Chamber members from across the region have been reacting to today's Autumn Statement and Spending Review from Chancellor George Osborne. Here's a round-up of members' views...
Ian Borley, Senior Partner for Chamber patron KPMG in the Midlands, said: "While the Chancellor’s Autumn Statement didn’t give any further devolution measures to the East Midlands, the praise given to the Midlands region as a whole could be a forerunner to more reform in our region.
“Mr Osborne’s claim that the Midlands is creating jobs three times faster than the London and the South East is a welcome boost to the reputation of the region’s business community. The sentiment will be boosted by the prospect of greater local control over business rates and sales of housing stock, but also the commitment to support the Midlands’ long term transport strategy, with electrification of the Midlands Mainline highlighted in the Chancellor’s speech.
“What we must continue to do as a business community is to shout about our success, work together and seek increased inward investment – by doing these things we put ourselves in a good position to see reforms come our way.”
Ian's colleague, Marc Abrams, a Partner in KPMG’s East Midlands’ tax practice, added: “There are a couple of key themes arising from today’s Autumn Statement and Spending Review, but overall the tax agenda is very much a populist one. The Chancellor is raising nearly £21bn of extra tax over the Spending Review period – largely from large business with the apprenticeship levy and increasing stamp duty on additional residential properties - while relaxing the welfare squeeze by just over £5bn.
“Focusing on the main tax themes, the first bucket of tax changes is that of devolution and the spreading of government powers across the UK, while the second looks at encouraging enterprise and helping the aspirational."
David Ralph, Chief Executive of the D2N2 Local Enterprise Partnership, said: “There were a lot of positives in the Chancellor’s Spending Review. We had the commitment to LGF funding; the extension of capital allowances at Infinity Park at Derby, part of the Nottingham and Derby Enterprise Zone we are investing in, to ease businesses’ tax burden; and the £1.25m HS2 growth strategy funding for Toton.
“However, we had hoped to hear more about the ‘Midlands Engine’ and of the practical measures the Government will bring in to support it. Similarly, there was a lot on Devolution for other UK areas but no big announcement on our area’s deal; which we are continuing to negotiate for and hope to shortly conclude.”
Simon Browning, tax partner at UHY Hacker Young, in Nottingham, said: “Unlike the Budget outlined by George Osborne in the summer, this afternoon’s Autumn Statement seemed to be more about making bold political statements than announcing anything of real substance. For example, no real-term cuts to police budgets in England and the dramatic U-turn on tax credits appeared to send a political message rather than delivering significant change.
“As predicted, the Chancellor placed a focus on business and the ambition to move towards full employment, delivering ‘what business needs’ in this country, building on measures announced in the Budget. The extension of the doubling in small business rate relief until 2017, for instance, illustrates this commitment.
“Devolution of power was a hot topic, and will no doubt raise the question of when Nottingham will make the shift particularly as key infrastructure projects such as HS2 draw nearer. Perhaps a negative for the Midlands, despite encouraging statistics about job creation, is the potential impact of the 3% supplement on stamp duty land tax for buy-to-let properties and second homes which, twinned with the changes to tax breaks for landlords announced in the summer, could see the property investment market become less attractive.
“The Chancellor remains committed to anti-avoidance measures to reduce tax evasion, but measures to be introduced for the payment of capital gains tax within 30 days of the sale of residential property certainly seem ambitious.”
The Government has today confirmed a £60 million capital investment in the Energy Research Accelerator (ERA). Together with private sector and university support the decision unlocks £180 million total investment in the Midlands region.
Today’s announcement has been welcomed by ERA’s leadership partnership, the six leading UK universities forming the Midlands Innovation group – Aston University, The University of Birmingham, The University of Leicester, Loughborough University, The University of Nottingham, The University of Warwick - and the British Geological Survey.
The funding will create new world-class facilities in the Midlands to meet the challenges of developing affordable low-carbon energy and technologies for greater energy efficiency.
Gordon Waddington, CEO, of the Energy Research Accelerator (ERA), which is made up of six leading UK universities, including the University of Leicester, Loughborough University and the University of Nottingham, said: “Today’s announcement allows us to take the next step to accelerate the transformation of the UK energy sector and invest across the whole of the Midlands. ERA is putting the UK on the global map of energy innovation. The amount of private sector funding is a testament to the fact that this is a critical opportunity for growth and productivity in the UK.”
And Alan Coole, Head of the East Midlands Property Alliance, said: "I’m delighted to see that affordable housing is a priority for the Government and 400,000 new homes will be built across England, including 200,000 starter homes and 135,000 shared ownership homes by the end of the decade – the biggest house building programme since the 1970s.
