Looking at the aftermath following the Chancellor’s budget it’s easy to miss some of the good things that will benefit businesses of all shapes and sizes amidst the uproar of the resignation of the Work and Pensions Secretary.
There was plenty in the Budget for small and medium-sized businesses. I’m sure that we all welcome more relief on business rates and cuts to capital gains tax, and a further corporation tax reduction coming in a few years.
The Chancellor’s decision to outline significant progress towards the £12,500 personal tax allowance and a £50,000 higher rate tax threshold should be welcomed and the increase in the higher rate tax threshold to £45,000 from next April is particularly long overdue.
However it’s slightly disappointing that he did not smooth out the excessive and counter-productive spikes in marginal tax of more than 60% that occurs when child benefit is withdrawn on earnings over £50,000 and the personal allowance at earnings over £100,000. This is another tax dilemma, rather like National Insurance, that isn’t easily understood by the media but hits some very hard and is a disincentive to be ambitious.
For some time now the IoD has been lobbying for a “triple lock” on these allowances rather like the one given to those in retirement.
It’s also disappointing that the Chancellor has not been bolder on tax reform and simplification. Smaller businesses will welcome the doubling of the business rates exemption, but mid-sized businesses will feel rightly aggrieved that the reliefs are withdrawn too quickly as a business moves from start-up to scale-up. Additionally we still need to see the reform or abolition of National Insurance, a non-hypothecated tax which is a tax on employment.
It was good to see support for major infrastructure projects. The ones in the North are much needed but it was encouraging to see Crossrail2, vital for the Surrey economy, getting a nod of approval.
It was also is good to see the Chancellor attempt embrace the sharing economy by announcing a world first ‘sharing economy’ allowance. However, the £1,000 allowance for such things such as renting out a parking space or a room through Airbnb is still very low. We should be encouraging the utilisation of these assets. How many parking spaces would be freed up at Surrey railway stations if commuters could park at a competitive price near the station in someone’s drive!
The academies programme for school reform and the so called Sugar Tax struck me as two of those initiatives thought up in the days before the Budget statement that were not fully analysed. In Education and skills, as all employers know, standards matter much more than structures, so the changes in governance that academisation requires, risks becoming a distraction from the core issues of improving teaching and learning. Likewise making studying maths compulsory until the age of 18 is on paper a very good thing. However what’s taught needs to be relevant and targeted to the abilities and needs of the individual.
My policy colleagues often tell me that things like this are thrown into the speech at an amazingly late hour to try to grab positive headlines the next day. We can all remember those that didn’t work or needed radical reform afterwards, the climate change levy and airport passenger duty spring to mind.
So the challenge to the Chancellor is whether, with his significant “headwinds” in the Global economy, he will able to meet the commitment of the delivery of a budget surplus by the end of the decade. I hope, that with the key votes out of the way by the autumn, we may see some more radical reforms that address some of our underlying problems in the economy.