Plenty of good news, but is it based on solid foundations?
ACCA gives its verdict on the Autumn Statement.
The Chancellor delivered an Autumn Statement and Spending Review that was full of good news, but very little detail about how they will be funded.
Chas Roy-Chowdhury, ACCA head of taxation, says: ‘The Chancellor managed to deliver an Autumn Statement that was filled with good news, but given the lack of wiggle-room he has, it is concerning that much of the spending is based on the assumption of consistently strong growth figures, especially given the downgrade in world growth forecasts by the Office for Budget Responsibility.
‘The breach of the welfare cap is politically embarrassing, but many believe it was a purely political, rather than economic, gesture to introduce the cap in the first place. In the long run it will likely lead to very little economic repercussions, and could even give him cover for even deep welfare cuts in the future.'
Tax credits The improved public finance figures have dug the Chancellor out of a big hole regarding tax credits; he’s able to wait for them to be phased out through the introduction of universal credit. He will be relieved that this avoids another battle with the House of Lords.'
Paper tax returns ‘This is not simplicity, call it what it is - accelerating payment. Radical reform is needed to support our small businesses who simply want to get out there and get on.'
Tax avoidance ‘As expected the Chancellor is expecting the Treasury coffers to be swelled by more anti-avoidance measures. This, alongside public spending cuts, has been the mainstay of his monetary policy; the problem now is that HMRC has just about exhausted the well of easy to reach targets. This past year saw a fall in corporation tax collected through anti-avoidance measures; this would imply that they are moving in to areas where collection is more difficult and time consuming.
'The new penalties announced under the General Anti-Abuse Rule is a further announcement of tax creep, which is unwelcome.
'The failure of the government to get the tax credits cut through the House of Lords has taken away near enough all of the Chancellor’s room for manoeuvre, so relying on the latest anti-avoidance expectation would be dangerous.'
Corporate tax devolution to Northern Ireland 'The devolution of corporation tax to the Northern Ireland Executive – to be set at 12.5% - is welcome news: it will give Northern Irish businesses a boost in their competition with businesses over the border in the Republic of Ireland.'
New apprenticeship levy ‘The new 0.5% levy is ripe for future tax hikes - we need to be cautious around any ‘mission creep’ on the levy. It might be increased in future years and all the funding received from it should be ring-fenced and any surpluses solely used for future apprenticeships.’
Stamp duty land tax ‘On the surface the premium charged to overseas investors is good for UK residents looking to buy their own home, but we must remember that there are many Britons living outside of the UK and make sure that they do not pay the premium.'
Further education Anthony Walters, ACCA Western Europe head of policy, says: ‘As ever the Chancellor bucked the chatter and all the trends with commitments around adult skills funding. The protection of further education funding is a welcome surprise. Allowing part-time students to access maintenance loans may help in plugging the skill gaps and improve social mobility.'
Infrastructure ‘The announcement of the funding for more rail projects is welcome – especially the trans-Pennine electrification. These were vital to the Northern Powerhouse project. Let’s not forget that this investment is not merely a vanity project, it’s about making good on decades of underinvestment which has been threatening to hold back the UK economy.'
Innovation ‘We are pleased that InnovateUK has been protected in cash terms. Encouraging innovation will be essential if the Chancellor is to deliver on his long term economic plan. Whilst accountants may be the most trusted partner of SMEs Innovate UK is an important supporter.’