Government needs to focus on performance, not only cost, says ACCA
ACCA's experts have analysed the Budget and highlight the following key points:
Overall fiscal position
Michael Taylor, head of economic analysis at ACCA says: 'Brexit uncertainty, the forthcoming spending review and the government’s lack of an overall parliamentary majority suggested a cautious Budget today and Mr Hammond duly delivered. Despite this, better than expected borrowing numbers allowed the Chancellor to announce some increases in spending in politically sensitive areas while credibly claiming to meet his fiscal rules. He could also do this without significant tax increases, which ACCA welcomes. The Office for Budget Responsibility (OBR) reduced its forecast for public sector borrowing by £11.6bn to £25.5bn for this year (2018/19) and by £2.1bn to £31.8bn in 2019/20. Meanwhile, the OBR’S GDP growth forecasts are little revised at 1.6% for next year and 1.4% for 2020. The 2019 figure – along with many other of today’s Budget projections – may be subject to significant revision depending on the final Brexit outcome.'
Managing an end to austerity
Alex Metcalfe, head of public sector policy at ACCA says: 'The Chancellor has committed to increase public sending in real terms, but there needs to be a shared vision of what it means to end austerity. The Chancellor rightly points to next year’s Spending Review as the time for making the big decisions for the public purse. Looking ahead, the policy of ring fencing some public services, at the expense of others, needs to end in the Spending Review. Departments, like the MoJ, have seen real-term cuts of 40 per cent. Some public services, such as prisons and adult social care, are already seeing significant pressure and deterioration. An end to austerity will require the government to take a systems approach, understanding the interactions between public services, while also focusing on service performance, not just cost.'
Meanwhile, looking specifically at tax, Chas Roy-Chowdhury, head of taxation at ACCA says:
Personal allowance and 20% tax band ‘The accelerated personal allowance increase to £12,500 as well as the extension of the basic rate band to £50,000 being brought forward earlier to the next tax year is welcome. Many hard pressed individuals, who have had little or no pay rises over the last several years. This is the biggest signal the Chancellor could give that austerity is almost over.'
Tax crackdown on fake self-employment ‘It is right for the Chancellor to target those who take on work through a private company when they should actually be treated as employees and pay the appropriate national insurance contributions, both the employer and employee. However, opinion on whether the public sector IR35 rules are really working is sharply divided, and implementation from 2019 (alongside Brexit) is something that business groups have begged the Chancellor to avoid, so it’s disappointing to see this measure brought forward so soon. But these new rules should be accompanied by clear guidance and a pragmatic approach from HMRC so that those who are genuinely self-employed are not penalised and put off setting up in business. The UK urgently needs entrepreneurs and this should not be a road block to start ups and existing businesses.’
Business rates ‘We fully welcome this significant announcement and consider it to be a good start. Much more needs to be done to reduce the disproportionate tax burden which small businesses suffer around tax compliance and red tape in general. ACCA has been involved in discussions with Government Departments to find ways to relieve the burden of rates on small businesses.’
International tax reform for the digital tax ‘The OECD is already working on the new digital services tax. The UK needs to be very careful about the design of the tax to ensure it specifically taxes the platforms in a targeted manner, should be time limited and details need to be consulted on.'