Chancellor Jeremy Hunt will announce his Spring Budget on Wednesday. At the same time the Government’s independent assessor, the Office of Budget Responsibility, releases its latest forecasts for growth and borrowing. The Chancellor has already seen these – so expect him to be cautious. He has also said that any money available for tax cuts would prioritise businesses over individuals.
Hunt has repeatedly said he favours steady long-term policies based around Enterprise, Education, Employment and . . .er. . . Everywhere. This last E means the benefits are not simply confined to London and the South East.
Let’s have a look at these key areas.
We need more dynamic and productive companies. The World Bank ranks the UK as the best place to do business amongst large European nations and second only to America in the G7. So, we expect to see;
- an increase to the Seed Enterprise Investment Scheme (SEIS) with companies being able to raise up to £250k of SEIS investment, a two-third increase. The annual investor limit could also be doubled to £200k.
- support for future business investment with the Annual Investment Limit, which was due to reduce to £200k from April 2023, to remain at a permanent level of £1 million.
- improvements to the tax-advantaged Company Share Option Plans, increasing the value of options from £30k to £60k. Shares may no longer need to be of a class that give employees control of the company or are majority owned by investors.
- some kind of signal to global business that the UK remains ‘open for business’. For example, making it easier for a company to become incorporated in the UK. Albeit a bit late for building company CRH and microchip designer ARM.
- Corporation Tax rises to 25% next month – expect some tinkering to capital allowances (generous tax relief on equipment purchases) and/or laying out a roadmap for future corporation tax reductions – growth permitting.
- new commercial property developments required to have charging installations for electric cars.
There are around nine million adults with low basic literacy or numeracy skills and over 100,000 people leaving school every year unable to reach the required standard in English and maths. We need to have more high-skilled people and find ways to encourage those who have not been to or do not wish to go to university. Better late than never. We might see;
- possible retraining funding (perhaps ‘lifetime learning loans’ similar to student loans) for vocational qualifications for those out of full-time learning for over 10 years.
The total in employment is nearly 300,000 people lower than pre-pandemic with around one fifth of working-age adults economically inactive. The Chancellor should make it worthwhile for retired people to re-enter the labour force. We expect to see;
- an adjustment to ill-conceived pension rules to tempt retired doctors and consultants back to surgeries and hospitals.
- changes to the annual allowance and lifetime allowances for pension pots.
- a clamp down on misuse of umbrella companies.
- An increase in the state retirement age by yet another year for those currently in their 50s.
- An extension of the number of hours that foreign students are permitted to work.
- an increase to child support.
We are unlikely to see any further tinkering with NICs or Income Tax. There is no election this year.
Not only is it socially divisive if young people feel the only way to make a decent living is to head south, it is also economically damaging. Most countries have economically strong second cities, typically about one third the size of the capital – the UK does not. Better infrastructure and widespread full fibre broadband would help. Levelling up is supposed to do something about such things. What we would like to see is;
- tax advantages to support investment zones or ‘highest potential knowledge-intensive growth clusters’.
- a clamp down on misuse of umbrella companies.
- New rules to permit REITs (real estate investment trusts) to be established for a single commercial property (currently three) provided it is worth at least £20 million.
- Allowing city mayors to spend more of their budget on business incentives, assuming they have the funds.
- clampdowns on the estimated 10,000 overseas companies owning UK residential property that did not register with Companies House by the January 31, 2023 deadline.
- an extension to the Energy Support until the warmer summer months.
- no increasing fuel duty (yet again) which would help to bring the inflation rate down (or at least reduce the pressure for it to rise).
About the author: Martyn Page is the investment director of Worldwide Financial Planning which is authorised and regulated by the Financial Conduct Authority.