On Wednesday 16 March 2016, Chancellor George Osborne will deliver his fourth budget summary in the last 12 months – but what can businesses expect to see in his latest fiscal review? And furthermore, what are the UK’s biggest business groups hoping for?
In advance of tomorrow’s budget, the Chancellor has signalled tough times ahead stating that Britain must ‘act now to make sure we don’t pay later’.
In his November 2015 Spending Review and Autumn Statement, the Chancellor announced that Whitehall spending would be reduced by 19% in order to cut the deficit and secure a £10.1bn surplus by 2019/20. However, the Chancellor has recently said that spending must now be cut by another £4bn within this parliament to achieve this surplus.
Although we won’t know anything for sure until Wednesday, some of the UK’s biggest business groups and think tanks have released their budget recommendations.
Leading industry representatives are looking to the Chancellor to spare UK companies any more financial burdens and instead aid them to grow their businesses.
According to recent analysis from the Confederation of British Industry, a combination of inaction on business rates accompanied by recent Government policy changes, including the National Living Wage and the Apprenticeship Levy, will cost businesses around £9bn every year to 2020/21. The CBI has called on the Chancellor to strive for increased investment in businesses to harness and fuel innovation.
Rain Newton-Smith, CBI Director of Economics, said: “Businesses will want to see concrete action to reform the UK’s business rates system, support investment through the capital allowance system and equip our world-class innovators with the tools they need to compete globally.”
A key recommendation of the CBI is to reform the current business rates system, switching the uprating of the tax rate (‘multiplier’) from RPI to CPI and furthermore removing the smallest businesses from the tax entirely. The CBI has also recommended an increase in the scope of capital allowances and the UK remaining competitive on interest deductions for Corporation Tax. Furthermore, the CBI wants to see an increase in the level of access to research and development (R&D) incentives, allowing companies to innovate better.
The British Chambers of Commerce has also recommended that businesses be spared any hardships in the form of costs, taxes or obligations. The BCC has made three primary recommendations for Budget 2016 which directly involve businesses.
Due to the burden placed on businesses from pensions auto-enrolment, the National Living Wage, the Apprenticeship Levy, higher dividend taxes and other measures, the BCC has recommended that businesses should not have to endure any new taxes for the remainder of this parliament.
The BCC is also pushing for business rates reform, urging the Chancellor to prioritise resetting the valuation, collection and setting of the rates. The BCC has furthermore recommended greater support from HMRC for SMEs and is pushing to make compliance easier for businesses.
The call for business rates reform is being made by companies all over the UK, including those in manufacturing. The manufacturing industry is pushing for plant and machinery to be withdrawn from rateable calculations. The EEF – The Manufacturers’ Organisation says that to do so would provide a boost for sectors such as steel, releasing figures which claim that 42% of companies surveyed said they would be likely to invest if plant and machinery were removed from the calculation of business rates.
Companies with a turnover below £5m and those with a turnover over £50m would be the ones most likely to increase investment, the figures suggest.
EEF Chief Economist Lee Hopley said: “Our evidence shows that removing plant and machinery from the calculation of business rates could help tip the balance for some companies, notably small manufacturers looking to scale up, and large manufacturers facing international competition.”