“Local authorities across the East Midlands will have their own housing targets to meet with limited funds as public expenditure is stretched and the Government wishes to ‘create more homes more quickly’.
“The housing plans announced today by Chancellor George Osbourne should help bring positive steps to help alleviate the housing crisis, but does put significant pressure on local authorities to deliver. training academy is already helping to strengthen the construction workforce and will contribute to the 1 million extra jobs to be created over next five years.
“As part of the ‘devolution revolution’ Mr Osbourne has also encouraged local authorities to sell some of the quarter of a trillion pounds worth of assets nationwide to generate income.
“This news might be welcomed by many local authorities, but before they react quickly to this news they may want to consider if those unused assets could actually become an income tool for councils.
“Our expert construction partners on the empa framework have already helped local authorities bring historic buildings back to life to create a new tourism offering and long-term income streams for local authorities.”
Matt Hammond, regional chairman of PwC in the Midlands said: "As hoped, the Chancellor addressed the tax credit cuts, a welcome relief from the cloud of uncertainty faced by many.
“Otherwise, the Autumn Statement provided plenty of positive news for the Midlands. Transport and infrastructure spending, devolution support with specific incentives for enterprise zones and house building were among a package of stimuli helping the Midlands remain vibrant region, helping to drive the success of the UK economy.
"We know there is more pain yet to come, but today’s slightly more graduated approach to will provide a little comfort in some areas. The return to a surplus budget by 2019-20 term is in the interests of all.”
Steve Blackmore, Pensions Director at PwC in the Midlands, said: “Today’s commitment to the triple lock combined with a generation that have retired with generous defined benefit pensions, means that today's pensioners are better off than they have ever been, with increases in pensioner incomes outpacing those in work.
“PwC analysis shows that pensioners are better off after receiving basic state pension rises higher than inflation rises since 2001. Pensioners will be nearly £1,000 better off a year, than if the basic state pension had tracked CPI.
“While we must ensure that today's pensioners continue to have an adequate income, keeping an eye on future generations ability to retire is also critical. Today's confirmation that state pension age will be linked to life expectancy means that many in work will have to work longer and save harder than their parents to enjoy the same standard of living in retirement.
"We would encourage the Government to think carefully about the impact of pension reforms on helping working people save towards their retirement.”
Phil Harrold, Automotive Lead for PwC in the Midlands, commetned on the Government's commitment to enhanced funding. He said: "It was encouraging to see the Government's commitment to enhanced funding for the UK's Catapult Centres.
"These engineering research centres, such as the enhanced manufacturing unit at Warwick University, are crucial to support R&D and technical activity in manufacturing - keeping the UK at the forefront of innovation. With a concentration of manufacturing, particularly in the automotive sector in the Midlands, this additional funding is good news for the region's businesses."
James Bailey, Partner at Bruton Knowles' Nottingham office, said: “Today, the Chancellor used the Autumn Spending review to reiterate his plans for a ‘devolution revolution’, whereby business rates will be decentralised and local councils in England will have more control on how they are administered, without the interference of central government.
“As part of this new deal, the Government has agreed to allow local councils keep the rates they collect from business, as well as giving councils the power to cut business rates to boost growth. Cities with an elected mayor will have the power to levy a business rates premium for local infrastructure projects.
“Furthermore, the Uniform Business Rate (UBR) will be abolished, giving local areas the ability to cut business rates as much as they like in order to create jobs and generate wealth. However, with local authorities able to reduce rates and multiples from 2020, more clarity is required on what happens between April 2017 and 2020.
“In terms of supporting small businesses, many will be breathing a sigh of relief following the announcement that the Small Business Rate Relief will be extended for a further year from 1 April 2016. However, it would have been good to see more support for high street retailers, who are now facing the prospect of a 17.2 per cent rise in business rates next April after the retail relief scheme ends in March.
“This is a major blow for small retailers who are the lifeblood of Britain’s high streets."
George Osborne dealt an unexpected and heavy blow to buy-to-let investors in yesterday’s Autumn Statement, according to Innes England director Steve Holland.
He said: “It was already known that from 2017 the mortgage interest tax relief previously available to a buy-to-let investor was being reduced to the basic rate, under the banner of “levelling the playing field”, pointing out that owner-occupiers competing in the same market enjoyed no such benefit.
“The massive impact of this change is still not widely appreciated - those highly geared will be dramatically affected. There is also a dilution in the allowance available against wear and tear and an ever-increasing regulatory burden on private landlords including not only health and safety issues but extending to deposit controls and even immigration checks.
