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Jeremy Hunt’s Spring Budget – Don’t forget about business

19th Feb 2024
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Much of the build-up to the Spring Budget has focussed on the potential for Chancellor Jeremy Hunt to make further tax cuts. This follows the cut Mr Hunt made to National Insurance contributions (NICs) in the Autumn Statement and political pressures from those who want to see cuts made before the next General Election.

However, the news that the economy entered a technical recession last year came as a blow to both businesses and Mr Hunt. Now, the UK’s business groups are urging the Chancellor not to forget about measures that can improve the economy. Here we take a look at some of the latest lobbying as the Spring Budget draws closer.

Meaningless cuts

The Federation of Small Businesses (FSB) has warned that further cuts to personal taxes will be meaningless unless the Chancellor also announces measures to bring the economy out of its slump.

The business group has written to Mr Hunt calling for the Spring Budget to include measures that it says will help businesses grow and create more jobs.

The FSB points to a backdrop of low business confidence and warns that ‘a shake-up is urgently needed to unlock real progress in an otherwise lethargic economy’. 

Uprate the Employment Allowance

The FSB has reiterated its call for the Employment Allowance to be uprated to £6,500.

It says more small firms expect to reduce employee numbers than increase them in the next quarter, with labour costs being cited as a cost pressure by 46% of firms.

At its introduction and subsequent upratings, the Employment Allowance was set to a level where a firm would be able to employ four people on the National Living Wage (NLW). The FSB says that the allowance should be increased from its current £5,000 to £6,500 from April, and then should increase automatically in line with the NLW. 

Barrier to growth

The FSB is also warning that the current VAT threshold is a ‘barrier to growth’ so should be raised to £100,000 from its current level of £85,000.

It says there is significant untapped economic potential if the threshold increases. Introducing a smoothing mechanism could avoid firms bunching beneath the new threshold.

£10 billion tax-free spend

To make the UK a more attractive destination for tourists the FSB says the Chancellor should introduce tax-free shopping.

It says that, if the UK were to become the only country in Europe to offer tax-free shopping to all overseas visitors, it could create a market that could be worth an additional £10 billion annual spend on shopping, hotels, restaurants, travel and leisure.

Extending services and loans

The FSB would also like to see the Chancellor build on some success stories by extending the Business Energy Advice Service Pilot and the Recovery Loan Scheme.

It says that many small businesses are still feeling the pinch of extortionate energy costs, with many still stuck in the contracts they negotiated at the peak of the energy crisis. Now, it wants to see the successful pilot of Business Energy Advice Service in the West Midlands expanded nationally.

The extension of the Recovery Loan Scheme in 2022 was crucial in helping small firms invest and grow, says the FSB.

The business group says it should now be extended beyond its current end date, in July 2024. It is performing well and an important feature of the UK’s funding ecosystem and brings many benefits in the case of economic slowdown, it adds.

Build momentum

In its Budget submission, the Confederation of British Industry (CBI) is calling on the government continue building momentum in the economy and put the country on the path to sustainable growth.

It says the Autumn Statement delivered a much-needed boost for business confidence and warns that the General Election must not distract from economic growth.

The CBI says the delivery of permanent Full Expensing was a boost and now wants to see it extended to cover leased and rented assets.

Tackle acute labour shortages

The CBI is also asking the Chancellor to help businesses tackle labour shortages.

The group says he can do this by making Employee Assistance Programmes (EAPs) a fully tax-free benefit and making tax relief for employee medical treatment more focused on prevention.

In addition, the CBI says the government must deliver the planned expansion of eligibility to 30 hours of funded childcare to help parents increase the hours they work, including support for attracting the expanded workforce needed through a comprehensive Early Years Strategy.

Spring Budget

The Chancellor will deliver the Spring Budget, alongside a forecast from the independent Office for Budget Responsibility (OBR), on 6 March. 

Mercia’s tax experts will be watching and will provide detailed analysis of the day’s announcements. Keep your clients up to date with our range of digital and printed products.

Find out more information