IoD responds to Chancellor's Autumn Statement
05 December 2013
Full IoD reaction to announcements on business rates, the jobs tax, retirement age changes,
housing and energy
5 December 2013
Reaction to the Autumn Statement from the IoD’s Chief Economist, Graeme Leach:
“This was a pro-business, confidence-building Autumn Statement. Supported by the OBR’s forecasts of stronger economic growth, the Chancellor was able to announce further improvement in the public finances, with a budget surplus pencilled in for 2018-19. It’s good news to see light at the end of the tunnel.
“The IoD would welcome a return to surplus much sooner, but we recognise the political realities. Of course, much could change between now and then, but the IoD strongly supports the pursuit of budget surplus. Whilst the public debt to GDP ratio can fall by debt growing slower than GDP, much quicker progress can be made with a return to annual budget surpluses.
“The Chancellor’s main purpose in crafting the Autumn Statement was to help secure economic recovery and win a General Election. The reality is that the Treasury didn’t have much money to play with today, and we can expect more fireworks in the Budget next year.”
On the global economy, Simon Walker, Director General of the Institute of Directors:
“The Government is right to recognise that while significant headwinds remain in the Eurozone, and, to a lesser extent, in America, the most exciting economic opportunities are to be found in Asia. This will be the Asian Century and it’s absolutely essential that we’re part of it.
“We welcome the additional support for exporters, but it remains the case that the most effective way to increase Britain’s international trade is to make it easier to do business at home. Whilst today’s announcements on Employers National Insurance contributions and business rates will go some way to achieving this, burdens on key export sectors should always be under review.”
On business rates, tax reform and changes to the Jobs Tax, Stephen Herring, Head of Taxation:
“We welcome the Chancellor’s acknowledgement that Employers National Insurance Contributions are properly – and better - described as a tax on jobs. Words matter, and the Chancellor is displaying admirable honesty in calling this tax what it is.
“We support the removal of Employers NICs for employees aged under 21; a genuine incentive which will help more young people enter the jobs market
“Capping the increase in business rates at 2% is a positive step. However, the Chancellor should have gone further and frozen business rates until the revaluation.
“We welcome the new incentives to move into empty high-street premises. This, combined with the scrapping of the jobs tax on new employees under 21, means that from a taxation perspective at least, there’s never been a better time to start a small business.
“Furthermore, the £1,000 discount on business rates for retail premises with a rateable value of up to £50,000 is an elegant manoeuvre but could be extended to other sectors such as services, manufacturing and distribution. We have an interdependent economy, so picking out one part of the supply chain is counterintuitive.
“It’s right that only residential property owned by non-residents will be subject to a capital gains tax charge, as extending it to commercial properties would, inter alia, threaten foreign direct investment in the UK’s infrastructure.
“It’s also right that charities established for the purpose of tax avoidance will be excluded from receiving tax reliefs. “
“On apprenticeship funding, we are encouraged that the Government will introduce it directly to employers, rather than further complicating the already excessively complex tax system. It will, of course, be vital to ensure that the new funding system is administratively streamlined so that employer engagement is not restricted. The new funding system should prioritise both Advanced Level Apprenticeships and provide greater opportunities for the under-19s.”
“We regret that the Chancellor has not used this opportunity to reform the nonsensical Stamp Duty Land Tax (SDLT) ‘cliff edge’ system which means that SDLT jumps from £2,500 to £7,500 when the proceeds of sale increase by £1 above £250,000.
“It is also disappointing that he didn’t announce that, as funds permit, he intends to reverse the reductions of the basic rate tax band so that individuals earning much less than twice median earnings would no longer pay income tax at a rate of 40% (or 42% including the Jobs Tax).
“We would like to have seen the Chancellor publically acknowledging the right of businesses to undertake authentic tax planning, as opposed to tax evasion and tax abuse which HMRC are, quite rightly, more determined to prevent.
“The Treasury also missed an opportunity to reduce the excessive rate of capital gains tax which discourages gains being realised and, accordingly, limits the total CGT collected. This could have gone hand-in-hand with an accelerated broad-based tax simplification by, for example, implementing more of the proposals of the Office of Tax Simplification.”
On raising the retirement age, Malcolm Small, Senior Advisor on Pensions Policy at the IoD:
“It’s time to get real. The country needs to get used to the terms of this debate, as it isn’t going away. The demographic reality compels us to take this issue seriously.
“In 1948 the state pension age was set at 65 when average male life expectancy was 66. Three out of four men did not make 65. Today, five out of six men will live to 65, and will live an average of 21 years in retirement with many living far longer than that.
“The IoD has long called for a rise in state retirement age to 70. Today’s announcement is a start but, unfortunately, future Chancellors will have to go further.”
On housing and the property market, Graeme Leach:
“The Chancellor is right to say that Britain has a chronic housing shortage, but as we can see from rising prices the problem is not demand but supply. 90% of the UK population lives on 9% of the land, and we live in the smallest, most congested, and most expensive housing in Western Europe.
“Government needs to resist the siren calls of both NIMBY campaigners and public bodies by addressing the UK’s housing crunch through radical planning liberalisation, not short-term tinkering.”
On energy, Graeme Leach:
“The Chancellor renewed his support for shale, but unfortunately is not expecting us to get much gas out of the ground for a few years. The Government has acknowledged that shale is safe and could provide secure energy for Britain's households and industry. There is no time to waste.
“The reforms to energy subsidies, prioritising riskier offshore wind, are a positive step forward in the development of the renewable energy industry. We welcome this signal from government that onshore wind and solar are growing into mature industries that are no longer reliant on subsidies. To be sustainable in the long-term all technologies must be able to stand on their own two feet, and this includes renewables.”