that a quarter of the money collected will be spent on just administering the levy.”

However, there was also guarded optimism. British Retail Consortium director general Helen Dickinson argued that the government was “right to want to increase the number of apprenticeships but in doing so it must make sure the quality is increased too”, while Petra Wilton of the Chartered Management Institute, said: “If businesses want a skilled workforce then it's only right that they pay for it.”

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