In a budget underpinned by the Office of Budget Responsibility’s (OBR) positive reforecast, George Osborne took the opportunity of the Autumn Statement to highlight the cuts each government department is making. Supposedly small tweaks like transference of grants to loans has allowed specific funding to be announced for the NHS, justice system and tax avoidance investigation. Investment in infrastructure and technology across the board could be an advantage for contractors but with the recent rumours about IR35 there’s still some hesitancy on how the government views PSCs and contractors in general.
Since 2010 the UK is the fastest growing economy in the G7, at the same rates as the US.
GDP has been revised upwards to 2.4% in 2016 and 2.5% in 2017 - overall living standards are expected to increase as well as the creation of one million extra jobs in the next five years.
The debt to GDP ratio will reduce with a surplus expected in 2019/20 and that’s ADR certified!
The debt forecast has been lowered to 82.5% of national income from 83.6% and is expected to drop every year to 71.5% in 2020/21. The borrowing forecast for 2015/16 has been revised to £73.5 billion from £74.1 billion and should lower each year until a surplus of £10.1 billion is achieved in 2019/20.
Unemployment is at its lowest since 1975 at 2.3% but full employment is still high on George’s list.
Now the Treasury is also suffering cuts of 24% to its budget there can’t be a government stone that’s been left unturned.
HMRC themselves are making efficiencies of 18%, but will receive an additional £800 million to combat tax evasion. They’re also rolling out Digital Tax Accounts to everyone, individuals and businesses, so tax will be managed online for everyone.
Recent events have highlighted the need for international relations to be maintained – the NATO recommended targets of 0.7% GDP to be spent on foreign aid (£16.3bn by 2020) and 2.0% GDP on defence will be met as previously promised. The Foreign and Commonwealth Office budget has been protected and looking closer to home there will be no cuts to police budgets in real terms.
The limits on public spending have been set and will rise from £756 billion in 2015/16 to £821 billion in 2019/20. Day to day spending of government departments will fall by 0.8% per year.
Funding has been made available for large infrastructure investment including HS2 and a permanent pot hole fund. Spending on energy has been doubled and investment in science and the arts secured.
Tax credits – George has changed his mind here and the cuts to tax credits won’t be happening. The planned changes to tax credits and Universal Credits from previous budgets still remain though, so the pinch will just be felt a little later now.
Pensions – the basic state pension increased to £119.30/week – a £3.35 increase per week. The full rate for the new state pension will be £155.65/week. The Savings Credit will be frozen instead of cut as in previous years.
Council tax – councils given the power to set a 2% levy to go towards social care only. Police forces have also been given the power to set a precept levy for local funding.
NHS - £22 billion of efficiency savings will need to be made but additional funding is being found for mental health provision, new research and testing and new hospitals. As seen across the board, funding for nurses will change from a grant to a loan. This should relieve restrictions to allow 10,000 new nurses.
Household bills – a new cheaper domestic energy efficiency scheme is expected to save each household £30/year on energy costs. Restrictions introduced on motor claims like whiplash should save motorists £40-£50/year too. The funding for £50 off water bills of South West Water customers remains for the moment.
Housing - housing benefit will be capped at private tenancy levels. Help to Buy schemes are being continued and extended and new investment is being released for 400,000 affordable homes. The Right to Buy scheme is also being extended, with a pilot for five housing associations starting at midnight.
Capital Gains Tax (CGT) on residential properties will be payable within 30 days by 2019 – likely to be just the first of the efficiencies allowed for by the new Digital Tax Accounts.
26 new and extended Local Enterprise Zones announced.
Auto enrolment – 5 million people already enrolled with millions more set to enrol in the next two years. It’s good to be aware of your staging date and watch this space as we’ll be releasing some advice on this soon.
Tax evasion – a common theme and the government will refocus its efforts on the following:
* General Anti-Abuse Rule
* Disguised remuneration schemes
* Stamp Duty avoidance
* Intangible fixed assets regime and capital allowances abuse
Business rates – 100% will now be kept by local government and powers have been devolved so authorities can cut rates to attract business. Mayors have also been given powers to increase rates to invest in local infrastructure.
Apprenticeship levy – as announced in the budget earlier this year the levy has now been set at 0.5% of an employer’s payroll bill. Allowances of £15k can offset this, but further guidance will be issued to see the actual effect of this.
Surprisingly, not much has really been announced here. With the recent IR35 rumours things were looking very gloomy for contractors, and with the findings of the consultation yet to be published there is some good news as the travel and subsistence restrictions only apply to those caught by the intermediaries legislation (inside IR35).
We’ll write about this in more detail very shortly.
So a spending review that was mainly positive, or at least spun that way, with none of the shocks of four months ago but wanted to demonstrate that the government listen to the people, will protect the country and position themselves once again as the working person’s party.
Let’s hope the OBR has its forecasting sorted.
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