SOME GOOD NEWS FOR BUSINESS – BUT WILL IT SPARK GROWTH?
The raft of 110 announcements made by Jeremy Hunt in his Autumn Statement included some welcome good news for small businesses and the self-employed.
Small business owners and those that work for themselves have felt the pressure of the cost-of-living, high inflation and the continuing impact of the pandemic over the past year.
So the measures to reduce their tax burden will be widely welcomed, not least the changes to National Insurance (NI), including abolishing class 2 payments.
Mr Hunt said the announced tax cuts for the self-employed would be worth £350 per year. Abolishing class 2 NI will save them £192 annually.
Nearly two million self-employed people will benefit and on top of that the chancellor also delivered a reduction in class 4 NI that they pay.
Taken together, those measures will save self-employed workers £350 a year from April next year.
Mr Hunt also announced that he was cutting the main rate for employee NI from 12 per cent to 10 per cent from January.
The chancellor said 27 million people would benefit from that move and the reduction will be worth £450 a year or someone on an average salary.
The cash benefit for the self-employed is not large but every little helps. Whether the general reduction in national insurance will encourage more spending to stimulate growth remains to be seen.
An extension of the 75 per business rates discount for hospitality, retail and leisure for another year will also help businesses that really are under pressure.
Business rate relief was also extended with a freeze on the small business multiplier for another year.
Moves to help end the scourge of late payment are also positive though more action is needed. The £50m of extra investment in apprenticeships in engineering and other key sectors is also welcome, if it delivers results.
Economic growth was at the heart of the chancellor’s statement. Whether he has done enough to make any real difference remains to be seen.
And there are concerns about the impact of the increase in the National Living Wage, which will rise by almost 10 per cent next year, from £10.42 to £11.44 an hour – benefiting at least 1.7m workers.
Business groups and analysts have warned it could spark future rises in inflation and fears that some employers will struggle to pay the new rate, putting jobs at risk.
Measures to boost investment in “strategic manufacturing” were included in the statement. Mr Hunt committed £4.5bn to manufacturing up to 2030, with £975m for aerospace and £960m for the green sector.
He told the Commons: “Taken together across our fastest-growing innovation sectors, this support for manufacturing alone will attract an estimated £2bn of additional investment a year over the next decade.”
Mr Hunt also announced a widely anticipated decision to make permanent “full expensing” for businesses.
That measure means that for every £1 that a business invests in IT, machinery and equipment, it can claim back 25p in corporation tax.
He declared the move as “the largest business tax cut in modern British history” and it will be of benefit to larger companies.
The chancellor also committed to reforming the planning system to allow for faster planning applications when it comes to major business projects.
Mr Hunt will also consult on giving pension savers a “legal right to require a new employer to pay pension contributions into their existing pension”.
In response, shadow chancellor Rachel Reeves said that under the Conservatives growth had “hit a dead end” and the economy would be £40bn smaller by 2027 than it had claimed in March.
• You can find in-depth analysis of the Autumn Statement on our website www.wnj.co.uk
