The chancellor also announces that local governments will have the power to reduce business rates, as well as the creation of 26 new and extended Enterprise Zones
After all of the usual bluster and speculation, the chancellor George Osborne finally delivered his Autumn Statement this afternoon, outlining where the government will be spending and saving taxpayers' money over the next four years. And, much like the national living wage in June's summer budget, there were two announcements that stood out above the rest. Following a damaging defeat on the issue in the House of Lords earlier this month, Osborne revealed that tax credits won't be cut – yet will still be phased out as the government introduces universal credit – and that police budgets will also be maintained, despite reports to the contrary.
U-turns aside, Osborne triumphantly announced that no economy in the G7 has grown faster than the UK since 2010. This growth, he said, has been fuelled by business investment, exports and the north of England, which is now growing faster than the south. He revealed that the economy is predicted to grow by 2.4% this year, 2.4% in 2016, 2.5% in 2017, 2.4% in 2018 and 2.3% in 2019 and 2020. Meanwhile, debt is expected to fall to 71.3% of national income in 2020-21, with the deficit expected to move into a surplus of 0.6% and borrowing predicted to reach a surplus of £14.7bn.
As far as Britain's SMEs are concerned, there was some positive news as the chancellor announced the abolition of the uniform business rate. By the end of this parliament, said Osborne, local governments will be able to keep all of the revenue raised through business rates and will be given the power to cut rates. The small business rate relief scheme will also be extended for another year. Elsewhere, the government is set to create 26 new and extended Enterprise Zones and increase the national science budget to £4.7bn. "In the modern world one of the best ways you can back business is by backing science," Osborne proclaimed.
There was also some much-needed clarity on the apprenticeship levy, a measure that was announced back in June and has divided opinion among employers. Osborne revealed that the levy – which the government hopes will create three million apprentices by 2020 – is to be set at 0.5% of an employer's pay bill. Every employer will receive a £15,000 allowance to offset against the levy, meaning all businesses with wage bills of less than £3m will not have to pay the levy. Finally, he confirmed that every individual and small business will have their own digital tax account by the end of the decade.
But, as always, the devil will be in the detail. Here's what the British business community made of today's spending review.
Matt Clifford, co-founder, Entrepreneur First:
"While the Autumn Statement was largely positive for businesses, the highlight was the £75m to be invested in the Cavendish Lab. We are an innovative and entrepreneurial nation so protecting and incentivise businesses that rely on industry leading R&D is a step in the right direction. But more needs to be done. We have technology and science areas of excellence throughout the UK – Southampton, Manchester and Nottingham to name a few. They all need to be recognised to help cultivate the talent that exists there and develop defensible technology businesses that can safeguard the future of UK plc."
Louise Boland, managing director, Opus Energy:
“We welcome the chancellor’s decision to increase the number of Enterprise Zones to 26. This signals a clear intent to continue boosting British business and our economy. Enterprise Zones have created 19,000 jobs, helped 540 businesses and attracted over £2.2bn of private sector investment; the continuation of this scheme will no doubt benefit our SME community and upskill our workforce by encouraging a diverse range of multi-sector businesses."
Ed Molyneux, CEO, FreeAgent:
"I’m glad to see the government has committed £1.3bn to the digitisation of HMRC. The result should be a more efficient, streamlined HMRC that is also better able to focus its resources on chasing down genuine tax avoidance. In a world where everything – from shopping to banking – is done online or via smartphone, this is an area which has been long overdue for reinvention."
Mark Sismey-Durrant, CEO, Hampshire Trust Bank:
“The new power handed to councils enabling them to set local business rates should boost regional economic prosperity, as councils will now have responsibility for creating thriving local environments for growth. However, with greater power comes greater responsibility. The UK’s smallest businesses need less red tape in order to grow and prosper and therefore we hope to see local councils look to support smaller businesses when making future decisions on business rates.”