Chancellor announces budget plans
CHANCELLOR George Osborne has made a concerted effort to kick-start house-building and the housing market through measures which could make it easier to buy a home.
But he delivered headline-grabbing cuts in beer and fuel duty against the background of dire economic performance, with the UK’s growth forecast for 2013 slashed to just 0.6 per cent – and Government borrowing still sky-high.
Anne Rose, a director and tax expert with the accountancy firm Ernst and Young in Nottingham, says the continuing poor performance from the UK economy has cramped the Chancellor’s room for manoeuvre.
But she believes Notts business owners of all sizes should still be better off as a result of the Budget statement.
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Corporation tax – the main tax paid by incorporated firms – will come down from 23 per cent this year to 20 per cent in two years’ time
“Because it is one of a string of decreases it won’t in itself make much of a difference. But the fact that it has fallen all the way from a high of 28 per cent has made a difference,” she said. “Certainly for businesses operating internationally it is making them see the UK as a more attractive place to invest.
“But the Chancellor is also stressing the need for everyone to pay their fair share of tax and that includes both wealthy individuals but the big corporate businesses who will benefit from the lowering of this main tax rate.”
And the smallest businesses will get some cash back from a decision to bring in an Employment Allowance which cuts £2,000 off the employers’ National Insurance firms pay.
“This is good news for entrepreneurs who are thinking of taking on people for the first time or expanding their workforce”
There is other assistance for investors who want to put money into smaller start-up businesses, which may help fledgling entrepreneurs who have ideas but not funds to get off the ground. The Chancellor also encouraged investment in social enterprises – not-for-profit businesses, which have been an expanding area of the economy among young people or those out of work.
Mr Osborne also announced that savings from cutbacks would see £3 billion ploughed into increased infrastructure spending from 2015.
Ms Rose said: “Spending on infrastructure is good news for the economy because it tends to have a wider impact through a multiplier effect, creating wider jobs and opportunities.
“However, we have to remember that substantial sums are already being invested in the expansion of the tram and the widening of the A453 in Nottinghamshire, so it remains to be seen whether we will benefit from this additional spending.”
The Chancellor also announced that the Bank of England, which changes interest rates to help control inflation, would be given a wider remit. Ms Rose said: “He wants them to be more proactive but he isn’t making clear exactly that that means – he is setting the scene for the arrival of the new Governor of the Bank of England, Mark Carney, when more details will probably emerge.”
Two key measures wee aimed at helping the housing market, with cash to help fund deposits and guarantees to help secure mortgages
Ms Rose said: “The Help to Buy scheme to me sounded very interesting but as it is targeted at people buying newly-built homes. That has to be good news for the likes of Barratt and other housebuilders and the wider construction industry.”
The Chancellor’s announcements about shale gas were also significant, with one of the biggest reserves of shale gas in the UK under the East Midlands. There will be new allowances aimed at stimulating the development of this and it could be significant for the region in the long-term.
There was further discussion of assistance for key industry sectors, among them aerospace, which will receive extra support, alongside life sciences and what is known as agrigulture technology.
While economic growth remains weak, the forecasts about employment were better than expected. “This is one of the great puzzles of the economy at the moment – though growth is weak, the private sector continues to create new jobs at a significant rate.,” said Mrs Rose. “This is an encouraging sign that the economy may be making progress in terms of creating a more sustainable future which is less dependent on public sector growth.”
She concluded: “The Chancellor did his best when he had very little room to move and he has tried to deliver as many growth-related initiatives as he feels able to.
“However, some people will believe he should have been bolder particularly with infrastructure investment which might further boost the economy. He has essentially stuck to his Plan A when there are a number of critics who believe he needs to find ways of creating growth more quickly. That would, of course, come at a cost.
“What was also conspicuous by its absence was any form of extra wealth tax, which was also called for by the some commentators.”