SPECIAL REPORT Autumn Statement: good, bad or ugly?
By Simon Hacker | 23rd November 2023
So what's on your lunch menu after the autumn statement: magic rabbit or red herring?
On the morning after yesterday's autumn statement, Punchline-Gloucester.com has been chewing over the nitty-gritty of yesterday's big event with key stakeholders in Gloucestershire and the UK's business community.
And as the dust settles, we've been asking leading figures here and further afield what they believe Jeremy Hunt pulled out of his hat: a just-in-time rabbit that will aid the economy and the government's chances for re-election – or a missed opportunity that smells distinctly like a red herring?
Jay Rahman, the owner of Cheltenham's Prithvi restaurant said VAT stayed in the hat.
Mr Rahman said: "VAT was a pressing issue that we were hoping would have been solved. For hospitality, cutting VAT would have brought us in line with the rest of Europe, meaning that the government had the chance to save thousands of small businesses and jobs. Supporting businesses by cutting VAT would be a massive step forward in acknowledging and actively aiding our sector's growth - it's disappointing that the autumn budget missed the mark on reducing these costs.
"We've been hoping for this relief, especially considering how tough these past years have impacted our sector with the energy crisis, soaring living costs, and the lingering impact of Covid. It's a challenge because ,whilst businesses like us pay VAT on food sales, we can't claim anything back. We anticipated more support, given the immense hurdles we've faced. It feels like a missed opportunity to stand by independent restaurants like ours during these difficult times."
As echoed elsewhere, Mr Rahman also addressed business turbulence caused by inflation: "The growing challenge of inflation, coupled with the rise in wage costs has placed us in an increasingly difficult position. It's obvious that a 2% reduction in National Insurance will not cover a 10% wage increase."
He warned: "As prices soar and wages escalate, it's becoming a struggle for us to keep pace. We find ourselves caught in a cycle where the economic landscape is shifting faster than we can adapt. Finding an extra 10% in profit to cover wage increases before other rises in utilities and rent is just not going to be possible for so many small hospitality businesses."
If Mr Rahman's outlook is bleak, Alex McIntyre, Gloucester Labour candidate who is, of course, chasing Richard Graham's job was unsurprisingly unalloyed.
In a broad response, and with an obvious eye on an election which some suspect may now be as early as the spring, Mr McIntyre said: "Working people in Gloucester are worse off and have had enough. Prices are still rising in the shops, energy bills are up and mortgage payments are higher after this Conservative government crashed the economy."
As the director of the Gloucestershire Chamber of Business West, Ian Mean offered a more positive critique.
Mr Mean said: "Business got a welcome shot in the arm from the Chancellor's Autumn statement after being ignored by government for so long - Jeremy Hunt said it was the largest tax cutting government package to help business in history and he was right, with something like 110 areas of help to companies.
"One of the biggies, as predicted ,was the continuation of the full expensing initiative so that firms can claim back tax on profits if they invested in items like IT and plant.
The statement was all about going for growth, and undoubtedly this is a measure that hits that button."
And on the key bunny or herring debate, Mr Mean definitely spotted a four-legged offering: "The rabbit out of the hat that was not predicted was the 2% cut in Employee National Insurance from 12 to 10 per cent as early as January 6th, which will save an employee earning £35,000 a year about £450."
Turning to tighter time regulation on the costly planning process, Mr Mean thought this was specifically a boon for Gloucestershire: "The move to provide £32 million to speed up applications will be welcomed by companies who are finding this increasingly difficult, with some businesses waiting up to a year or more for decisions on applications.
"As a campaigner for apprenticeships in the county, I was also pleased that the government intends putting in an extra £50 million for skills development."
Overall, he said this was a good statement for business albeit nothing was indicated about government cash for projects like Enterprise Zones in the South West.
He added: "Behind the better outlook for business is still the spectre of a depressed economy, with the big question: have we turned the corner? I am afraid the answer is sadly no."
However, Ben Rhodes, South West Director of the CBI, was perhaps a little more optimistic (and understanding) of Jeremy Hunt's position.
Mr Rhodes said: "With tough decisions to be made, the Chancellor was right to prioritise 'game-changing' interventions that will fire the economy. While the move on National Insurance will give hard-pressed households some much-needed breathing room, making full capital expensing a permanent feature of the tax system can be transformational for accelerating growth and improving living standards in the long-term.
"Helping firms to unleash pent-up investment is critical to getting momentum into the economy. Making full expensing permanent will give firms the stability they need to press on with decisions on investment, while keeping the UK at the top table internationally for investment incentives."
He also cited moves to speed up planning and grid connectivity as good reason to bolster business confidence to invest in high growth areas, such as green technologies, renewable energy and advanced manufacturing.
Zooming in on many key aspects of the statement, the Federation of Small Businesses' policy chair Tina McKenzie was welcoming of many moves - not least action on late payment.
Ms McKenzie said: "The Chancellor is right to have condemned from the despatch box the scourge of late payment practices. Driving out the worst payers from government contracts and increasing the reputational risk faced by those large corporates who use their small suppliers as a form of free credit is not only the right thing to do to lessen the absolute stress and strain so many business owners face - it is also the way to increase the amount of working capital small businesses can put to good use building up their businesses and investing in the future."
