Dogged by conflicting demands from different business groups, trade associations, and confederacies, the Chancellor will have to make some tough choices in the run-up to the Autumn Budget on October 27th.

business staff meeting

Since the Spring Budget, much has changed. There’s been an intensive rollout of Covid-19 vaccines, furlough support has ended, tourism and hospitality VAT rates have increased from 5% to 12.5%, and Chancellor Rishi Sunak has announced a temporary 1.25 percentage point increase to dividend rates and National Insurance contributions (NIC).

In short, there’s now a number of questions surrounding the Chancellor’s decisions for the upcoming Autumn Budget, particularly as he seems set on ‘balancing the books’ and reducing government borrowing to bring the deficit to more sustainable levels. Nevertheless, many currently speculate that, because of the NIC increases announced, the devil will most likely be in the details this Budget, with technical tax changes proposed over significant ones.

What might be on the table and why?

What businesses want – growth, investment, and incentives

Recent weeks have seen the Chancellor inundated by demands and pressures from a variety of groups, each with their own priorities.

The Confederacy of British Industry (CBI) has stated that this Autumn Budget is a once-in-a-generation opportunity to positively impact UK productivity and growth, in order to overcome the effects of austerity and the pandemic. This echoes a general belief amongst businesses that this Budget will define the UK’s trajectory for at least the next decade.

41 trade associations have banded together to ask the government to once again consider reforming business rates deemed ‘uncompetitive, unproductive, and unfair’ – something that has been continually promised but has yet to come to fruition. Indeed, it looks as though this review has been delayed once more, to the dismay of many struggling companies.

The heads of UK Hospitality, the British Beer and Pubs Association, the British Institute of Innkeeping, the Tourism Alliance, and the Association of Leading Visitor Attractions have signed a collective letter featuring recommendations by CIB and asking for the VAT rate to remain frozen at 12.5% post-April 2022, suggesting that the return to the pre-pandemic VAT rate for hospitality and tourism will stymie the sector’s recovery.

So, what exactly are businesses demanding, and what might this look like in the Budget?

Smart taxes over new taxes

  • Most businesses are against punitive tax hikes being introduced, suggesting that current, ongoing pressures may cause many to buckle.
  • To encourage investment – particularly foreign investment – businesses want the tax system to be ‘green’ focused.
  • Calls to introduce full expensing for capital expenditure past 2023 have been made, along with targeted ‘green’ investment capital allowance mechanics.
  • There are also demands to reform outdated business rates to reflect the country’s green ambitions and reward decarbonisation efforts.
  • To incentivise sustainable construction and investment in innovative, climate-friendly initiatives, businesses have called for a boost to the current structures and buildings allowance for businesses.

Government innovation and investment

  • Many want the Chancellor to double-down on commitments to invest £22bn in Research and Development funding by 2025, which would look akin to the aims of the current Super-Deduction scheme.
  • Large pockets of industry leaders want the government to commit to investing in business-led innovation and demand that regulators prioritise innovation, net-zero carbon output, and green investment as part of the core remits.

Skills training

  • To unlock business investment in training staff, many business leaders are calling for the Apprenticeship Levy to be converted into a Lifelong Learning Levy, with an appropriate amount of funding allocated to make this viable.
  • There are also calls to turn Job Centres into Jobs and Skills Hubs to encourage lifelong learning and address skills shortages, with each individual hub aligned more closely with local job markets and reflecting the needs of local industry.
  • Create individual training accounts for the unemployed to increase personal skills and remove recruitment barriers.

Public investment

  • A vast proportion of industries want the government to allocate energy efficiency and heat as an infrastructure priority – with related funding schemes to reflect this.
  • Similarly, many believe that ringfencing long-term funding schemes that are dedicated to decarbonising public transport and developing a viable electric vehicle market are essential to future economic growth.

With economic growth weakening and prices rising, the Bank of England and Chancellor have little room for manoeuvre in the upcoming Budget – all eyes will be watching to see who the Budget is set to benefit, and who will be left out in the cold. After all, this Budget in particular is essentially a balancing act and, at such a crucial juncture post-pandemic and post-Brexit, the Chancellor has a lot of people to please – something will have to give.

 

We will provide a comprehensive summary of the Autumn Budget in the days following October 27th. In the meantime, if you have any questions or would like further advice, please get in touch and speak to one of our knowledgeable advisors, who will be more than happy to help.