Autumn Budget 2021: What does it mean for business?
Greater Birmingham Chambers of Commerce
What is the Autumn Budget?
The Budget is a statement presented to the House of Commons by the Chancellor of the Exchequer which includes a review of the nation’s finances and the present economic climate, as well as the Government’s proposals for changes to taxation. The tax measures introduced in the Budget are subject to debate over the following four days in a process called ‘Budget Resolutions’.
In his statement, the Chancellor announced that the Office for Budget Responsibility expects the country to recover more quickly from the pandemic than originally forecast with the economy set to return to pre-Covid levels by the new year. The successful vaccination programme and the Government’s economic plan have led to faster than anticipated growth, with forecasts showing a significant upgrade this year to 6.5%, followed by 6% growth in 2022.
What is the Comprehensive Spending Review (CSR)?
The CSR, alongside the Budget, sets out the total amount of money the Government plans to spend on departments and public services – such as the NHS, education and local government – over a multi-year period. The Chancellor outlined how public spending will deliver the Government’s election manifesto commitments up to 2024-25 in the first multi-year spending review since 2015, after asking Departments to identify at least 5% of savings from their day-to-day budgets. There is no formal vote in Parliament on these plans, though they must still be approved each year to give the Government the legal right to spend money.
The CSR confirmed an increase of £150bn in departmental spending by 2024-25. What follows is a breakdown of the announcements made today across policy areas such as business taxes, employment & skills, the environment, innovation, transport & infrastructure and housing.
Business Taxes
The Chancellor announced a number of changes to the Business Rates system. More frequent revaluations would take place every three years with additional reliefs announced on investment in green technology (see below for more details). In addition, businesses operating in the retail, hospitality and leisure sectors would benefit from an additional year of business rates relief. These organisations would be able to claim a 50% discount on their bills up to £110,000. The Chancellor also announced another freeze in fuel duty and a new “draught relief” a lower rate of duty on draught beer and cider that would cut the price of a pint by 3p. In addition, a planned increase in alcohol duty was cancelled with alcohol taxes simplified with 15 main duty rates reduced to six.
Furthermore, the rate of air passenger duty is to be lowered on domestic flights from April 2023. The Government also released plans for a new long-haul air passenger duty, which would cover flight of over 5,500 miles. The Chancellor also announced that the £1m Annual Investment Allowance would be extended from the end of the current year to March 2023. The bank surcharge was also reduced to 3% but the overall corporate tax rate for the sector will go up from 27% to 28%.
Employment & Skills
The Chancellor confirmed the increase in the National Living Wage announced on Monday, a rise from £8.91 to £9.50 an hour, as recommended by the Low Pay Commission’s recommendation of a 6.6% increase. This will be effective from next April and apply for workers aged 23 and over. Those aged 21-22, will face an increase from £8.36 to £9.18. For a full-time worker, this is claimed to represent a £1000 annual increase.
Total skills spending will increase by £3.8 billion by 2024-2025 (equivalent to a cash increase of 42% compared to 2019). This funding aims to boost Skills Bootcamps places four-fold.
A UK-wide numeracy service will be launched to tackle numeracy skills gaps called Multiply. This aims to help 500,000 adults improve their numeracy skills.
Up to 100,000 T Level students will have increased classroom hours. Additionally, funding will drive the opening of technology institutes and Further Education college estate upgrades UK wide. Apprenticeships funding will experience a £2.7 billion increased investment by 2024-2025, to help build the leaders of tomorrow and a productive and skilled workforce for businesses.
There will be continued funding for the Help to Grow Schemes, which help SMEs improve productivity through management skills training and support for digitalisation.
A focus on the international talent pool sets to increase the attractiveness of the UK to international talent and ensure the visa process is smooth. In Spring 2022, the Scaleup, High Potential Individual and Global Business Mobility visas will support this. A Global Talent Network will proactively source talent to UK Science and Technology sectors.
Environment
The Government reiterated their intentions from their Net Zero Strategy, which build on the 10 point plan for a green industrial revolution.
£26 billion of public capital investment was confirmed in Net Zero Strategy (published this month) since the 10 point plan. Since March 2021, £30 billion of public investment for the UK’s green industrial revolution has been committed. This includes £620 to support the electric vehicle transitions and new funding to encourage active travel. Funding to decarbonise buildings is set at £3.9 billion.
The Business Rates reform has accounted for green technology installations. From 2023, no business will experience increased business rates for 12 months after making qualifying improvements to a property they occupy. This new investment relief encourages investment in technologies, such as solar panels. This change is one the GBCC called for in July.
