No sooner had Rishi Sunak sat down in response to Rachel Reeves first budget, the BBC was on the phone to me to ask my opinion as to what I thought about it.
First of all congratulations and kudos to Rachel Reeves for being the first female chancellor.
And my thoughts?
Well, it was very much a budget by the people, for the people wasn’t it? Which is pretty much what you expect from a Labour government.
I welcome her seven pillars of financial stability including restoration of economic stability, increasing investment in infrastructure, local growth plans, Skills England to tackle economic inactivity, a modern industrial strategy, protecting R&D and the investment in clean energy.
I also welcome the fiscal rules which orientated around stability and prudence. Getting back to a budget surplus would be great for us all.
I was very surprised that there was no increase in the fuel duty but again this would hit working people very hard at a time where by the cost of living is already crucifying a lot of people. And Labour have kept their commitment to normal working people with no increases in VAT and income tax.
But they certainly did not keep their commitment to employers.
Reeves and her advisors fail to recognise that 60% of our GDP is contributed by SMEs. Now whilst she spoke with the FSB and had concessions in terms of national insurance for very small businesses, for us medium size employers we’ve got a lot of cost increases.
And here they are.
An increase in national insurance – which is effectively tax to employers for employing people – increasing from 13.8% to 15%.
An increase in the national minimum wage by 6.7% for the over 21s which will add an additional £1400 per year per employee.
And for the 18 to 20-year-olds that will be a 16.3% increase, hourly rates up to £10 an hour.
That, with the accompanying review of employment rights, will make people very cautious about new employment or new employees.
I think the changes in CGT were inevitable. I was pleased to see that the lifetime limit of £1 million to encourage entrepreneurs to build their businesses was retained. But there is a creep in terms of CGT and business asset disposal over the next four years.
Then there were the changes to inheritance tax. It doesn’t impact on me personally (at present) but my real fear here is for the British farming community (some of which are our clients) and how they pass on their farms to their families.
Although there was relief under £1 million, small holdings in the South East cost more than that and I think you’ll find people having to sell off parcels of land in order to afford it.
I think it’s great news that there’s going be duties on the pernicious vapes moving forward. And the encouragement of electrical vehicles being sustained is great.
I did have to laugh at the private jet rate of duty up by 50% to £450 per person. Sunak certainly squirmed at that. Costly flight to California shortly?
My biggest fear is that Ms Reeves spoke about a Business Rate review.
She spoke an awful lot about support for retail, leisure and hospitality and the relief they’re going to offer them. They’re talking about a higher multiplier for ‘the most valuable properties’.
I have no objections to private schools paying business rates – after all they are commercial entities. I fear the Treasury’s aim will be at the industrial estates which is where a lot of small / medium size enterprises reside.
If we are going to be facing business rate increases, on a background of exponential rental increases it’s going to make for very challenging trading conditions.
We’ve been presented with a 35% increase in our rent here in Guildford. If you add business rates increases to that will make our cost base challenging.
I think it’s beneficial to have a five year roadmap for corporation tax but would argue that reducing corporation tax will support more companies to have their headquarters in the UK.
I don’t think most normal working people have got any challenges with the abolishment of the non-tax regime. As for stamp duty increasing on second homes from 2% additional to 5% I don’t think anyone’s going to cry about that one.
So all in all if I had to sum up the budget in one sentence it would be ‘it could’ve been worse’.
But remember please Ms Reeves that small businesses are responsible for 60% of the GDP of this country.
And if you want us to create the growth that’s going to support your budget surplus in five years time then you’ve got leave us with some profit for us to invest in that growth.
Our salaries, our employee costs, making it more onerous to employee people, reviewing business rates – you ain’t making it easy.
