Budget reaction

Reaction to George Osborne’s summer budget:

 

This is a Budget for the whole of the UK. It rewards work, backs aspiration and ensures fairness for taxpayers across the UK. We’re moving towards a lower tax, higher wage and lower welfare economy. And within the welfare system, we continue to protect the most vulnerable.

The economy is growing. We are taking more people out of tax. Jobs are being created. The deficit is coming down . Our economic plan is working.

 

The UK currently has 1 per cent of the world’s population, but 7 per cent of the world’s welfare bill. That cannot be right and is not sustainable.

Work is the best route to a secure future, and the peace of mind which that brings . We are making sure we have a welfare system which always rewards work, while making sure the most vulnerable are protected.

 

The National Living Wage is an essential part of the move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society. It ensures that work pays, and reduces reliance on the State topping up wages through the benefits system.

There is no sensible person who suggests the deficit we inherited should not be tackled. Even our opponents agree with us on that. It would be wrong to burden our children and grandchildren – the next generations – with debt run up by previous governments in this generation.

This is part of being a responsible, responsive Government.

David Mundell MP, Scottish Secretary

The Chancellor is giving with one hand and taking away with the other. Massive cuts in support for working people will hit families with children hardest.

The Chancellor has finally woken up to the fact that Britain needs a pay rise. The TUC has long campaigned for the minimum wage to rise faster and the Chancellor has listened to us at last.

For young people, it was all bad news as they will not get the minimum wage boost and will suffer from cuts to higher education grants and housing benefit. And it was not a one-nation budget for public sector workers who will face years more of cuts to real wages.

Massive tax cuts for the wealthiest show the Conservatives are still the party of the inheritors, rather than the workers.”

TUC General Secretary Frances O’Grady

This is a double edged Budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.

Firms have been unwavering in their support for the Chancellor’s deficit reduction plans and will welcome the clarity that the new fiscal rules provide. Other standout measures include making the Annual Investment Allowance permanent at £200,000, which the CBI called for, as well much-needed investment in our roads network.

The further reduction in corporation tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7% increase.

The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.

Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measure.

These new (fiscal) rules strike the right balance between getting down our national debt as share of GDP and ensuring we can respond to future shocks in the economy.”

On the introduction of the National Living Wage:

Small shops, hospitality firms and care providers are the businesses that will face real challenges in affording the National Living Wage.

Delivering higher wages can only be done sustainably by boosting productivity. Bringing politics into the Low Pay Commission is a bad idea.

On changes to Corporation Tax:

The Chancellor has provided clarity on the future direction of corporation tax rates for the remainder of this Parliament. Combined with a welcome commitment to publish a business tax roadmap in April 2016, which was called for by the CBI, this must provide businesses of all sizes with the certainty they need to invest.”

On the apprenticeship levy:

In the past, the training delivered by levy approaches has often been costly and not linked to the needs of businesses and learners. The real solution to more quality apprenticeships lies in giving greater control over content to businesses working together in partnership.”

On reducing the bank levy and introducing an 8% surcharge:

By phasing out the bank levy, the Chancellor has tackled an issue that was making the UK uncompetitive for global banks headquartered here. But the proposed new banking profits surcharge will need careful examination to avoid unintended consequences and ensure it doesn’t stifle choice in the banking sector.”

On further tax avoidance measures:

We support efforts to counter tax avoidance and evasion, such as increasing HMRC resources, and we look forward to consulting closely with the relevant authorities on a number of matters to ensure they are well designed.”

On transport and energy commitments:

The Chancellor is right to address the £8bn black hole in the existing road budget through the creation of the new Roads Fund. However there’s more to do to reverse rather than simply halt the decline in road funding.

The CBI has long argued that the current business energy efficiency regime is far too complex and burdensome and so we welcome the review announced. Better designed green taxes and regulation will drive business investment.”

On boosting local growth:

New enterprise zones, city and county deals, smart transport investments and science and innovation audits provided further detail on the Northern Powerhouse agenda. Business wants to work with Government to ensure new powers boost job creation and business investment.”

On further pensions changes:

The Chancellor is right to tread carefully in reforming the taxation of pension saving. Previous mis-steps in this area have damaged our savings culture. Any future measures should not damage the attraction of saving in a workplace pension for employees –this remains the best way of preparing for retirement.

John Cridland, Confederation of British Industry (CBI)

(On the announcement  that automatic entitlement to housing benefit is to be cut from 18-21 year olds): This is a youth tax and a shameful decision which is unjustified and cruel. It completely removes the safety net that is in place to protect young people whose circumstances often prevent them from staying in or returning to the family home.

Whether it’s someone fleeing an abusive relationship or thrown out of their home, or someone caught between jobs a long way from home, we have a duty to support young people.

Cutting this vital lifeline for many thousands of young people is simply wrong and I fear that, despite Shelter Scotland and other support service’s best efforts this will cause very hard times and lead to a rise in homelessness among young people.

Short-sighted cuts like this do nothing to fix the root cause of the housing benefit bill – which has grown due to the chronic shortage of affordable homes, a growing reliance on the private rented sector and sky-high rents. That’s why the reduction in the benefit cap doesn’t make sense as it will drive those affected by it out of their homes for not being able to pay their rent, in effect, clearing out people who rely on housing benefit from high rent areas.

In Scotland, we need to build at least 10,000 new homes for social rent each year for the foreseeable future to tackle the shortage of affordable housing. By investing in affordable housing, not only would this bring hope to the 150,500 households on council waiting lists, it would also gradually reduce the housing benefit bill, which in turn would leave more funds available for investment in housing.

Graeme Brown, Shelter Scotland

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:

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.

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.

John Allan, Chairman, Federation of Small Businesses

For the first time the Chancellor has finally admitted that his attack on the poorest and most vulnerable people ­in our communities isn’t actually about tackling the deficit. It’s all part of his push for a low tax low welfare society.

This is the work of an economically-illiterate Chancellor who is dead set on cutting, freezing and scrapping welfare to reach his target of £12bn cuts.

He’s demonstrating a cruel disregard for the impact this will have on hundreds of thousands of people’s lives. The sad truth is that far too many people can’t afford to feed and clothe themselves and their families, or keep a roof over their heads.

Taking money from the pockets of our poorest people will only plunge them deeper into poverty and increase inequality which will be a drag on the economy.

Setting the new statutory living wage at £7.20 for next year when the recommended living wage is currently £7.85 is just a headline-grabbing con. Combined with tax credit cuts it means that people will be worse off and only the Treasury will benefit.

The Chancellor and Prime Minister’s war on tax credits will back fire and will worsen poverty levels in the UK. We’re a rich country. It’s utterly senseless that we’re treating people like this.

John Downie, Director of Public Affairs, Scottish Council for Voluntary Organisations (SCVO)