While the chancellor said he would raise the National Insurance threshold to £12,570 for workers from July, the previously announced National Insurance increase for workers and businesses remains in place, meaning from next month employers will pay 15.05% in NICs on employees' earnings over £170 per week, compared with 13.8% employer NICs currently.
Institute for Fiscal Studies (IFS) director Paul Johnson said that at its heart the Spring Statement had two paradoxes.
"The chancellor has managed to announce tax cuts without reducing the planned tax take from previous plans. And by saying nothing about spending, he is reducing the real-terms generosity of his plans for spending on public services. That’s what inflation does."
However, there was targeted support for small business in the shape of an increase in the Employment Allowance, which is a relief relating to the employer National Insurance contributions for firm's that have annual Class 1 National Insurance liabilities of less than £100,000. The relief has been increased by £1,000 to £4,000.
And in terms of broader support, while the immediate 5p-per-litre cut in fuel duty was welcomed, many organisations were disappointed it paled into insignificance when compared with the increases at the pump.
Equally, bringing forward a number of business-rate exemptions for green technology, such as solar panels, were largely dismissed as window dressing, especially in the face of spiralling energy costs. Although revamping the R&D tax credits scheme to include things like data and cloud storage were welcomed, despite the change not set to come into force until next year at the earliest.
"And we’ll consider, in the autumn, whether to make the R&D expenditure credit more generous," Sunak told parliament yesterday.
The chancellor also announced the government was looking at "fixing" the current capital allowances scheme and would launch a consultation in advance of the end of the 'super deduction' next year.
He also said that he would review the Apprenticeship Levy, questioning whether it was "doing enough to incentivise businesses to invest in the right kinds of training".
Industry and business group's response:
BPIF
CEO, Charles Jarrold
“In his Mais Lecture last month, the Chancellor stated that he wanted the private sector to train more, invest more and innovate more. The UK’s productivity lags other similar nations, with capital investment well below the OECD average. We know our sector is ready to invest, wants to invest, and needs to invest, but it faces considerable headwinds. So, we’re pleased to hear that before the super-deduction ends next year, the Government has committed to creating a much more supportive environment for investment; that’s really important and we look forward to working with government to develop the details.
“Our sector has a good record on investment in training, notably the Modern Apprenticeship scheme, which has encouraged greater levels of training in the sector. There’s always room for improvement, but it’s important that any review really incentivises more training, rather than disrupting the existing programmes – that’s the stated intention, we’ll wait to hear the details.
“Overall, there are some positive signs that government understands the need to create a positive environment for businesses to invest in skills and staff, but real action remains in the future. The immediate challenge is spiralling costs – particularly energy and raw materials – and these have been ignored. We will continue to bring government’s attention to the acute need for action to relieve the intense cost pressures on our industry.”
IPIA
General manager, Brendan Perring
“I think the Spring Statement has gone some way, with the increased National Insurance and a number of the measures, to try and lessen some of the pain that working families, especially in our industry, will go through over the next year. There wasn’t a very big cut in fuel duty considering the rises, so that will really be of limited help to industry and households. Any cut is welcome, but overall [a 5p cut] is not a huge effort.
“As the chancellor mentioned himself several times, with the crisis in Ukraine, the government needs to ensure it has a war chest, which is now not a euphemism – it is actually a war chest. You can see that there has been an effort to try and be as frugal as possible in the schemes that the chancellor has rolled out, and in our opinion that is more than likely to compensate for the fact they’re going to need to keep as much as they can in the Treasury in light of what’s going on in Ukraine.
“There will be no support for energy price rises for industry. That’s something we’re continuing to talk to the government about ourselves, to try and make them really understand and realise that it’s going to cost our economy, by allowing businesses to be completely exposed to this energy hike. It would be cheaper for the government, overall, to provide a subsidy to offset the energy cost rise, but unfortunately that wasn’t announced.
