IoD Business welcomes commitment to stability as the basic foundation for growth, but urges more action on skills
Responding to the Chancellor of the Exchequer’s Autumn Statement, the Institute of Directors welcomes the commitment to stability, which is the basic foundation for growth. In particular:
- Evidence of good partnership working with the Office of Budget Responsibility
- The re-commitment to the principle of fiscal rules including to reduce the stock of debt in a rolling five-year period
On tax, the IoD welcomes decision to:
- Maintain the lower rate of employers’ national insurance, even if the threshold remains frozen as for other taxes
- Remove tariffs on key imports which will reduce costs for businesses
- Maintain the current VAT registration threshold at least to 2026
- Provide transitional relief for firms affected by the long-anticipated business rates revaluation
However, the IoD opposes the government’s decision deliberately to weaken R&D incentives for smaller companies in the name of efficiency before allowing time for other pre-announced reforms to the system to be implemented.
Today’s announcements will also lead to concerns from:
- Micro businesses about reducing the tax-free allowances for dividend taxation
- Employers using shares as one of the ways to incentivise their teams, who will find that harder with the reduction in tax free allowances for capital gains tax
On supply-side reforms, the IoD welcomes the commitments to:
- Maintain the planned growth in capital budgets for the next two years
- Invest in long-term energy independence
- Crucial rail infrastructure projects such as the HS2 extension to Manchester, the core Northern Powerhouse Rail project and the East West Rail project linking Oxford and Cambridge
However, the IoD is disappointed that there was no commitment to extend the capital investment 130% super-deduction, that is due to expire in April, the absence of any new initiatives to address adult skills shortages across the economy and lack of detail on the role for business in improving energy efficiency.
Kitty Ussher, Chief Economist at the Institute of Directors, said:
“Business leaders were so dismayed by the fall-out from September’s mini budget that the bar for judging today’s announcements was set pretty low. To that end it was good to see joined-up working between the OBR and the Treasury this time round.
“On tax, while low rates of tax are always welcome, we understand that it was proportionate to announce in March 2021 that corporation tax should rise in April 2023 as a way to pay for the pandemic and are pleased that the headline rate of employer NICs has been maintained at its lower rate given the huge cost pressures on business.
“In the longer term, however, today’s Autumn Statement will be judged on whether it set the stage for a sustained period of growth once the current difficulties have eased. The Chancellor rightly recognised the importance of capital investment, citing the Sunak Mais lecture from earlier this year. But he failed to follow through on one of the key elements of that speech, namely the possibility of using tax policy to incentivise employers and sole traders to upskill in national skills shortage areas.
“As a result there remains a hole in government policy around how to address adult skills shortages. We would like to see a comprehensive and systematic plan to anticipate and address labour shortages across the whole economy, not just – as he announced today – in the NHS. We are calling on government to establish an independent Shortage Occupations Agency to advise on a granular list of priority skills and to be bolder in what it will do to achieve change, including incentivising organisations to train up their staff to meet national skills shortage needs.
“In the longer term, raising the productive potential of the economy through supply-side measures is the way to reduce both inflationary pressure and the pressure on government borrowing for budgets to come.”