Overall the statement was a mainly political and fiscally neutral one, with little in the way of major changes that were not already leaked, briefed or expected. Much of it was, understandably, devoted to outlining the recent improvements made on growth, employment and the national debt. It was also a ‘don’t rock the boat’ statement with a healthy dose of ‘we’re not out of the woods yet’ and sensible calls for further long term fiscal responsibility, given the remaining scale of the deficit.
Plenty of political capital was made of the fact that the recession in 2008/09, inherited by the Chancellor, was deeper than previously thought but that the country did not actually suffer a ‘double-dip’ on his watch. Whilst the targets that he set himself in 2010 have by and large not been achieved, being able to paint the UK as now growing faster than any other major, developed economy and confirming the previously reported upturned OBR growth forecasts of 1.4% this year and 2.4% next year, for the UK economy, were easy wins.
There was plenty of forecasting of growth and employment rates, annual borrowing figures and reductions in the deficit, out as far as 2018/19, but how accurate these will prove to be is anyone’s guess. Continued fiscal prudence was emphasised with “fix the roof while the sun is shining” rhetoric and more practically, the formal announcement of the welfare cap and further departmental budget cuts over the next 3 years, as well as a ‘charter for budget responsibility’ setting out targets for continually reducing debt as a percentage of GDP.
Other than broad economic picture, the Chancellor attempted to tackle what he highlighted as remaining risks (or unhappy voters?) in the economy – namely youth unemployment, small businesses, exports to emerging markets and the cost of living, with measures ostensibly aimed at small businesses, the young unemployed and the eponymous ‘hard working family’.
Small Businesses Round Up
- No risk of a change of tack on the reduction of corporation tax rates
- A package of help for small businesses on business rates comprising: 2% cap on increases, a year’s extension to small business rates relief (to Apr 2015), a £1,000 discount for all retail premises with a rateable value of up to £50,000 for 2 years and a 50% discount for business newly occupying vacant high street property
- Removing NI for employees under 21 years of age
- Further tax relief for film production
- Cancellation of the planned fuel duty increase next year
- Funding for 20,000 apprenticeships and loan help for another 50,000 start-up businesses
- Further package of funding to help exporters to emerging markets
- Focusing the Funding for Lending scheme away from housing and toward small business
- Blueprint for helping small businesses to be published
- Help for start-ups in accessing R&D relief
- Enterprise Allowance extended until March 2016
Tax Avoidance and Self-Employed Workers
Perhaps the single item of most specific relevance to contract and freelance workers could be the brief reference, in the tax avoidance section of the speech, to clamping down on employment intermediaries and disguised employment. Commentary within the industry has suggested though that this is to likely to refer to employment agencies engaging workers with self-employed status, as well certain partnership (non-limited company) arrangements and a continuing focus on office-holders using personal service companies to pay themselves. It is thought that genuine self-employed contract workers, using limited companies or PAYE umbrella arrangements were not the main focus and that no changes to IR35 are intended, with changes to Agency Workers legislation more likely.
However, there was little detail behind the reference and with a House of Lords committee currently looking at the role and impact of personal service companies on tax collection and further HMRC resource allocated to IR35, we’re certainly not being complacent, though we remain confident that genuine self-employed workers should not be at risk.
General and Wider Economy
- More capital infrastructure projects and tax incentives – including transport, shale gas and nuclear power
- £1bn of loans to promote new house building
- An increase in the bank levy
- A rise in the state retirement age to 68 in the 2030s and 69 in the 2040s
- “Oligarch tax” on sales of UK residential property by foreign nationals/non-UK residents
- Cap on rail fare increases at inflation
- Removal of green energy levies
- Compulsory maths and English training and apprenticeships for all young job seekers
- Free school meals for all reception, Y1 and Y2 children
- Measures to enhance engineering, science and technology training and education
- Transferable tax allowance for married couples
- Further emphasis on tax avoidance clamp down