Firms need further guarantees over energy costs - Chamber

Business leaders today urged the Government to provide guarantees over energy prices following a drastic overhaul of former Chancellor Kwasi Kwarteng 's controversial mini-Budget.

Mr Kwarteng 's successor Jeremy Hunt yesterday reversed nearly all of the tax measures announced on 23 September.

Measures announced by Mr Hunt included:

• Keeping the basic rate of income tax at 20 per cent
• No longer removing the 45 per cent rate of income tax for earnings over 150k for England, Wales and NI taxpayers
• Increasing Corporation Tax from 19 per cent to 25 per cent in April 2023
• Reducing the period of the energy price guarantee, which will now end next April for domestic users
• Businesses are still protected for six months from soaring energy prices - with those struggling most set to continue to receive support, based on an upcoming review
• IR35 regulations will remain in place - the Government was planning to repeal changes to the rules on off-payroll working. The proposed changes meant it would be up to the contractors to make sure they were paying the right amount of tax without employers shouldering the burden. These plans have now been scrapped
• VAT free shopping for overseas visitors has also been cancelled

However, Mr Hunt said several elements of the mini-Budget will still go ahead. They are:

• The planned reverse of National Insurance cuts from 6 November
• Changes to the stamp duty system (with no stamp duty paid on the first £250,000 and for first time buyers that rises to £425,000)
• Tightened rules around universal credit by reducing benefits if people don't fulfil job search commitments
• Rules which limit bankers' bonuses to twice their fixed salary to be scrapped

Greater Birmingham Chambers of Commerce said Mr Hunt 's announcements offered little respite for businesses.

And the GBCC warned many firms could face closure or be forced to make redundancies if the energy price guarantee isn 't extended beyond Spring.

Head of policy Raj Kandola (pictured) said: “Given the financial turmoil which has engulfed the markets over the last few weeks, the Chancellor was faced with little choice but to reverse nearly all of the measures announced in the now infamous 'mini-Budget '.

“Mr Hunt will be relieved that gilt yields are falling, which makes Government borrowing less expensive and interest rate rises less painful than we expected only a few days ago.

“However, the statement will offer little respite to those firms up and down the country that have been knocked from pillar to post over the last couple of years - many are still struggling with the fallout from the pandemic as well as grappling with soaring inflation and eye watering cost pressures.

“We understand the need to balance the books but we would urge the Government to maintain the energy price guarantee beyond Spring if required - the volatility in wholesale gas prices means many businesses might still be facing unsustainable pressure and without financial support, many will be forced to make a spate of redundancies or face closure.

“In the short term, the Chancellor needs to publish full details of the proposed review of the energy price guarantee for businesses and set out the options that will be on the table for the most impacted firms beyond April.

“Businesses also need to see some meaningful intervention in reducing upfront costs - ongoing reform of the business rates system, reducing the rate of VAT for hospitality firms and non-essential retailers are options which need to be given serious consideration.

“In the long term, the Government will need to demonstrate it has the interest of business at its heart and create a blueprint that drives growth both home and abroad, underpinned by a commitment to meet ambitious net zero targets and deliver once in a generation projects such as HS2 in their entirety. ”