The Confederation of British Industry (CBI) has responded to Chancellor Philip Hammond’s Autumn Budget statement, which was delivered in the House of Commons over 72 minutes on the afternoon of Monday 29 October. According to the Chancellor, the era of austerity is “finally coming to an end”. The 2018 growth forecast was downgraded to 1.3% from 1.5% in March due to the impact of bad Spring weather, but the forecast for 2019 is raised from 1.3% to 1.6% and annual forecasts upgraded to 1.4%, 1.4%, 1.5% and 1.6% in 2020, 2021, 2022 and 2023.
Public borrowing in 2018 is set to be £11.6 billion lower than forecast in March, representing 1.2% of GDP (ie the total value of goods produced and services provided). Borrowing as a share of GDP is to rise to 1.4% next year.
Overall, borrowing will total £31.8 billion, £26.7 billion. £23.8 billion, £20.8 billion and £19.8 billion in the next five years. Debt as a share of GDP peaked at 85.2% in 2016-2017, falling to 83.7% this year. It’s forecast to drop to 74.1% by 2023-2024. 1.2% annual average growth in departmental spending is promised.
When it comes to the business landscape, there will be a new 2% digital services tax on the UK revenues of big technology companies from April 2020. Profitable companies with global sales of more than £500 million will be liable.
PFI contracts are to be abolished in the future, with a new Centre of Excellence established to manage existing deals “in the taxpayer’s interest”. The annual investment allowance is to be increased from £200,000 to £1 million for two years.
Interestingly, the contribution of smaller companies to the Apprenticeship Levy is to be reduced from 10% to 5%. Business rates bills for those firms with a rateable value of £51,000 or less will be cut by one third over two years. There will also be £900 million in business rates relief for smaller businesses and £650 million to “rejuvenate” our High Streets.
The Government is to extend changes to the way in which self-employment status is taxed, from the public sector to medium and large private companies, from 2020.
Carolyn Fairbairn (pictured), the CBI’s director general, said: “This was a rock solid Budget, bringing more treats than tricks for business. It recognises the enormous contribution enterprise has made to balancing the UK’s books through jobs, pay and tax and responds to many of the recommendations that firms have made, but while the Chancellor has indeed reduced some of the biggest barriers to growth, he has also missed some opportunities. That said, the new investment in broadband, research, housing and infrastructure will help in tackling the UK’s glaring regional inequalities head on.”