Chancellor George Osborne heeded business’s call for a ‘steady-as-she-goes’ Autumn Statement last week rather than a grab bag of electoral giveaways, according to Business West, the organisation that runs Bath Chamber of Commerce.
But managing director Phil Smith said he should have been bolder over business rate reform and added: “While Britain’s economy is improving, and our businesses report strong confidence, the UK is still some way from achieving the truly great economy we need.”
He said business would be pleased that the Chancellor has finally acted on business rates bills after years of relentless increases that sucked the life out of businesses in this part of the UK.
“The measures announced to curb business rate increases are positive, but not strong enough to boost companies’ cashflow and investment,” he said.
“The Chancellor should have been bolder, freezing business rates entirely until this pernicious tax can be properly reformed.
“To put this into context businesses in 184,000 premises in the South West will all see benefits from the Government’s actions, and 70,000 premises in the South West will see their business rates bill frozen or falling.”
The upgraded growth forecasts, lower borrowing forecasts, and increased business confidence were all indications that the UK economy was moving in the right direction, he said.
However, restoring stability to the public finances remained crucial to businesses.
“The Chancellor must continue to restrain current spending and prioritise resources on investment in infrastructure and on creating the most competitive environment for wealth creation and enterprise,” said Mr Smith.
“We welcome the measures to address the skills gap and youth unemployment. Businesses and young people in the South West will benefit from Government action to cut employer National Insurance Contributions for all under 21s on earnings up to £42,000.”
This meant employer NIC bills for 139,000 under 21s in the South West would be wiped out from April 2015. Some 37,000 employers in the South West would benefit, resulting in £45m worth of savings for South West employers in the first year alone.
“However, we are concerned that some companies might find it difficult to keep these young people on after their 21st birthdays, when employer National Insurance contributions would kick in,” said Mr Smith.
“We would urge the Government to consider some sort of taper, so that we avoid seeing people who are hired at 18 or 19 let go when they reach 21. A taper would also mean that over-21s are not disadvantaged in the job market.”
West accountants Bishop Fleming, which has an office in Bath, said the Chancellor’s measures on business rates had “applied a sticking plaster” to the controversial topic.
It said rates were now constraining and crippling many SMEs because they were based on outdated property values and, uniquely, rise with inflation.
The Chancellor capped the inflationary increase in business rates to 2%, extended small businesses relief, introduced a 50% discount for new occupiers of empty shops, and offered a £1,000 discount to small retailers.
These were all welcome gestures, but Mr Osborne had failed to tackle the fundamental iniquities of this tax, said Bishop Fleming.
The firm is continuing to campaign for a ‘root and branch’ reform of business rates and has launched a Downing Street petition at: http://epetitions.direct.gov.uk/petitions/57038
Meanwhile, the firm welcomed Mr Osborne’s decision to freeze the fuel escalator and above inflation rail fares as well as the plan to scrap the ‘job tax’ (employers’ NI contributions) for employees aged up to 21.
“It’s a pity, though, that this NI measure cannot take effect before 2015,” said managing partner Matthew Lee.
“Indeed, it is significant that many of today’s ‘good news’ announcements will not take effect until 2015 – the election year,” he said.
Accountants KPMG’s tax partner in the region, Julian Cockwell, said many businesses would welcome the statement but believed the Chancellor could have done more.
“Businesses were the winners with enough positive measures announced to ensure that, if not quite an early Christmas present, the speech was certainly not a turkey.
“There was little tinkering around the edges and some welcome targeted measures to provide relief. In particular the Chancellor has obviously listened to the SME community and delivered on key areas such as skills, business rates and access to finance to help them grow, such as the capping of business rates with specific reliefs for small retailers and an extension of film tax reliefs, plus some allowances for the oil and gas sector.
“The surprise measure though is the removal of employer’s NICs completely for 16-20 year olds. Most SMEs now pay more in National Insurance Contributions (NICs) than they do in corporation tax so this announcement will be most welcomed by the SME sector as it will reduce the costs to business and hopefully in turn support job creation.
“The business community will also be happy with the commitment from the Chancellor to investment in major infrastructure projects and up-skilling our young people, which will in the long turn create an environment for this region’s businesses to compete effectively on the world stage.”
“However, it’s a shame that the Chancellor again passed up the opportunity to introduce tax relief on capital investment which is a measure that many businesses have called for and is arguably the remaining missing piece in the jigsaw to completely transform our corporation tax regime.”