Transport & Infrastructure
Although much of the funding was announced in earlier spending rounds, Metro Mayors will receive £5.7bn for “London” style transport settlements. £1.05 billion has been allocated to the West Midlands and £1.2 billion on buses to speed up journey times, simplify fares, and increase the number of services outside London. The Chancellor also revealed that the Scottish Government would receive a funding increase of an average of £4.6bn per year, whereas administrations in Wales and Northern Ireland would receive an additional £2.5bn and £1.6bn respectively.
Mr Sunak also used the Speech to allocate grants from the £1.7bn Levelling Up Fund for various towns and cities across the country. From a Greater Birmingham perspective, funding was allocated towards improving the A457 Dudley Road in Birmingham, regenerating the Moseley Road Baths in Birmingham and refurbishing the Prince of Wales Theatre in Cannock. Money was also allocated towards remediating 20 hectares of unusable land in East Birmingham and Solihull. Over £270m of local roads maintenance funding between 2022-23 and 2024-25 and £40m for smaller transport improvements through the Integrated Transport Block for Local Authorities in the West Midlands not receiving City region settlements. An additional £1.81m went towards restoring the Kinghurst Village Centre in Solihull.
Innovation & Technology
The Government reiterated they want the UK to be a science and technology superpower and continued investment in R&D was announced. Private sector spending in innovation is relatively low, with business investment in 2018 in R&D was 0.6% below the OECD average. To augment this, the Government are providing at least £2.5 billion Innovate UK core funding, a 36% increase across the Spending Review 2021 period. This aims to generate capital, skills and connections for innovation and growth across companies. Green technologies are to be increasingly invested in as green innovation is a key focus for the Government’s Net Zero Strategy.
Cloud and data computing costs will be included in the qualifying costs for R&D tax credit claims, reflecting modern innovation in IT. Continued support for entrepreneurship was announced, through continued funding for the Start Up Loan Scheme, which provides mentoring to those wanting to start a business. R&D relief will refocus towards innovation. Plans are to be confirmed over the next few months.
Housing
A further £1.8 billion was announced to meet the committed £10 billion housing supply investment and unlock over 1 million new homes.
Two-thirds of the Affordable Homes Programme (2021-2026) funding will focus on homes outside of London. The commitment of £11.5 billion was reconfirmed, delivering up to 180,000 affordable homes.
For unsafe cladding on the highest risk buildings a £5 billion fund has been announced, to ensure the safety and security of residents.
What is the Chamber’s reaction to the 2021 Autumn Budget and Comprehensive Spending Review?
With a stronger than expected economic recovery, the Chancellor has chosen to introduce a number of favourable tax cuts that will ultimately help those businesses that are still struggling with the effects of the pandemic. For a number of years, the GBCC has called for reform of the outdated business rates system and it was pleasing to see the Chancellor announce more frequent valuations, incentives to encourage green investment and a freezing of the multiplier.
Whilst we will need to study the finer details of the scheme, it was also good to see that business rates would be slashed for those operating in the hospitality, retail and leisure sectors – a development that will no doubt be cheered by those businesses that suffered huge losses as a result being forced to close as a result of the pandemic. The extension of the AGOSS Scheme is also a sensible step and will offer a timely boost to anchor institutions such as Birmingham Airport that have been rocked to their core over the last 18 months. However, it was disappointing to see no mention of the £1.5bn Business Rates Relief Fund which was announced back in March 2020 and has been stuck in the legislative machinery ever since.
The freezing of alcohol duty will also help those in the hospitality sector, however, we would urge the Government to go further and maintain an open mind on keeping lower levels of VAT in place for the long term given the positive effect impact it’s had on driving consumer demand. The additional investment in skills training is also welcomed – for years, economic output in our region has been hindered by skills gaps and greater levels of investment will help bridge the gap between ourselves and more prosperous parts of the country. Greater investment in local transport networks is also something that’s long overdue; however, it was disappointing that the release of the IRP has been delayed again – if the Government’s much vaunted Levelling Up Agenda is to be realised then we need to see transformative projects such as HS2 and the Midlands Rail Hub delivered in full.
Nevertheless, much of the Chancellor’s strategy has been predicated on a sustained economic recovery and as Mr Sunak admitted himself, the spectre higher Covid case rates and a sharp rise in inflation could still cause huge problems for businesses during the Winter. In light of this, we would urge the Treasury to commit to an appropriate level of financial support if national restrictions are re-introduced otherwise a number of businesses could be left facing a bleak future.
Further support:
Please visit our Covid-19 Support Grid for further information on how you can access the various support packages which have been introduced by Government to help businesses during the pandemic. Full details can be found on our website.