Philip Hammond’s Spring Budget, which had been trailed as a non-event, accomplished precisely the opposite of what the Chancellor intended. The slim volume, intended as little more than a tidying-up exercise as the government moves its main ‘fiscal event’ to the autumn, has effectively unravelled in less than a fortnight.
Much has been made of the fact that the Budget broke one of the cardinal rules of politics, by undermining a key manifesto commitment. When that dubious commitment not to raise income tax, VAT or NICs during the course of the parliament was made by George Osborne and David Cameron in 2015, I remember commenting with concern.
Our thinking at the time was that a five-year freeze on personal taxes was foolish for any Chancellor, meaning that any squeeze to follow would put pressure on business taxes and costs as a result. The battle we continue to wage against the up-front taxes and costs plaguing Chamber business communities predates the Conservative manifesto’s tax lock, but has been exacerbated by it.
With HM Government still well short of a fiscal surplus, businesses of all shapes and sizes face two competitiveness-sapping trends that we will need to fight if we are to have the sort of post-Brexit business environment that gives Chamber member companies confidence to invest and grow.
The first is, simply, tax hikes. As we saw with the short-lived NICs rise for the self-employed and the equally unfortunate reduction in the tax-free allowance for dividends, the Treasury is turning a blind eye to both sole traders and entrepreneurs. While providing some very short-term support on business rates, it has a tin ear on some of the bigger problems caused by ridiculously high taxes on premises – which have stopped many places from achieving their potential. We face more of these sorts of issues in future as the Treasury’s need to bring in tax receipts comes up against our need for a competitive business environment where costs are not loaded onto firms up-front.
The second is the trend whereby the state is shifting costs from itself to businesses. Digital quarterly tax reporting, checking the immigration status of employees or tenants, the closure of staffed support functions in favour of DIY websites – the list goes on. While businesses agree that the state needs to live within its means which must not be on the back of wealth-generating firms – whose productivity can be stunted by endless form-filling and compliance.
All of this is a rather long-winded way to say that the Chancellor’s Autumn Budget – which is closer than we think – must do better. As we have said recently, confidence-boosting investments in infrastructure and digital connectivity, front-line support for international trade, and more radical action on business rates is needed. The Chamber team looks forward to working with Chamber members all across Norfolk to campaign for improvements to our business environment in the weeks and months ahead.
