The Chancellor, George Osborne, will get up at the house of parliament on Tuesday 29 at 12.30pm facing and calls for dramatic interventions and tax changes to kickstart the flagging UK economy.
Join our live expert panel during the speech.
Alongside the chancellor’s statement, the Office for Budget Responsibility (OBR) will publish its latest Economic and Fiscal Outlook. The Bank of England cut its 2011 growth forecast to 1% earlier this month, when Sir Mervyn King warned the outlook for world growth has worsened, so the OBR forecasts are unlikely to be positive, adding to the pressure on Osborne to pull something out to stimulate growth.
During the past few weeks groups ranging from the ICAEW to business lobbyists and special interest groups have all been offering the Chancellor their advice on what to do. As the stakes rise there are few portents about the substantive measures he will put on the parliamentary table on Tuesday.
Unlike the comprehensive pre-Budget reports favoured by Labour’s Chancellors Gordon Brown and Alistair Darling, Osborne’s autumn statement last year was a relatively content free political speech with few concrete measures released on the day. The most significant developments for accountants emerged a week later with a raft of draft clauses for the Finance Bill (now Act) 2011. The Treasury has indicated that this pattern is likely to be repeated this year, but so intense is the expectation around the speech that he may spring a few surprises on us.
Already announced
Unlike previous Budgets and pre-Budget reports, the government has not been hoarding all its announcements for the big day. In the past few weeks, it has unveiled a number of initiatives:
- On Tuesday the Department of Work and Pensions published a Sickness absence review that recommended tax breaks for employers helping long-term sick workers return to work, reduced statutory sick pay reporting requirements and an end to the Percentage Threshold Scheme.
- During Global Entrepreneurship Week the government unveiled a number of schemes to benefit business owners and employees, such as a revamped Business Link website, the National Consortium of University Entrepreneurs scheme and the Get Mentoring network.
- As part of the government’s drive to combat rising unemployment, Vince Cable also announced today a £2,275 wage incentive for employer’s willing to hire jobless 16-24 year-olds.
Mark Prisk told BusinessZone in an exclusive Q&A session that the chancellor was “serious” about improving access to credit for small business. He later revealed that the government will spend more than £78m on small business support programmes including finance schemes such as the Enterprise Capital Funds and the Enterprise Finance Guarantee scheme. The government has also announced that a Regional Growth Fund will provide £500m more to small firms.
The business minister also promised “common sense changes” to health and safety regulations, but batted back the suggestion of a VAT holiday for start-ups in their first year. “A blanket scheme wouldn’t work for everyone,” he said.
What businesses and accountants want
A number of business lobbyists and accountancy groups have presented their statements of request to the chancellor in recent weeks. The British Chambers of Commerce released a statement in agreement with the Bank of England’s inflation prediction but urged the committee to reassess its reluctance to purchase private sector assets, and take further measures to reinforce the credit easing programme.
Earlier this week, The Federation of Small Businesses called for measures to credit easing policy addressing the issue of small firms’ access to finance. The group requested a National Insurance Contributions (NICs) holiday for small businesses employing young people and a credit easing policy .
The Federation of Private Business called for a number of changes, including:
- A greater business voice in how skills money is spent – employers are eager for either a voucher scheme for skills training or NI reductions for apprentices.
- To ensure the Regional Growth Fund delivers funds on a much quicker basis by relaxing requirements on due diligence for low value bids, while continuing to support and clarify the role of LEPs.
- Business Rates frozen in April.
- Postpone all fuel duty increases scheduled for next year.
- Further tax breaks for private lenders, as well as equity investors, which would ease credit conditions for small firms.
- Do more to increase confidence in alternative sources of finance for low turnover businesses, and introduce tax incentives for alternate lenders.
John Cridland, director-general of the Confederation of British Industry, said: “The Government must stick to its plans to bring down the deficit to maintain confidence in the UK's public finances and keep the cost of borrowing down, but now is the time to revitalise its growth strategy and create a “Plan A plus”.”
The ICAEW has called for the reduction of 20% VAT on repairs and refurbishments of dwellings to 5% for two years, as well as a rise in the rate of tax relief for the Enterprise Investment Scheme (EIS). The institute asked the Chancellor to extend the Enterprise Finance Guarantee Scheme (EFG) and to extend the moratorium on new domestic regulations for microbusinesses until 2014, and for it to encompass medium and and larger companies where possible.
Current consultations
According to a September ministerial statement from Exchequer Secretary to the Treasury David Gauke, responses to the tax policies announced in the March Budget will be published on or by 6 December 2011. There are a lot of them to grapple with, as detailed in AccountingWEB's consultation tracker page. The more arcane issues such as reform to the informal ESC C16 winding-up process, a statutory residence test, intellectual property and Controlled Foreign Companies (CFC) rules may well show up a week after the autumn statement, but Osborne may look to wow the nation with some of the more business-friendly proposals, such as: