Your quarterly quota of expert insight and fresh thinking.. The business magazine for Suffolk and Cambridgeshire...
17th March 2016
Given that we are only a few months away from the vote as to whether we stay in a reformed EU or exit, the Chancellor’s eighth Budget was undoubtedly not going to undermine the position of those, not least the Chancellor and Prime Minster, who want us to remain in the EU.
Back home, the news for East Anglia, including Cambridgeshire, was the devolution deal which will give devolved powers to the region and the appointment of an elected Metro Mayor. On making the announcement the Chancellor George Osborne said: "The East of England is a vital part of our economy and this Budget gives it a big boost. It is an area already benefitting from the action we have taken, with more people in work than any other region in the UK, and my Budget today delivers the next step of our long term plan to make sure Britain is fit for the future.”
If Britain is to be fit for the future we must build more infrastructure, despite the uncertainty in the global economy, and with over £150 million to develop two of the East's most important projects, we are backing your region with vital investment.
"This is a Budget that delivers for the East of England and puts the next generation first."
The mayoral devolution deal is believed to be worth £900 million to the region over 30 years and will benefit Norfolk, Suffolk, Cambridgeshire and Peterborough, giving devolved powers over transport, planning and skills. A further £175 million has been earmarked to deliver new homes.
The East of England is also set to receive £2.9 million across 15 organisations as part of two funding competitions run by the Office for Low Emission Vehicles (OLEV) and Innovate UK for R&D into lowering vehicle emissions.
For the self employed and small businesses there was good news, with plans to reduce business rates and in some cases to abolish them from April 2017. In addition, those that are self employed are to benefit from the scrapping of Class 2 National Insurance. Equally it is estimated that over 1 million businesses are set to benefit from the further cut in Corporation Tax to 17% by 2020.
For the tax profession, possibly the main area of interest for which they await the full details is around changes to Capital Gains Tax (CGT), with proposed reductions seemingly set to benefit those subject to CGT on asset transfers and sales, including shares and business assets.
Equally the proposed new rates of Stamp Duty for commercial property transactions will be of mutual interest to those involved in commercial property transactions, be they investors, developers or agents alike. The new rates and tax bands will be 0% for the proportion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000. Overall all those buyers of commercial property up to £1.05million will pay less in Stamp Duty. Could this change be a small boost for commercial property transactions, not least small businesses looking to expand?
The Chancellor made numerous references to looking after the next generation and putting them first, not least with re-affirmation that it is this Government plan to ensure by 2022 that all schools are an Academy or in the process of becoming one or being part of one. At present 42% of schools are part of the Academy network. The challenge, not least for many of the small schools and their governing bodies is the journey they now need to take to become part of the new order. With increased devolution and loss of support from divested and scaled down Local Education Authorities, the pressure is looming great for many a school governing body and head teachers as to the future of non converted schools. Further announcements around proposals and support for conversion may include a mix of ‘carrots’ and ‘sticks’ to cajole and coerce.
With plans to support schools and academies with additional funding for sport and the introduction of a levy on producers of sugary soft drinks, the Chancellor is certainly focusing on the next generation’s well being and education.
The Chancellor downgraded forecasts for economic growth for this year, attributing revised forecasts in part to reduced levels of UK productivity, global financial uncertainty and a decline in world trade – including from China. Equally, lower rates of increase in wages and reductions in tax revenues have impacted on overall revenues and therefore the deficit, as well as the long term debt, have not gone down as much as planned. The ability to fund the proposed changes is seemingly coming from his focus on clamping down on tax avoidance and evasion as well as ensuring large corporate and multi-nationals pay tax. Public sector cuts are also a contributor to his re-balancing act.
Overall it was probably a Budget for the self employed and small businesses, the back bone of the UK economy. Whether it was a Budget that helped to re affirm his position and/or the Governments as a whole, not least around the decision to remain in or come out of the EU, we will have to wait until the election on the 23rd June.
For further details and commentary on the announcements made and new tax rates, please visit www.streetsweb.co.uk, download our app Streets iAccountant or watch our Budget 2016 videos on You Tube.