The chancellor springs no surprises but gives businesses food for thought so close to the election
The chancellor George Osborne has raised the little red suitcase for what could be the last time in the final budget before election. While there were no real surprises, there is much for businesses to consider.
First of all, Osborne confirmed that the government will carry out a review of business rates after admitting the system “has not kept pace with the needs of a modern economy”. He also revealed something we have known about for some time — a “provisional agreement” to allow Greater Manchester to keep 100% of the additional growth in local business rates in a move to help create a northern powerhouse.
“Businesses large and small have asked for a major review of this tax and this week that’s what we have agreed to do,” he said.
Businesses will also welcome the news that consumers will be given more spending power as the tax free allowance will raise to £10,800 next year and £11,000 in April 2017. Eventually this will raise to £12,500. The cancellation of the planned fuel duty increase, along with beer duty being cut by 1p a pint add to this spending power, as does the tax relief for savers and first time buyers.
Commenting on the Chancellor’s Budget, Mark Beatson, chief economist for the CIPD, said that the government is right to cheer the rise in employment but there are still some big questions that they have failed to answer on productivity. “It’s astonishing that productivity wasn’t referenced even once in the Chancellor’s speech, and yet this is the biggest challenge that the economy and businesses face now,” he said. “We need to understand how we can make more of our people, our assets and our infrastructure in order to boost business performance.”
Beatson said that while there were announcements in the budget designed to encourage investment, there is little which will make a real difference to how UK employers develop workforce skills or use existing workforce skills effectively. “There still isn’t a clear, coherent plan for productivity and, once again, skills are falling through the cracks. Unless we address the UK’s skills challenges, any short-term gains in the economy will be dashed by productivity shortfalls in the long-term.”
Philippe Gelis, CEO and co-founder of Kantox said: “George Osborne’s pledge to invest further into UKTI resources for exports to China is a great opportunity for SMEs looking to diversify from a reliance on the struggling Eurozone. As Osborne referenced, the number of exports to non-EU countries has risen to 24% since 2010, and further investment in the UKTI is a positive step in continuing this trend.”
Levi Roots, one of the speakers at today's Elite Business Event National Conference and Exhibition, was watching the budget closely earlier. What he really wanted to see — although it wasn’t forthcoming — was more efforts to encourage young entrepreneurs. This is an area the next government must be much more proactive on.
With the Conservatives and Labour neck and neck in the polls, this budget really is the the chancellor’s last chance to woo voters. Are you convinced? Before you decide, you should bare in mind the promises made in Osborne’s first budget in 2010. The deficit today is almost three times the £37bn Osborne expected it to be, with it forecast to hit £91.3bn in 2014/15.
At the time of George Osborne’s emergency budget five years ago, the Office for Budgetary Responsibility predicted that by 2013 Britain would have grown by 7.7%. By 2013, the economy had grown by just 2.6%.
Osborne also promised a “balanced economy” and a doubling of British exports to £1trn by the end of the decade. As we have reported previously in Elite Business, exports have fallen far short of this and much still needs to be done.