“Overall, I think the Spring Statement was largely as expected. We obviously wish that the government had gone further to support industry specifically. There was tinkering around the edges [but] no single, decisive policy to protect jobs, manufacturing and industry, as there was during Covid. But at the same time, I don’t think we can be too critical because there are some very difficult choices ahead for the government.”
Federation of Small Businesses (FSB)
National chair, Martin McTague
“We are very pleased to see the chancellor adopting our top ask for this Spring Statement: uprating the Employment Allowance to help small employers with National Insurance costs.
“We originally put forward the Employment Allowance as a targeted measure to help small firms, and it has now been expanded three times since its creation. Together with a cut to fuel duty, these measures will provide crucial breathing space for our embattled small employers.
“This Spring Statement marks a good starting point, with welcome measures on business rates, net-zero and energy investment taking effect next month.
“With steep inflation, energy bills increasing fast, without the same support in place as enjoyed by consumers, and hiring pressures landing hard on small firms, more of the right stuff will be needed in the autumn given this challenging backdrop.
“We look forward to working with the chancellor on his new tax plan. Achieving the new culture of enterprise vision he rightly aspires to, alongside levelling up aspirations, will mean putting community small firms and sole traders front and centre of reforms.
“That means taking more of them out of the business rates system, protecting SME R&D investment incentives and delivering on commitments to end an endemic late payment culture that destroys thousands of firms a year.”
Unite
General secretary, Sharon Graham
“With inflation at its highest for 30 years, Rishi Sunak’s Spring Statement just tinkers around the edges of this shocking cost-of-living crisis.
“Workers will still be facing sleepless nights worrying about how to make ends meet, overwhelmed by rocketing prices.
“His Spring Statement does nothing to tackle the corporate elite, the billionaires who stash their loot but sack UK workers by Zoom. Once again, ordinary working people bear the broadest burden while the super-rich get off scot-free.
“That is why I’m calling on the government to join Unite in our new workers’ commission on profiteering because it’s not just the big six energy firms who have made money from this crisis.
“What about those providers who made bundles charging exorbitant prices to our NHS during the pandemic? What about Amazon and the money it made from lockdown. What about DP World, which made over $1 billion dollars in profit and then sacked P&O 800 workers on the spot?
“Our commission will bring together experts and workers to uncover exactly where the money has gone, who has profited while others have suffered and who should really be paying the price for this pandemic. One thing is clear, working people are paying for bad decisions made by powerful people. Unions must now step up to the plate and take over the reins. The rebirth of the trade union movement must now begin.”
CBI
Director-general, Tony Danker
“The chancellor has taken steps to sustain confidence in our economy. They are welcome but don’t do enough to tackle the current challenges facing firms.
“His new plan to incentivise business investment from next year is very good news. We stand ready to work with the chancellor on measures essential to transforming productivity such as capital allowances, R&D reforms and a revised Apprenticeship Levy. These measures lie at the heart of UK competitiveness.
“In reality, we cannot wait until October to get growth going. The government needs to get moving straight away.
“We need concrete plans now on how we get new nuclear, hydrogen and onshore wind investment. We need more EV charging infrastructure deployed this year. We need post-Brexit regulation changes that unleash the potential of our health, science and technology sectors.
“The chancellor is right that the government can’t solve every challenge. However, the only enduring response to inflation, energy prices and cost-of-living challenges is a relentless campaign for economic growth.”
Advertising Association
CEO, Stephen Woodford
“As the chancellor’s spring statement outlines, the UK economy, businesses and the public are experiencing the harsh effects of increases in cost of living.
“As inflation rises, businesses need to grow to offset rising costs and it is important to recognise that advertising’s multiplier effect is a vital engine of growth for our economy. Every £1 spent on advertising delivers £6 to UK GDP. Therefore, as the chancellor looks to support businesses and incentivise growth, it is only right that employer-led skills training receives recognition.
“We stand ready to work with government as trade bodies and professional associations to help close the skills gap and provide opportunities for people seeking to upskill, progress in their careers while contributing to the wider business economy and responding dynamically to business needs.”
