BUDGET IS POTENTIALLY CHALLENGING FOR BUSINESS

FSBThe Chancellor is right to continue to focus on reducing the budget deficit and has made some tough decisions to reach his goals. For businesses, the Budget contained a mixed bag of proposals, some of which will prove challenging for our members.

John Allan, National Chairman, Federation of Small Businesses said:

“There was further support to reduce corporation tax, fix the annual investment allowance and boost regional growth, where investment in roads will be particularly well received. We agree with the focus on productivity but need to see the details to raise skills through the apprenticeship levy on large firms. Planning reforms are also critical to raising productivity and again we look forward to seeing the proposals on Friday.

“However, even though offset by a welcome increase in the employment allowance, some will find the new National Living Wage challenging. Changes to the treatment of dividends will also affect many of our members.”

Commenting on specific areas detailed in the Budget, John Allan continued…

The National Living Wage
“The introduction of a new National Living Wage for over 25 year olds, set at £7.20 an hour from next April, will pose significant challenges for many small firms, particularly those in the hospitality, retail and social care sectors. We have been supportive of gradual increases in the National Minimum Wage in recent years, to reflect the improvement in the economy. However, we believe annual increases should be set according to the recommendations of the independent Low Pay Commission (LPC). We support the idea of giving employers a clearer indication of where minimum wages are heading in the medium term, but we note this move risks undermining the independent status of the Commission.”

Employment Allowance
“The increase in the Employment Allowance to £3000 is welcome although, for many small businesses, it is unlikely to fully off-set the increase in costs brought by the new over 25s National Living Wage rate. FSB’s research shows that in the past the Employment Allowance has enabled members to increase wages and spending on staff training. Going forward we expect the allowance to primarily be used to meet higher wage costs, as a result of the new National Living Wage.”

Annual Investment Allowance
“The Annual Investment Allowance has been an important incentive for people investing in the future growth and productivity of our small businesses. We have long called for the Allowance to be set permanently and at a reasonable level. Small firms will therefore welcome the move by the Chancellor to do just that by setting the Allowance permanently at £200,000.”

Introduction of an apprenticeship levy
“The increasing focus on vocational on-the-job training is the right approach but we must not let the drive for greater numbers come at the expense of quality. Encouraging small businesses to take on an apprentice is the only way to deliver the Government’s target of three million apprenticeships.

“While we welcome the exclusion of small firms from the proposed apprenticeship levy, we urge Government to talk further with businesses about the wider implications and implementation of the levy.”

Productivity and infrastructure
“Closing the productivity gap is the best way to boost the long term health of the UK economy. It’s the key to reducing the budget deficit, delivering higher wages, and improving living standards. Solving the productivity puzzle requires long-term effort and focus, and we look forward to seeing the Chancellor’s thinking when he publishes his productivity plan later this week. Among the range of measures we will be looking for are proposals to address longstanding planning issues, ending delays in infrastructure investment, and giving young people the skills businesses really need to grow and for them to have successful, rewarding careers.

“The new road fund announced today will be particularly welcome for small businesses which are heavily reliant on the road network for the success of their businesses.

Sunday trading
“The FSB remains concerned about the impact of any change to Sunday trading rules on smaller retailers. As well as assessing the potential impact of these measures, the Government should be taking a wider holistic view to see what else can be done to support these businesses.

“Bringing forward reforms to business rates is an immediate priority. We should also do more on liberalising licensing laws, easing planning restrictions and on improving customers’ access to parking. All are areas which are currently doing more to hold back the high street than Sunday trading.

“Under current proposals, the decision to change Sunday trading rules will be devolved to the local level. It is critical these local decision makers include small businesses in the debate. Local businesses are at the heart of our communities and the ones most likely to feel the direct impact of these proposals. Their concerns should be listened to, before any decision is made.”

Tax simplification
“Working out just what tax you owe can be a huge headache for small businesses. Getting it right costs unnecessary time and money. Businesses want a much simpler system, which is why they will welcome the greater resources and new statutory footing awarded to the Office of Tax Simplification (OTS) and the greater resources to support its work. To deliver simplification, it is critical Ministers implement the recommendations the OTS has already made. Working with stakeholders, they also need to present a clear roadmap on how they will take simplification forward in the future. This should be done with a clear regard to boosting productivity and growth.”

Fuel duty
“Small firms, especially those in rural areas are disproportionately hit by the cost of fuels. Continuing to freeze fuel duty will be welcomed by small firm still struggling with the cost of fuel at the pump.”

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