“From 1 April next year,Stamp Duty Land Tax on buy-to-let residential purchases will be subject to a three per cent increase. So, if a dwelling was purchased for £150,000 today the stamp duty payable would be just £500 – under the new rules that will rise to a staggering £3,800, an increase of 660%. On a £250,000 property, the stamp duty would rise to some £8,800.
“In the short term, the impact is perhaps more likely to be downward pressure on the capital value of dwellings suitable for the rental market, rather than dramatic increases in rents, and quite probably the exit from that market of many landlords. That will reduce the viability of many new schemes which might otherwise have come forward.
“It is a surprise that the sector is being hit so hard. Many buy-to-let investors are private individuals with only one or two properties, taking their own initiative and providing for, usually, long term income and, effectively, their pensions. And yet it is already recognised that, in the majority of cases, pensions are generally under provided to the extent companies have been forced to implement contributory schemes.
“Also, the private rented sector (excluding registered providers) makes up around 20% of the rental market in the UK, with successive governments continuing to badly miss new housing provision targets and, in some areas, a chronic shortage acknowledged.
“These new changes seem to fight against other recent policies and initiatives aimed squarely at encouraging pension provision and increasing housing supply.
“Equally, investment in property remains, sensibly, a long term vehicle. The underlying attraction of historically demonstrated substantial capital appreciation, the continuingly volatile stock market and exceptionally low interest rates will no doubt remain an attraction for some.”
In a full response to the Autumn Statement and Spending Review, John Longworth, BCC Director General, said:
On the apprenticeship levy:
“Although we finally have clarity over the threshold of the apprenticeship levy, it will hurt larger businesses who will have to pay what is effectively a payroll tax. It is important that the delivery of the levy doesn’t undermine other types of vocational training, which could be better suited to some businesses. The priority must be delivering high quality apprenticeships, viewed positively by employers. Otherwise this is simply another cash cow from business that will not have the desired effect.”
On housing:
“A lack of affordable housing supply is a big issue for business, impacting on their ability to recruit and retain talent. It’s therefore reassuring that the Chancellor is prioritising housebuilding on a national scale, even if we’ve heard much of this before. It is imperative that the government sets out further details on how these schemes will be implemented.”
On investment in infrastructure:
“Our transport and digital infrastructure has been in dire need of repair for quite some time. Fixing our broken roads and railways and ensuring a world-class digital broadband network is a no brainer if the government wants to support growth and boost productivity. The 50% increase in capital expenditure for transport is good news, but we sorely need the government to crack on and get building.
“There isn’t enough detail to show how the UK will develop a sustainable energy supply for the future.
“The creation of a Northern Powerhouse Investment Fund will help to unlock growth and development in the north of the country. But this must be coupled with support for businesses and a boost in infrastructure spending so that our transport system can be brought into this century.”
New tax administration target to reduce the costs to business:
“The cost of complying with the UK’s complex tax system has become a major burden over recent years and so businesses across the UK will view positively the new target for cutting the cost of tax administration. The new target will rightly increase the scrutiny on HMRC, but by reducing the number and frequency of changes to the tax system the government can also play a major role in reducing tax administration.”
On research and development:
“Increasing investment in science and technology is a boon to our dynamic businesses, especially in our thriving tech sector, so that they have room to grow. However, it is important that the move to replace grants with loans from Innovate UK does not reduce our dynamism in the global economy. Businesses must continue to feel empowered to evolve and expand, otherwise we risk being also-rans in the global race.
“We are pleased with the investment in health and energy research, as well as the protection of the science and research budget. This just one of the drivers necessary to maintain UK productivity – but it is equally vital that the UK does not lose its competitive advantage, and supports innovation by retaining our intellectual property.”
On supporting exporters:
“We await more details on the government’s future plans for investing in export support. Businesses need in-market support to enable them to break into new markets. Chambers of Commerce both in the UK and overseas are increasingly well placed to provide the help needed for those companies, especially SMEs who wish to trade the world with confidence.”
On business rates:
“Extending the small business rate relief scheme will support businesses across the country while the broader shape of a reformed business rates system is determined. We will continue to work with the government to ensure that business concerns over our broken rates system are met. The Chancellor recognises that support of the business community is crucial in implementing a supplementary levy for infrastructure – this should be expressed through a ratepayers vote.”
On Further Education:
“We are encouraged that the Chancellor has listened to the BCC call to protect adult skills funding for FE Colleges. A strong further education sector, which meets business needs, is crucial to boost productivity and make sure firms get access to the skilled staff they need.”