On business rate changes, she added: "Thousands of pubs, cafés and small shops in high streets across England will be pleased today with the bold, measured and targeted support from the Chancellor to help them through troubled times and build towards growth.
By acting to help small businesses with premises through freezing the small business multiplier, the government has prevented an inflation-linked hike for many of those in the supply chain and other sectors too, she said.
Meanwhile, the decision to reduce the rate of self-employed NI and abolish the Class II element was "extremely" welcome, she added, and would ease "the burden on strivers up and down the country."
The FSB perspective on NI change, enjoyed little support from the GMB Union.
Gary Smith, GMB General Secretary, said: "Today's measures go nowhere near fixing the damage this Conservative government has done to people's finances. The cut to NI will mean just over £150 a year to the lowest paid; a drop in the ocean when mortgages have doubled and energy bills are crippling household finances. Working people aren't fools and won't forgive or forget who trashed our country's economy."
Unsurprisingly perhaps, the Campaign to Protect Rural England (CPRE) warned that the measures didn't encourage investment in solving the "hidden rural housing crisis".
Roger Mortlock, CPRE CEO (and former boss of the Gloucestershire Wildlife Trust) said: "People are crying out for genuinely affordable and social rented homes, both of which are in desperately short supply in all parts of the country. The government must act now to ensure there is a supply of the homes people need. If it doesn't, the future of our countryside communities will be at stake."
And while commerce might relish pressure on planners to speed up their decisions, he sounded an alarm on the risk of bad decisions: "This will not resolve the chronic under-funding of planning departments that is to blame for the inability of Local Planning Authorities and Planning Inspectorates to meet deadlines. Speeding up the decision-making process without additional resources will inevitably lead to councils approving lower-quality applications. Councils will be financially incentivised to push schemes through, rather than consider them on their merits and adherence to relevant planning policies.
The Institute for Public Policy Research questioned whether Mr Hunt's changes might negatively impact employer-employee trust.
Melanie Wilkes, associate director at the IPPR, said: "We welcome the expansion of specialist support for disabled people to go to work where there is no risk of a sanction. But at the same time, those who the government thinks can work from home will be compelled to do so, or face a sanction if they don't. This will increase fear and distrust at a time when the DWP is trying to reach people facing the greatest barriers to work."
More broadly, she added: "The full impacts of the cost-of-living crisis are only just starting to bite for many households, through sudden mortgage or rent rises. Against that backdrop, today's social security measures will bring welcome relief to many. But with housing support due to be frozen again next year, much more will be needed to drive a meaningful reduction in poverty over the long term. For many households, uprating universal credit from next April will not compensate for the loss of £900-a-year emergency cost-of-living payments; and even before the housing allowance freeze was introduced, more than half of private renters on universal credit faced shortfalls in their housing support."
The British Chambers of Commerce meanwhile broadly welcomed the key moves.
Shevaun Haviland, Director General of the BCC, said: "We are pleased the Chancellor has listened to our calls to help businesses deal with the current economic challenges."
The decision to make full expensing permanent "will be a boost to companies wanting to invest," she added; BCC research shows 34% of businesses have already benefited from the policy, rising to 47% for manufacturers.
The BCC also welcomed measures to alleviate cash flow issues: "Smaller firms will be relieved to see a package of measures... such as continued business rates relief for hospitality, retail and leisure, and new rules to help them get paid on time."
Her verdict overall? "The Chancellor has today taken a step in the right direction, but nothing can be taken for granted and we must all continue focus on encouraging companies to grow."
All of this feedback, might - just about on balance - indicate a momentum of support from business for Mr Hunt's dispatches. To temper that though, a lasting final sentiment might be found in a statement from commercial financiers Colliers.
John Webber, head of business rates, told Punchline-Gloucester.com he felt "despair" in what amounted to a "final nail in the coffin for the high street".
Mr Webber said: "The Chancellor announced he would support smaller businesses by freezing the multiplier for another year (currently 49.9p for small businesses) [and] etending the 1-year 75% discount on business rates bills up to £110,000 per business. However, nothing was said to support the larger retail and hospitality businesses who will still see an eyewatering 6.62% rise on their business rates bills next April.
"By adding the CPI inflation figure to the existing multiplier, he has grabbed even more cash from hard pressed retailers. For these businesses, the multiplier will be 54.6p - meaning business rates is heading towards being a 60% tax!
"The Chancellor's actions will be a massive hit to the high street. Although most businesses in the retail and hospitality sectors have benefited to some extent from the 2023 Revaluation, the sectors are still under pressure facing higher occupational costs across the board as energy, employment and insurance costs soar - yesterday's rise in the national living wage only adds to the pressure."
Mr Webber continued: "In his rush to save his job, the Chancellor has ignored the calls of the BRC and UK Hospitality and seems to have forgotten that the larger retailer and hospitality companies are the main employers in their sectors. Hitting them with a 6.62% rise in their rates bills next April will have a dire impact and certainly dampen expansion and growth plans.
"For some businesses it might be the last straw. The situation is even more bizarre when we see the current inflation figure has already fallen to 4.6% and may be around 3% next April, but we would see such businesses tied to the 6.62% figure for the year."
● For expert and forensic assessment of yesterday's announcements, you can read insight from Gloucestershire's top independent accountants and business advisers, Hazlewoods.
● And don't miss Punchline TV's interview with Gloucester MP Richard Graham – with reaction live on the day from Westminster.
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